This post is from GRS staff writer April Dykman.

On 02 August 2005, my friend Frank and his partner awoke at 2:45 a.m. to the dog barking and a neighbor knocking on their door. The apartment complex was on fire. They grabbed their dog and whatever they could carry and ran from the building.

"We lost everything," he says. Later they'd find out that it was arson. A former employee of the apartment complex stole rent checks and set the office on fire. Frank was moving into a new apartment in ten days, and the new complex agreed to let them move in early. "We moved in with a plastic bag of groceries, paid for with a $50 food voucher from the Red Cross," he says. The other 70 displaced tenants stayed in Red Cross shelters.

To make matters worse, Frank didn't have renters insurance. "We didn't think we'd ever need it," he says. "You don't see why you should pay this extra bill until you're in a situation where you need it." They had to start over from scratch.

Why renters skip the insurance
There are any number of reasons renters don't think insurance is a necessary expense. I myself didn't have a policy until Frank's situation motivated me to get one. Common reasons renters forgo an insurance policy include the following:

• "What are the odds anything will happen?" The odds are not in your favor. The Bureau of Justice Statistics reports that renters are 50 percent more likely to be burglarized than homeowners.
• "My landlord has insurance." That means that your landlord (or condo association) has their valuables — the building — protected. Your belongings are not covered.
• "I can't afford renters insurance." Many people are willing to spend a couple hundred dollars on clothes, but won't spend the cash to protect themselves from the risk of losing everything they own. It's possible to find a policy for $10-12 per month, though your premium will depend on location, the deductible, the insurance company, and coverage needs.

There are ways to lower the cost of coverage, including raising your deductible (make sure you can afford it, though) and having protective devices such as smoke detectors, extinguishers, and security alarms. Some insurance companies offer discounts to senior citizens. Also look for a multi-line discount, which is a discount for buying more than one type of policy from the same company (e.g., renters insurance and auto insurance).

I suspect that the main reason most people don't have a policy, though, is that they don't understand how renters insurance works, or why they need it.

Renters insurance 101
Renters need a HO-4 policy. Condominium owners need a HO-6 policy. Both will cover personal property loss from "named perils," which is insurance-speak for what you're insured against. Your policy will likely include the following named perils:

• Fire and lightning
• Windstorm and hail
• Smoke
• Vandalism and malicious mischief
• Theft
• Accidental discharge of water

Other named perils covered sound like scenes from Die Hard (explosion, riot, damage caused by air crafts and falling objects), but I suppose you never know when German radical activists might terrorize your Christmas party.

Renters insurance also includes liability protection, which covers medical expenses for a person injured on your property and legal defense, if necessary. Additionally, if your apartment or condo becomes uninhabitable due to a named peril, your coverage will pay for somewhere to live in the meantime.

Buying a policy
Shopping for renters insurance is similar to shopping for other types of policies. Here are the basic steps:

Take inventory. This seems to be the step that most of us dread, but it's where we should start. (Confession: I haven't done it yet. It's been languishing on my to-do list for almost a year now, but I'm going to make it a top priority.) If you lost everything, it'd be awful to have to recall every item you owned and it's value. Better to document it. Here's the plan of action:

1. Photograph or videotape each room.
2. List the value and serial and model number of items.
3. Attach receipts, if you have them.
4. Save the list and the photos or video to a DVD, and make at least three copies. Keep one copy in a fireproof place, one at an off-site location (could be a parent's house or a safe-deposit box), and send one to your insurer.

There also are software programs that walk you through the process. The Insurance Information Institute provides free inventory software that helps you complete a room-by-room inventory.

Prepare. Write down a set of questions you want to ask your potential insurance providers. Some suggestions include:

• Do you have brochures or any information you can send me in the mail? (Keep the ones from insurers that appear to be a good fit and use them to compare each provider's policies.)
• What could cause my rates to increase?
• What discounts do you offer?
• Does the liability insurance cover legal defense and medical expenses?
• Do you pay actual cash value (ACV) or replacement cost coverage? (ACV coverage pays what your property was worth at the time it was destroyed or stolen, minus the deductible. Replacement cost coverage pays what it will cost to replace the items, minus the deductible. It costs more in premiums, but pays more if you file a claim.)
• Do you offer separate policies for roommates? (Alternatively, talk to your roommate about splitting the cost of a policy.)

Shop around. To find the right provider and policy, consider the following:

• Contact the insurance company that provides your auto insurance policy. Ask about multi-line discounts.
• Call your local bank. Some banks offer insurance policies.
• Search "renters insurance" online. Most providers have Web sites that give you a free quote.
• Ask friends and neighbors which company they use, and if they are happy with their experience.

Updating your policy
Renters insurance isn't a Ron Popeil rotisserie — don't set it and forget it. Stay in touch with your agent to make sure you're getting the best deal and taking advantage of new options or discounts. Also, be sure to contact her if your living situation changes, as in the following situations:

• You moved. Each residence requires a unique policy.
• You got a roommate: human or furball. You'll need to decide on a separate or shared policy for the former. Make sure the latter is listed in your liability coverage.
• You bought an expensive bauble or a pricey new toy. You need to have it listed in your policy, or you might need a separate rider to cover it.

It's easier than you might think to find an affordable renters policy with good coverage, and it's time and money well-spent. As my friend Frank says, "It's the cheapest bill you'll have. For very little money, we could have replaced everything we lost."

If you are a renter, do you have renters insurance? If not, is there a reason you don't have it?

Photo by DVS.

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The October 2009 issue of Consumer Reports contains an article extolling the virtues of generic store-brand products. While shoppers used to sacrifice quality when choosing generic, that's no longer the case. From the article:

If concern about taste has kept you from trying store-brand foods, hesitate no more. In blind tests, our trained tasters compared a big national brand with a store brand in 29 food categories. Store and national brands tasted about equally good 19 times. Four times, the store brand won; six times, the national brand won.

In other words, store brands offer roughly the same quality as national brands, but at a much-reduced cost. How much reduced? Consumer Reports says that the store brands they tested cost an average of 27 percent less than the name brand equivalents.

How much can you save?
Sometimes theory is one thing and reality another. It's nice that Consumer Reports can score great deals on store brands. But could I? Last week, I walked to two local grocery stores to do my own research. First I looked at Safeway, where Kris and I shop most often. Next, I walked across the street to Fred Meyer, a store we usually try to avoid. (The store is huge and its layout makes little sense to me..)

I spent an hour in each store, roaming the aisles, looking for representative prices on a variety of items. I tried to pick one item at random from every section of the store. When I'd finished, I had a list of 25 products for which each store carried the same name brand and their own store-brand equivalent.

The results actually surprised me. You can save a lot of money with store-brand products — far more than I suspected. Here's the raw data from my research:

Click to open larger image in new window

The first column lists the name-brand item I used as a basis for comparison. I've given each store two columns, one for the price of the name-brand item, and one for the generic item. On each line, red text indicates the highest-priced option and green text indicates the least expensive option.

Here's a closer look at some of these comparisons:

• I'm out of my Head and Shoulders shampoo. I just threw away the bottle this morning. Normally I buy actual Head and Shoulders at Safeway, which costs me $5.99 if it's not on sale. If I were to instead buy the Fred Meyer store brand, I'd only pay $2.49 — a savings of nearly 60%!
• At Safeway, standard Charmin two-ply toilet paper costs $10.99 for 12 rolls. At $9.49, the store brand isn't much cheaper. But if I were to go across the street to Fred Meyer, I'd pay just $4.89 for the store brand. (Actually, Kris and I get our toilet paper at Costco, and I have no idea what we pay.)
• Hungry? For $2.17, you could buy a can of generic chicken noodle soup, a box of generic saltine crackers, and a bottle of generic root beer at Fred Meyer. To buy name-brand equivalents at Safeway would cost you $6.18. (You could eat three of those meals using generic Fred Meyer food for the price of one meal from Safeway.)

You get the idea. Buying store brands at Safeway would save nearly 22% for the items on this list. At Fred Meyer, I could save over 36%. And Fred Meyer store brands cost 44% less than name brands at Safeway — without the need for a "loyalty card".

Running the numbers
I learned a number of things from this project. First off, we're shopping at the wrong grocery store. Buying name-brand products at Safeway is the most expensive way to go. Based on this list, shopping at Fred Meyer instead would save us nearly 12%, even without moving to generics.

Second, generics are not always a bargain. On 10 out of the 25 items, the Safeway generic cost as much (or more!) than the name-brand equivalent at Fred Meyer. On the other hand, Fred Meyer store-brand items offer fantastic savings, especially when compared to Safeway's name-brand selections. (The items on this list were 44% less expensive!)

Another factor to consider is that some stores have a better selection of store brands than others. Subjectively speaking, Fred Meyer seemed to have about double the number of generic items that Safeway had — and often had multiple sizes or varieties. They carried several types of store brand salsa, for example, while Safeway's selection was more limited. At both stores, the generics were generally staple items: rice, toilet paper, tomato sauce, etc.

Conclusions
"We should buy more generics," I told Kris after collating my data.

"We do buy generics," she said.

"We do? Like what?"

"…" she said (proving for once that Kris is not always right!).

Though Kris and I do a lot of things to save money, we don't actually buy a lot of store brands. We're not opposed to them — we just stick to brands we trust. This brand loyalty costs us money. Here's how Consumer Reports put it in the article that inspired my research: "Switching to store brands can be a painless way to cut your grocery bill." They're right.

After conducting this experiment, I realize there are four key steps to saving big bucks on groceries. More than anything else, these actions can help struggling families cut costs:

1. Grow whatever produce you are able. The more you grow, the more you save.
2. Buy store brands whenever possible.
3. For everything else, do your best to purchase items only when they're on sale. (This may mean developing a grocery price book.)
4. Learn to clip coupons, especially for processed foods.

This exercise was eye-opening in another way. I discovered that shopping at Safeway costs us money. If the data here is representative, then switching to Fred Meyer could save us over 10% on our grocery bill.. That's enough to let us dine out one extra time per month. Or it's more money we can save for our trip to France next year.

Kris and I are both wary of switching from Safeway to Fred Meyer — as I mentioned, there's more to this decision than price — but I suspect that if we give it a chance, we'll find ways to deal with Fred Meyer's annoyances and save money in the process.

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• The Grocery Game
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• Saving at the Supermarket: 15 Great Grocery Shopping Tips
• Save on Groceries with 'Strike-Point Shopping'
• More Things Your Supermarket Won't Tell You

On this week's installment of The Personal Finance Hour, Jim and I spent the hour talking with nationally-syndicated financial columnist Greg Karp. Greg is the author of The 1-2-3 Money Plan, which I reviewed last week. We had a wide-ranging conversation about spending smart.

Spending Smart
One of Karp's mottos is, "You can't outearn dumb spending." Some people believe they can always just earn more money to sustain their lifetyle — but their lifestyle often grows to match the income. By spending smart, it's possible to make the most of your income — and to enjoy life too.

Karp notes that the goal of life is not to "live cheap and die loaded". Yes, you want to save for the future, but you should also allow yourself to enjoy today. Karp makes room in his budget for golf and good cigars. Now that I'm out of debt, I allow myself to spend more money on comic books.. It's fine to spend on yourself, as long as you keep your spending reasonable.

We also discussed the relationship between money and happiness. Karp recently interviewed Gretchen Rubin from The Happiness Project. Karp says he's learned that there are a number of ways you can "buy" happiness.. For example, you can spend your money on experiences rather than things. Material goods depreciate. The day after you buy them, they're worth less than what you paid. And they don't bring a lot of happiness. Experiences, on the other hand, tend to appreciate. Our memories of the things we do become fonder with time because we tend to focus on the positives rather than the negatives.

Our conversation covered several other topics as well, including:

• How to save money on insurance. Karp advises raising your deductibles. I'm an advocate of self-insuring whenever possible. And Aaron called in to remind us that an ounce of prevention is worth a pound of cure.
• How prepaid cell phones can save you money. Jim noted that on his recent trip to Europe, everyone seemed to be using prepaid wireless.
• How to save money on food. Tammy called to ask advice for saving at the grocery store. The three of us contributed our best advice.

During the show, Karp and I both ranted a bit. Karp complained about people who buy bottled water. (I confess that I'm guilty of this.) "This is stuff that falls from the sky for free," he said. And I ranted about the new Joan Rivers show How'd You Get So Rich?, which is lowest common denominator television at its worst. It's all about glitz and spending when it could have been so much more. (I'd like to see a Millionaire Next Door television show that profiles the rich and frugal.)

Be sure to join us next week when we speak with Michael Hampton from the Career Development Center at Western Oregon University. Hampton will be chatting with us about job hunting skills.

The Personal Finance Hour
Jim and I host The Personal Finance Hour nearly every Monday at 3pm Pacific (6pm Eastern). For the next week, our conversation with Greg Karp will be available via this widget (after that it will be replaced by the next episode):

You can always find this show (and other episodes from the archive) by following this link, which will open in iTunes. Finally, please note that every week Brain from My Next Buck takes the time and effort to create detailed show summaries, which you can find at personalfinancehour.com.

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• The 1-2-3 Money Plan
• The Personal Finance Hour, Episode 11: Frugal Weekend Fun
• The Personal Finance Hour, Episode 12: Earning Extra Money
• The Personal Finance Hour, Episode 4: Couples and Finances
• The Personal Finance Hour, Episode 3: Finding Balance