Renter’s insurance may be the most underestimated of all insurance policies.
Many tenants assume that they don’t need renter’s insurance because any hazards will be covered by their landlord’s insurance—after all, they’re the ones who own the property, right?
The landlord’s insurance will cover only what the landlord owns, and that will be limited to the land and the physical structures on it. Anything inside the building that you own will be excluded by the landlord’s insurance company.
For that reason, you need to have renter’s insurance.
What You Need to Know Before You Get Renters Insurance Quotes
What do renter’s insurance plans usually cover?
Much like a homeowner’s insurance policy, renter’s insurance policies typically cover fire, theft, vandalism, utility malfunctions (plumbing and electricity), weather related damage and a host of other hazards.
Two things you should be aware of in regard to what renter’s insurance policies will and won’t cover:
- Flooding and earthquakes are not included. If you live in an area prone to either you may need to get specific policies to cover those hazards.
- Any hazard that isn’t specifically listed isn’t covered! If your renter’s policy doesn’t list water damage from faulty plumbing, then you aren’t covered for it.
Renter’s insurance policies, like homeowner’s policies, are characterized by a lot of assuming as to what’s covered.
Never assume something’s covered when it comes to renter’s insurance!
How much coverage should you buy?
The answer to this question will depend on how much money you have tied up in personal possessions.
For some people, a few thousand will be enough, while for others $100,000 won’t be sufficient. You should have at least a rough idea as to how much your possessions are worth and be guided by that estimate.
For most people, coverage equal to at least $25,000 to $50,000 will be enough. But if you have certain items that are worth a substantial amount of money, such as jewelry or antiques, you should consider getting additional coverage for those items. Make sure you discuss any special valuables you own when pricing out policies.
For example, after I proposed to my soon-to-be wife we made sure her ring was covered in our rental insurance.
Personal liability coverage
This is one form of coverage that may not be automatically included in your renter’s policy. Adding it will cover you in the event someone visiting your home is injured, as it will cover the injured party’s medical costs and any legal expenses or damages in connection with the injury.
Your landlord’s insurance will probably cover most personal liability issues since the property and physical structure are the owner’s responsibility. However a renter’s policy will cover accidents that are not property or structure related, such a defective furniture piece.
Under a replacement cost policy the insurance company will reimburse you for the retail value of the items that you’ve lost. In other words, with a replacement cost plan you’ll get full replacement value, not the depreciated value.
If for example you lost, among other things, a living room set that you paid $2,000 for, and the set is five years old, the insurance company will reimburse you for the full $2,000. The fact that the set is five years old and worth far less on resale isn’t an issue. You will be in a position replace your set with a comparable, brand new one.
For most people, this will be the better policy to have (though it will be more expensive).
Actual cash value
An actual cash value (ACV) policy will reimburse you only for the current value of the item lost.
Using the living room set example from above, if the set is five year old and has a current value of $500, then $500 is all you’ll get should the set be destroyed.
Why would you even take such a policy? Cost is one factor; since ACV policies pay out less in benefits, they’re also generally less expensive to buy. If the choice is between an ACV policy and no renters coverage at all, you’d be better to take the ACV than to be uninsured.
Another reason might be if you’re a very frugal type who avoids buying new and prefers second hand merchandise. Since what ever you buy will be closer to actual market value, the ACV policy may suit your needs perfectly.
Inventory your belongings
This step is recommended for any insurance policy. You don’t need to do a detailed inventory of every item you own, but some sort of general baseline should be established.
Start by inventorying your most valuable possessions—furniture, entertainment equipment, jewelry, artwork—anything worth at least a few hundred dollars. Take photos and keep purchase receipts.
As to general possessions, take photos of each room in your home, including the cupboards, closets, storage areas and garages so that there’s a general idea as to what you had.
VERY IMPORTANT! Your inventory records should be stored outside your home so that they aren’t destroyed by what ever consumed the rest of your possessions. A service like Evernote or Dropbox is an easy option to store your insurance pictures in the “cloud.”
Your inventory will enable you to be prepared to get the full value of your possessions in the event of a claim.
For the most part renter’s insurance is pretty inexpensive yet it covers so much and is very important to have. Don’t get caught needing it. Take a little time and get a renter’s insurance policy and have peace of mind that your apartment is covered.
Have you ever had to make a claim on a renter’s insurance policy? How did it work out for you?
To help you out I’ve listed a couple of companies to check for a renter’s insurance quote: