Think that just because you don’t own your home or apartment you don’t need some kind of insurance? You are, unfortunately, wrong.
Yes, your landlord or property management company is responsible for carrying coverage on your house, condo, or apartment, but that only covers the structure—the building. Your stuff? That’s up to you to protect. That’s why renters insurance is so important. If something happens to your building, you’re not only possibly homeless, but possession-less, too.
We’re going to examine a few of the ins and outs of renters insurance so you’ll have all the knowledge you need to get the policy you need.
What to Cover
You need to do some homework around your place to get started. You’ll begin by making an inventory of all your valuables. Jewelry, electronics, artwork, musical instruments, antiques, collectibles—if you’ve got ‘em, write ‘em down. Now turn your attention to the everyday stuff that isn’t especially valuable but is necessary—furniture, clothing, and housewares like dishes and pots and pans. If your home were to catch on fire, you’d have to replace these items just to be able to live normally—so yes, they should be considered in your renters insurance policy.
How Much to Cover
There are two basic types of renters insurance policies—replacement cost and cash value.
Replacement cost policies will cover the amount of money it takes (up to the policy’s limit) to replace everything. Cash value simply pays you what everything was worth at the time of the loss.
Replacement policies tend to cost more but are well worth it if you have a lot of stuff to replace or if most of your belongings are fairly new. Electronics, new furniture, and this year’s latest fashions will all cost a pretty penny to replace. Same goes for your not-so-antique computer, by the way. Its price has probably gone down since you bought it. However, to replace it with a new model will certainly cost more than its depreciated cash value.
If you have a great deal of expensive collectibles, antiques, artwork, or heirloom objects, you can consider a floater on the policy. This specifically covers these items in addition to your household belongings and other not-so-precious stuff. You may not be able to put a dollar value on a sentimental item like Grandpa’s antique watch, but you could replace it with a similar one with the money you receive from the floater policy. Most companies require professional appraisals on items covered by floaters or receipts if the items were purchased by the policy holder. This can be an added expense that you will want to consider.
How to Understand the Policy
- Deductible – Your policy will undoubtedly have a deductible. The larger the deductible, the lower your premium, so it may look like a good idea to go for a larger one. However, stop and consider the possibilities of this. Could you really come up with $1,000 or more to start replacing your belongings in the event of a fire or theft? If not, the larger premium may be a better choice if it provides you with a lower deductible. Carefully consider this and talk to a professional for help.
- Coverage – What sort of disasters does the policy cover? Fire, vandalism, theft? How about flood damage? You may need a separate flood insurance policy for that great river-front property. Knowing what the policy does and does not cover in terms of cause of loss can help you determine which policy to purchase, and if additional policies are necessary.Ask about liability coverage, too. Your landlord’s policy probably only covers structural liability—say someone gets hurt on a broken stair. You may need a policy to cover injuries and accidents inside your home too.
Lastly, make sure you are aware of any limitations to the policy—living expenses, for example. Most policies will allow so much per day to cover expenses if you have to live elsewhere for a time. While it may not cover nights at the Ritz, you don’t want to end up at a roach motel, either.
- Possible discounts – Many companies offer discounts if you meet certain requirements. This can lower your premiums, allowing you to afford higher coverage. Some common discounts include:
- Having a security system
- Using a safe to store jewelry and other valuables
- Installing deadbolt locks, window gratings, and other security measures
- Living in a secure or “doorman” building
- Senior-citizen or student status
- Having a good credit rating
- Buying more than one policy with the same company—check with your auto or life insurance company first when considering renters insurance
Roommates may be able to purchase separate and/or joined policies to cover individual and “community” properties.
Townhouses and apartments with attached garages might need extra coverage for the vehicles involved. Check with both insurance companies—renters and auto, if they are different—to determine who covers damage to your car in the event of a disaster or theft.
Renters insurance isn’t typically expensive. The average policy costs around $200-300 a year. But in the event of a theft, fire, or other disaster, an inexpensive policy could mean all the difference in how quickly you recover “normal” living conditions.