General Overview of Renters Insurance

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renters insurance guide

Many millions of Americans rent a home or apartment instead of owning one. It’s easy to make the case for homeowners’ insurance, since you own the home and need to protect it against all sorts of damage, theft and other perils. However, even though you don’t own your rental property, your home contains much of your personal property, and that’s the compelling reason to own renters insurance.

What's Renters Insurance

Renters insurance is coverage that protects renters from many costly threats, including:

  • Fire and smoke

  • Vandalism

  • Water damage from water heater, plumbing or HVAC

  • Theft

These hazards can result in losses if your personal property is stolen or damaged. For example, if your belongings are destroyed by fire or are stolen, your policy will help you pay for repairs or replacements. Furthermore, your policy will usually cover your personal property it’s damaged or stolen outside your residence.

These costs can be substantial, and may even render your rental unit unlivable for a period, forcing you to stay in a hotel or temporarily rent another abode. Most renters insurance policies include additional living expense coverage, which reimburses you for living costs when a covered loss makes it impossible for you to inhabit your residence. This coverage reimburses you for hotel/rental expenses, the cost of food and many other expenses.

Limits and Deductibles

In order to keep premiums affordable, your renters insurance policy will impose certain limits and deductibles on your personal property coverage. For example, your policy might impose a $1,200 limit on your jewelry. However, you can choose to increase the maximum coverage on costly items, like expensive jewelry collections, art, antiques, collectibles and other high-value belongings. This additional coverage is specified as scheduled personal property within your policy. For very expensive items, you can add separate floater policies with high coverage limits.

A deductible is an amount for which you are responsible when you claim a covered loss. For example, suppose you experience a small fire that destroys $3,000 in clothing and furniture. If your policy has a $500 deductible, then you’ll be reimbursed $2,500, and the other $500 is your out-of-pocket expense. Deductibles apply to personal property, and may also apply to other types of coverage. Typically, you can choose the deductible amounts, bearing in mind that higher deductibles reduce your premiums.

Depreciation

Most belongings lose value over time, a phenomenon called depreciation. A typical renters policy will give you two choices for covering your belongings:

  1. Actual cash value coverage: the renters policy covers your belongings for their replacement cost minus depreciation. The insurance provider will specify how it figures depreciation

  2. Reimbursement coverage: you’re covered for the full replacement cost of damaged or stolen belongings. This protects you from both depreciation and inflation, because it reimburses you the amount you need to replace the item as of the date of the claim. Naturally, reimbursement coverage is costlier than actual cash value coverage

If you choose reimbursement coverage, you might receive two checks for covered belongings. The first will cover the actual cash value, and the second check will cover the remaining amount you need to complete the purchase or repair.

Liability Protection

Another coverage often provided by renters insurance is liability and guest medical protection. This coverage protects you when you’re legally liable to pay for injuries or property damage occurring on your property. For example, suppose your guest slips on your waxed kitchen floor and suffers a broken leg. Liability protection, subject to the deductible, covers the guest’s medical costs and lost income.

It’ll also cover legal costs associated with the accident. Some policies also cover liability costs incurred by family members occurring away from your residence. For example, if your son is visiting a friends house and throws a football through a window, the policy would cover the repair cost.

Items Not Covered

Typically, renters insurance doesn’t cover certain losses, including the costs arising from:

  • Damage to the dwelling structure

  • Earthquakes

  • Floods

  • Sewer backup

However, certain insurance providers will sell you additional insurance to cover these types of events.

Extra Protection

Insurance providers constantly look for additional ways they can serve you. Renters might be able to add various types of coverage to their rental policies, including:

  • Extended coverage: for expensive items like furs, watches and jewelry

  • Scheduled personal property: individual expensive items that have been appraised can be scheduled for higher coverage limit

  • Flood insurance: sold by the federal government and incorporated into renters policy

  • Personal umbrella policy: this is liability protection that covers costs arising from accidents that exceed the limits of your renters or automobile insurance

Filing a Claim

Many providers offer multiple methods to file a claim, including:

  • Calling your insurance agent

  • Calling a toll-free national number

  • Visiting the insurer’s claim website

  • Using a mobile app, if available

  • If a natural disaster occurs that affects many families, the insurer may set up special facilities for you to contact

You should work with your provider to arrange for any emergency repairs and to protect against additional damage. When filing your claim, you’ll need proper documentation, including photographs, videos and written descriptions.

You need to have the claim approved before beginning repairs. Usually, the claim agent will wrap up the process quickly so that you can repair or replace the covered items.

Costs

Renters insurance is not very expensive, frequently costing less than $20 a month for an average policy. You might also garner extra savings by bundling your renters insurance with your automobile insurance and/or an umbrella liability policy.

Some folks don’t spend the modest premiums for renters insurance in the belief that they’re covered by their landlord’s insurance, but this isn’t true – your landlord’s policy only covers the physical structure, not your belongings. Before you assume you don’t own enough belongings to require renters insurance, take the time to do an inventory.

In addition, suppose your apartment is burgled and your checkbook is stolen. Your renters insurance might cover any loss you incur due to forged checks. Even if you own a modest number of belongings, you should still consider renters insurance to protect you if an accident occurs in your residence.