What is Renters Insurance?

Since we did homeowners insurance last week, we’ll focus on renters insurance this week. The two are very similar, though there are some key differences. Some people think that renters insurance is unnecessary, but it can come in handy. Still, the decision is a personal one, and before you make that decision, you want to research your options.

Possessions

Renters insurance protects your possessions. Homeowners insurance protects your possessions as well, but it also protects your home’s structure. When you rent you don’t have to worry about insuring the structure because your landlord has done that. However, his or her policy typically will not cover the contents of the structure.

Renters insurance can provide you with money to help replace possessions that may have been damaged or stolen. For example, your apartment complex catches fire and you lose everything. You would file a claim with your insurance company, and a claims adjustor would come out to investigate. Finding that your possessions had indeed been damaged or destroyed by the fire, the insurance company will then pay out an agreed amount so that you are compensated for your loss.

Liability

Most people know that renters insurance covers your things, but did you know that it can also protect you against lawsuits? Many renters policies have liability coverage. For example, someone, who is visiting your home, slips and falls in the shower. Because this accident occurred in your rental home, you can be held liable for medical costs and other damages. Your renters insurance can help protect you from being sued for these costs.

Odds and Ends

Some renters policies include other types of coverage. For example, your policy may cover other people’s items. Some policies will provide money for you to live elsewhere while your house is unlivable. Some of them will even help cover medical expenses for a guest who was injured in your home. Policies vary widely, and it’s important to go over everything the policy has to offer.

Levels of Coverage

When you are choosing a policy, you will have to determine how much coverage you want. A good way to decide this is to come up with a value for the contents of your home. For example, if you had to replace everything in your house, how much would it cost? This can help to give you an idea of how much coverage you want. Generally, you will want coverage between $10,000 and $50,000. Especially valuable things, such as an engagement ring, might require a separate policy or rider. Valuable items such as these may need to be appraised so that you can get the right amount of coverage.

You will typically have two options when it comes to renters policies. One will give you the actual cash value (ACV) of your items while one will provide you with the replacement cost for your items. With an ACV policy, the value of your items decreases over time, which means you’d get less money if something happened to them. The advantage to these policies is that they do tend to be less expensive.

Lastly, don’t forget, you will typically have a deductible that will vary from provider to provider and from policy to policy. This is the amount you will have to pay out of pocket before your insurance will pay for anything. Also, you will have to pay a monthly (quarterly, semi-annual, or annual) fee, which is called a premium. Typically, the higher your deductible is, the lower your premium will be and vice versa.

So, the three numbers you want to consider when looking at renters insurance are your coverage, your deductible, and your premium. Once you’ve decided on those, you want to be sure to go over your policy with a fine tooth comb. You want to know exactly what is covered by your renters insurance and what is not.

Do you rent? Do you have renters insurance? Why or why not?

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