Renters insurance reality check
For most of those who rent apartments in the United States, renters insurance is still a concept rather than a priority. Many believe that their belongings will be covered under their landlord’s policy if anything goes wrong. Sorry to be the bearer of bad news, but if anything damages your personal property and you lack renters insurance, it’s gone.
Protecting your personal belongings is, in fact, not expensive and not at all difficult to do. Furthermore, once insured, the policy will offer a three-way protection: coverage for personal possessions, liability protection and additional living expenses.
The first and biggest concern regarding the policy is related to the cost, yet renters coverage starts as low as $125 per year. in fact, the price you pay for a policy is directly proportional to the value of your belongings—the higher the property value, the higher your renters insurance, and vice versa. The policy will also come with a deductible, known as what you’ll pay out of your pocket before the insurance starts. The policy will offer deductibles of a specific amount, typically from $500 to $2,000. In consequence, the larger the deductible, the lower the premium charged.
The first step in protecting your belongings is to know them and the best way to take stock of all of them is to create a home inventory—furniture, clothing, books, electronics, appliances, electronics, appliances and whatever else you own. Here are two more detailed posts on how to create an inventory.
The next step, after you’ve completed your inventory, is to decide what kind of policy you need. There are two kinds: replacement cost coverage and actual cash value coverage. Replacement cost coverage means that the policy will pay the cost of replacing your possessions without accounting for depreciation. The actual cash value coverage takes into consideration what your items are worth including depreciation and not what you bought them for. Even though the replacement cost policy is slightly more expensive (about 10 percent), it gives much more peace of mind as most items tend to depreciate quite fast. The MacBook you purchased a few years ago is now worth significantly less than what you paid for it.
Now you’re secured, protected against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and some types of water damage—burst pipes are covered, but flooding is not. You can get flood coverage from the federal government’s National Flood Insurance Program. Also not covered are earthquakes and jewelry or electronics used for business purposes. In case of expensive jewelry, musical instruments or collectables, you can a add a “floater.” It will provide additional insurance for valuables and also covers them in case you accidentally lose them.
Renters insurance also comes with liability coverage, usually up to $100,000. In a nutshell, this will cover you against lawsuits for bodily injury or property damage done by you, your family members or your pets. The damage caused to your neighbor’s apartment by that leak in your bathroom will be covered by the renters insurance. Similarly, dog bites, but it is important you know that certain breeds are not covered as agencies don’t want to be liable in case of more aggressive breeds. Still, there is a way to solve this part of the problem too, a higher premium.
There are also ways to lower your premium and they include security systems, deadbolt locks, good credit or holding multiple insurance policies. Ask your provider.
Finally, your insurance provides additional living expenses should your apartment turns inhabitable due to fire, water damage, or any of the covered perils. This means that you will get coverage for hotel bills, temporary rentals, restaurant meals and other expenses while your home is being repaired or rebuilt.
Keep in mind that a single policy will cover you, your spouse or immediate family members living with you, but with roommates things are somewhat more complex.