Rental Insurance: What Every Tenant Must Know About Covering Personal Possessions
Moving in to your first apartment is an exciting time. But before you get wrapped up in decorating the place to fit your personality, take inventory over your life. Whether you realize it or not, you have personal possessions that are worth quite a bit of money. Clothing, electronics, appliances, linens, kitchen utensils — each one of these things cost money to buy, and each one will cost money to replace in the event of a burglary, fire, or other disaster.
That’s why you need renters insurance. Before signing up for it, here are some things that you must know.
You Need A Home Inventory
The Insurance Information Institute (I.I.I.) notes that your home inventory is “a detailed list of all of your personal possessions along with their estimated value.” Having one in place will greatly reduce the time it takes to file a claim and get it processed. I.I.I. offers a free web-based inventory software at www.knowyourstuff.org. Your insurance company probably has a similar feature.
Replacement Cost Vs. Actual Cash Value
There are two types of coverage that you can purchase on a renters insurance policy. The first type is replacement cost. This is generally the most preferred plan because it pays for the full replacement amount of your possessions. If you lost everything in a fire and had to buy all new stuff, this would be the way to go. Actual cash value on the other hand, accounts for depreciation of the specific possessions that are covered. ACV acknowledges that your $2,000 TV won’t be worth $2,000 in five years and neither will your $150 set of dishes. If your renters insurance is set up in this manner, you get a payout for what the stuff is actually worth instead of what it would cost to replace it. The benefit to ACV: it’s about 10 percent cheaper per month than a replacement cost policy.
Many disasters will be covered under a renters insurance policy. According to the I.I.I., “losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (such as when the tenant upstairs leaves the water running in the bathtub and floods out your apartment or a burst pipe),” are all covered. Flooding as an act of nature, on the other hand, is typically not covered, though you can purchase supplemental insurance from the federal government’s National Flood Insurance Program as well as some private insurers.
The renters insurance deductible operates in the same way as any deductible, holding you accountable out-of-pocket for a certain amount of the loss before the payout kicks in. “Deductibles are available as a specified dollar amount, typically $500, $1,000 or $2,000,” the I.I.I. notes. “The larger the deductible, the lower the premium charged for the same amount of coverage, so if you can afford a deductible of at least $1,000, you may get as much as 25 percent off your premium.” Make sure that you choose your plan based on what you can actually afford to pay in the event of a claim and not simply what the monthly premium is.
“Floaters” allow you to go beyond the coverage limits that a standard renters insurance policy places on certain items — particularly “expensive jewelry, furs, sports or musical equipment, or collectibles,” the I.I.I. notes. Your floater will provide additional insurance for your valuables and cover them if they are lost by accident.
The Institute explains: “You will need to present receipts and/or appraisals for the items covered by the floater. It is important that expensive items be appraised properly as you will pay a premium based on the appraised value and in the event of a claim, be compensated for this dollar amount. You can ask your insurer to recommend a reputable appraiser. For some items, like laptop computers, a stand-alone policy may also be an option. Check your renters policy first to see whether your laptop is covered and what the deductible is.”
Renters insurance is as necessary as homeowners insurance, even if it’s not required by law. You have spent a lot of time and money building the life that you have, even if you don’t realize it. Don’t let it all be gone tomorrow because of a simple oversight. Contact an agent about getting set up with this coverage today.