Covering Your Assets
As a renter, you may think that your home and its contents are insured through your landlord, property manager or homeowner. Indeed, the building structure and any materials belonging to the landlord are. But all of the stuff inside the rental property – all of your stuff – is not. So should a fire, thief or broken pipe seize your possessions, your personal savings account alone will be left to cover damages and replacements. Unless you have renters insurance.
Unlike other property insurances, such as car and homeowner, renters insurance is not required by law, but that does not make it unnecessary. In addition to covering destruction from fire, wind, lightning, building collapse, smoke, theft (including identity), busted pipes and frozen air conditioners, renters insurance provides liability insurance should anyone get injured in your home. As with all other insurance policies, the cost and coverage of renters insurance varies based on what you have, where you live and what discounts you qualify for, but here are some Rentals.com tips for investigating your need for insurance for your home, even if you don’t own the place.
Take Inventory
Before you apply for renters insurance (and as a means to deciding if it is worth your investment), take thorough inventory of all of your things: furniture, clothing, electronic devices and appliances as a start. (Include jewelry, but be aware that most policies have a $2,000 jewelry limit, so you might consider taking out a separate policy on expensive items.) Keep the receipts and note the serial numbers for your most valuable items, so you can recover the most value/money should they need to be replaced. For visual evidence, take pictures. And if you decide to invest in renters insurance, update your inventory list at least once a year.
Know Policy Specifics
Most renters insurance policies cover all weather, fire and building malfunction related damages. However, most DO NOT cover floods. (If you live in a flood prone area, most landlords and property owners strongly suggest you invest in separate flood insurance.) Any possessions stolen out of your locked car are usually included in the policy, but be sure to note that renters insurance covers the contents of the car only and not the car itself. Most policies are effective everywhere you go, including vacation, but be diligent about knowing exactly where the policy is applicable. Also be sure to note the limits and deductibles on the policy you consider and/or buy. If the deductible is higher (and thus, your monthly payment is lower), make sure you can keep the deductible amount in your savings.
Actual Cash Value v. Replacement Cost
Damages are recouped one of two ways: actual cash value (ACV) or replacement cost. ACV pays the value of the property at the time of the loss. Therefore, it includes depreciation and, often, estimation. Replacement cost actually replaces the lost item, making it the more appealing of the two options.
Liability Concerns
Anyone who slips, falls, trips or tumbles in your house could hold you accountable, and fighting the claim in court could cost you thousands. Renters insurance covers hospital bills and legal fees in either (or both) cases.
Estimating Cost
Location is central to policy price. If you live in a neighborhood prone to theft, expect to pay more. However, if your home has interior sprinklers, security or staff at the front door or desk, a burglar alarm system and/or smoke detectors, you will likely qualify for a discount. Discounts are also often available through jobs and professional and alumni associations, so be sure to check with both your networks and your selected company about your qualifications. Policy costs vary greatly based on the overall value of your possessions, but for a very general guide, here are a few mock scenarios. (Keep in mind that deductibles, not included here, will also vary.)
For $15,000 worth of possessions, expect to pay about $15 a month.
For $10,000, about $10 a month.
For $5,000, about $8 a month.
Regardless of cost, renters insurance is still an added (and not required) expense. But it at least deserves consideration. If you opt out of it, be aware of the risks, and if you decide to move forward with it, be thorough in your research to select the best policy for your needs.