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 If you rent an apartment, condo, duplex or house, you really need to consider purchasing renters insurance. Your landlord's homeowners insurance policy should cover damages to the building, but you need to purchase renters insurance to protect your belongings. You can also purchase liability and certain medical insurance within the renter's policy.
Buying Renters Insurance
Insurance policies will differ from company to company so it pays to shop around. You also need to make sure that you are comparing apples-to-apples between policies. For example, many insurance companies will optionally offer "replacement cost" coverage. This type of policy will pay you the cost to replace an item that was damaged or stolen.
A policy that offers "cash value" will only pay you a fair market value for the item at the time it was damaged or stolen. This type of payment takes into account the depreciation in value of the insured items over time.
Replacement Cost Insurance
This is an extremely important point, so here is an example of what could happen. In fact, this is a real life example:
Replacement Cost Example
Bill's neighbor's oak tree blew down in a storm and came crashing into his kitchen. It destroyed not only a portion of his home, but also damaged appliances in the kitchen. Because he had "replacement cost" he was able to go to the store and figure out what new items would cost - items similar to the ones destroyed. After paying his policy deductible, his insurance company reimbursed him for the replacement cost for each appliance.
In this example, if Bill did not pick up the "replacement cost" option on his insurance policy, he would have been paid only a fraction of the actual cost to replace many of the items damaged. That's because many of the affected appliances were nearly 10 years old.
Categories of Renters Insurance
Renters insurance is very similar to homeowners insurance except it does not include the "dwelling" portion of a homeowner's policy. That's because the actual homeowner would insure their property for damage to the structure itself.
People renting homes need to insure the items in the home from damage or protect themselves and others if someone is injured in their home. That's one reason renters qualify for things like flood insurance offered through the National Flood Insurance Program - to protect their belongings from flood damage.
If you're thinking about renting an apartment or home, and you've never purchased a renters insurance policy before, here is a quick run down of the common categories of insurance:
Personal Property Insurance
Protect personal property in the home or apartment like your clothing, furniture, appliances and certain other assets - subject to limits. For example, their may be a limit on how much your policy will pay for a personal computer, artwork or jewelry.
So if you have valuable collections or even individual items that go beyond the standard coverage values stated in a renter's insurance policy, then you will need to get an endorsement or rider to the policy to cover the full value of each item. As part of that process you may also be asked to justify the value you place on this item via a professional appraisal.
Loss of Use Insurance
Loss-of-use provides payments for certain types of losses when your home is damaged and you cannot safely occupy the dwelling. The most common example here is when you cannot occupy your apartment and you need to stay at a hotel or motel until repairs are made and you can move back into your home.
Personal Liability Insurance
Personal liability insurance provides payments for legal liabilities stemming from damages related to bodily injury or property damage. Liability insurance is used to protect yourself against lawsuits that might arise because something happened to someone else on your property.
This protection can be either against property damage or an injury that might have occurred. Liability insurance will usually pay for the policyholder's defense in court, if necessary. The amount of liability insurance coverage provided by a policy is usually stated for "each occurrence."
Medical Payments to Others
Medical Payments to others is a second form of liability insurance that pays for medical treatment for those individuals that might be injured in your home or on your property. Medical payments covered could include doctor's fees, x-rays, hospital stays and similar expenses. This coverage does not cover you or your family and is NOT as substitute for medical / health care insurance.
Coverage Under Renters Insurance Policies
You need to make sure you understand what is covered in renters insurance and what is not covered. For example, you are typically covered for damages related to incidents such as fire, ice, snow, explosion, smoke, vehicles, falling objects, vandalism, theft, hail, wind and freezing of plumbing systems. Some of these might sound silly, but you're probably not covered for acts of war, earthquakes, nuclear explosions, floods and landslides. (Remember we mentioned earlier where you could get flood insurance.)
This is meant as a general guide to renters insurance. Be sure you check the limits of the policy, especially if you have expensive jewelry, electronics or antiques before you buy a policy and start making premiums payments. Many companies offer riders to renters insurance which can be purchased to close the insurance gap and ensure you are adequately covered for these special items. You also need to take a close look at the deductibles for each category of insurance and balance the cost of insurance with your ability to absorb deductibles in a time of crisis.
About the Author - Renters Insurance
Bill Sharlow is the Editor of Money-Zine.com. Copyright © 2004 - 2007 Money-Zine.com
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