Renters Insurance Basics
When a tree falls on your apartment building water seeps into the hole it made in the roof, most likely your landlord has insurance for the damage to the building. Often, renters assume that the landlord’s insurance coverage will reimburse for damages to their personal property as well. This is rarely the case. In fact, some landlords require tenants to purchase renters insurance to protect themselves from lawsuits.
If you keep anything in your apartment that water from a leaking roof could damaged and that you cannot afford to replace, you need to consider renters insurance. This includes electronics such as your laptop or computer games, small appliances, jewelry, book collection (remember how expensive that Physics textbook was), and even your clothing.
What Does It Cover?
According to Insure.com, standard renters policies cover sixteen basic types of loss:
1. Fire or lightning
2. Windstorm or hail
4. Riot or civil commotion
5. Damage caused by aircraft
6. Damage caused by vehicles
8. Vandalism or malicious mischief
10. Volcanic eruption
11. Falling objects
12. Weight of ice, snow, or sleet
13. Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
14. Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
15. Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
16. Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
You might notice that this list does not include damage from earthquakes or floods. These two perils require special policies, endorsements or a specific rider. If you live near the ocean or where hurricane damage is possible, a separate policy covering damage from high winds is a good idea as well.
How Much Coverage Do I Need?
While a burglary may necessitate just replacing your electronics, a fire could mean you lose everything, so take an inventory of everything you keep in your apartment and choose coverage that would replace all of it should the worst happen and you lose everything.
In general, a higher the deductible means a lower the premium. It is often tempting to choose a higher deductible for the lower premium payment. This method is only a good idea if you have ready cash available, perhaps in a savings account, equal to the amount of the deductible. Remember though, if you also have a deductible on your automobile insurance and the damage is from a natural disaster that affects both, you will need to keep the amount of both deductibles available in savings.
Actual Cash Value (ACV) vs. Replacement Cost Value (RCV)
Actual Cash Value covers the current value of your property at the time of loss, so if your computer is a couple years old, the amount your coverage reimburses reflects depreciation to what a used items might cost. The older an item is, the less ACV it is worth. Replacement Cost Value, however, covers the cost to replace your damaged property with a similar current product with no depreciation. While RCV coverage costs more than ACV, it usually is worth the additional premium.
Ways to Save
To take advantage of available discounts on renters insurance, consider bundling coverage with the same company as your automobile insurance. Some companies give a discount if you keep fire extinguishers on hand, or have dead bolts on your doors. Consult your landlord to see if he will add dead bolts and window locks for you. Other policies offer a break if the building has a fire sprinkler system or monitored security.
Often, liability insurance is standard with a rental policy. In case of an accident, or if a guest slips and falls, you are protected from legal claims up to the limit of your policy. If you have a pet, however, a separate liability rider may be necessary to cover injury to someone from a bite, for example. Certain breeds are too high of a risk for insurance companies to cover, so if you plan to get a pet, consult your insurance company to make sure your policy will cover them.