Introduction to Renter’s Insurance

So you don’t own a home – that doesn’t mean you don’t need insurance to protect your belongings in the event of a fire, flood or other major disaster. What you need is a renter’s insurance policy.

What is a Renter’s Insurance Policy?

Renter’s insurance is a specific policy that will reimburse you for lost property in case a qualifying event should destroy any. Most policies cover 16 major types of events, including fire, theft, vandalism and many other hazardous situations. Floods and earthquakes typically aren’t covered, so you may need to purchase additional coverage if you live in areas that are prone to these events.

The major distinction between renters and homeowners insurance is that renter’s policies don’t cover the building you live in, only your posessions. But as you don’t own the home, this isn’t a concern – the owner of your building carries a policy that will cover the cost of these repairs.

What Should You Look For?

A renter’s insurance policy typically covers the replacement of your belongings up to a certain dollar amount that you specify – typically between $ 20,000 and $ 40,000, depending on the size of your home and the quality of the items in it.

However, there are two types of replacement policies and this is an important distinction that you need to be aware of – the difference between replacement cost policies and actual cash value (ACV) replacement policies. An ACV policy will cover you for the value of your positions at the time of the qualified event, while a replacement cost policy will reimburse you the full cost of replacing the items you’ve lost.

To make that distinction clearer, let’s look at an example:

Suppose you purchased a stereo system that was worth $ 1,000 four years ago, but is only worth $ 250 today, even though it would cost you much more than that to replace it. An ACV policy would only pay the $ 250, but a replacement cost policy would pay enough to replace it with a comparable system in today’s market.

In addition to choosing between an ACV policy and a replacement cost policy, you’ll want to look for the same things you’d want to find from other insurance policies – a reputable provider, an affordable premium and extra coverage to match your unique situation.

Getting Started with Your Renter’s Insurance Policy

Shopping for a renter’s insurance policy is a simple process – just request quotes from several different providers, review their policies and select the one that best suits your needs. Completing the paperwork shouldn’t take more than a few minutes and can usually be done over the internet or on the phone.

Once your policy is in effect, there’s still one final step in getting started with your renter’s insurance policy. You’ll also want to make a photo inventory of your most important belongings to back claims in case disaster strikes. You don’t need to document every plate in the kitchen or shirt in the closet, but do take pictures and document the most expensive items you own and estimate the total value in each room.

Finally, be sure to store a copy of this inventory outside of your home and update it periodically. Though you get renter’s insurance hoping you won’t ever need it, having your paperwork in order will help if you ever do need to make a claim.

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