March 18, 2013
If you rent an apartment or home, having renters insurance is a very inexpensive way to protect your belongings from a wide variety of unexpected events that causes loss or damage. The coverage also provides some liability insurance in the event you are being sued for bodily injury or other accidents that happen to others while they are in your home. The cost of renters insurance is so low, often less than $1 per day, buying it should be a no-brainer. When setting up your policy, you should consider several factors to ensure that you get the coverage you need at the lowest possible premium.
Type of Policy
There are two major types of renters insurance policies to choose from. An Actual Cash Value policy gives you only the amount that your items were worth at the time when you make the claim. Therefore, your old laptop might only be worth a couple hundred dollars. On the other hand, a Replacement Value Policy gives you the amount you need to replace the item with a comparable one. This gives you enough money to actually replace what you own with new items that are similar to the ones you lost. In general, you should opt for a replacement value policy because it is hard to find used items that only cost you what yours were worth.
The main decision you need to make when establishing a policy is how much your maximum coverage is. Your maximum coverage needs to be enough to pay for replacing everything in your home. However, it does not need to cover anything for the structure of the home itself or any of the property owner’s possessions, including appliances provided by the owner, as these are normally covered by the homeowners insurance policy. Estimate your coverage needs by adding up the value of everything in your home, including clothing, electronics, books, furniture, and kitchen items. An easy way to do this is to walk through your house and estimate the cost to replace everything in each room. Add a little buffer to get the maximum coverage you need on your renters insurance policy.
Some items are not covered on renters insurance policies or have limited coverage. If you have a lot of expensive electronics, jewelry, or art, you might need to purchase riders, which add these items to your policy. Ask your insurance agent whether each expensive item is covered or if you need a rider for it.
The deductible on your policy is the amount you have to pay out of pocket before your renters insurance company pays for the rest of the cost of your damaged items. In general, the higher your deductible, the lower your premiums will be. To determine the best deductible, consider how much you would be willing and able to pay, today, if your house burned to the ground and you had to start over.
Using Your Policy
Your renters insurance policy will be most effective at replacing your stolen, damaged or destroyed items if you prepare ahead of time to use your policy. You should create an itemized list of all of your belongings, being as descriptive as possible so the insurance company can see what you have that needs to be replaced in the event of a claim. On your list, include the purchase price of each item and its current value. Pay special attention to furniture, electronics, kitchenware, appliances, jewelry, and other expensive items. Also, take photos of each room as a whole and close-ups of your shelves of books and DVD’s, your closet, dresser drawers, kitchen cabinets, and your most expensive items as additional proof that you own them. Keep an electronic copy of the list and photos on each of your computers and external hard drives. Also burn a copy to a CD and make a print copy to store in a fireproof safe in your home or a safety deposit box in a bank.