Renters often overlook the importance of insurance coverage for their belongings. They believe they don’t own enough “stuff” to make it worthwhile, but add it up – your computer, big screen TV, clothes, furniture – if you lost it all, it would probably cost thousands in out-of-pocket expenses.
Even if you rent a small space with a few inexpensive items, here are some facts most renters don’t consider when they sign the lease.
The landlord’s policy doesn’t cover your personal possessions. Prudent landlords carry insurance to protect their property, not your stuff. If someone breaks into your apartment and makes off with all your hard-earned possessions, you’ll be the one responsible for replacing them. A basic renters policy will help you protect your personal property.
Make sure to assess all risks. Complete coverage goes beyond protecting your possessions. If someone gets hurt in your apartment, or even in common areas in the building, you could be subject to liability – liability you can help protect against with a well-designed renters policy.
Renters insurance is relatively inexpensive. Insurance companies compete for renters’ business, so basic policies usually deliver good coverage at reasonable costs. Shop around for rates with the same coverage limits to compare “apples to apples”.
Read the renters insurance policy. Know what you’re paying for, what’s covered and what isn’t. For example, does the policy pay out for loss of expensive jewelry or valuable collectables like rare coins? Most insurance companies require a separate policy or a “rider” to your basic policy to provide coverage for big-ticket items. Read the fine print. This is where exclusions are often listed – liabilities not covered under that policy, and liabilities you may need to insure separately.
Raise your deductible can save on premiums. Raising your deductible by a few hundred dollars can save you money each year on your renters policy. Pick a deductible figure you’re comfortable with. If you bank the savings you create by increasing your deductible, you can build up a contingency fund in case you do have a large claim.
Check your current coverage. In your place goes up in smoke tomorrow, you may discover that you’ve been under-insured. Then you’ll pay a lot of out-of-pocket expenses because you didn’t regularly update your renters policy. As you accumulate more personal possessions, or as your personal circumstances change, update your renters coverage to protect all of your assets.
Full replacement coverage provides the cash needed to buy new furniture and restore your life after a catastrophic loss. Replacement coverage is more expensive than actual cash value (ACV) coverage, which only pays what the property is worth at the time of loss. ACV coverage includes depreciation based on age and condition. So, how much do you think the insurance company values your 10-year-old couch? Not much, and not enough to replace it. It may cost more for full replacement coverage, but for most of us, it’s money well spent protecting our possessions.
If you’re not already insured, call a local insurance agency to discuss your coverage needs as a renter. If you already have renters insurance, it may be a good idea to review your policy to make sure you have the coverage you need, and that your deductible is an appropriate amount.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.
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