There's a lot of confusion about renting and insurance. It's a popular misconception that, since the landlord has insurance, you don't have to worry about coverage of your own. If your apartment's living room sustains fire damage, the walls, carpeting, ceiling and floor may be covered by the landlord's policy, but your couch, chairs, electronics, books and other personal items won't be. The distinction is pretty simple: If you brought it with you when you moved in, you're responsible for insuring it.
Only about a third of renters have insurance in place. This is partly due to a poor understanding of their responsibilities. But the cost of insurance also plays a role. Students and low-income families are often renters. When money is tight, insurance can be one of the first things to fall off the to-do list. The good news is that a renter's policy is relatively inexpensive. Depending on where you live, you can get $30,000 worth of personal property coverage (the amount often recommended for the average renter with a two-bedroom apartment) for less than the price of a monthly trip to a pizza joint (about $250 a year).
We'll help you become an informed and well-protected renter.
Before you sign up, there are a few things you should know about choosing a renter's insurance policy:
- Depreciated value or replacement cost - The least expensive policies will replace lost, damaged or stolen items at their actual value, otherwise known as depreciated value. If you're still watching an analog television, that could mean pennies on the dollar, if that. Slightly more expensive policies (with about 10 percent higher premiums) will cover items for what's known as replacement cost. If your sofa gets waterlogged, you get compensation valued at how much it would cost you to replace the sofa in today's dollars.
- Per item limits - Take an inventory of your belongings and be aware of their value before you sign up for insurance of any kind. Policies set per item limits for things like jewelry. If you have a piece that's valuable, like Gran's pearl necklace, you'll want to include added coverage for it.
- Pick your peril - Here again, there are two ways to insure your belongings. A named peril policy spells out the types of events that the insurance covers. This will typically include things like theft and fire. An all peril policy will spell out what's not covered. You're protected for everything that isn't mentioned. If you think there's a chance that your new recliner will be mauled by the neighbor's pet iguana, a policy that covers unforeseen contingencies may be a good idea.
- Personal liability - Renter's insurance policies usually incorporate some personal liability coverage, too. Where personal property insurance protects your stuff, personal liability insurance protects you against loss resulting from your actions, even when you're not at home. A policy with $30,000 in personal property coverage will typically include about $100,000 in personal liability insurance. If you accidentally trip someone who breaks a leg as a result of your clumsiness, personal liability coverage will pay his medical bills or even for you to hire an attorney to represent you in a lawsuit.
- Choose a deductible - As with auto and medical insurance, there are deductibles in renter's insurance, too. The higher the deductible (the amount you pay out of your own pocket before the insurance kicks in), the lower the premiums (the monthly or yearly charges you pay for the insurance policy.)
If you have other insurance, like auto insurance, adding a renter's policy through the same carrier may be a good idea. Some carriers offer attractive discounts for existing customers. It's one way to lower the cost of the policy. Adding safety features to your rental, like a security system or fire extinguisher, can sometimes lower your premiums, too.
When you rent a home or apartment, renter's insurance is an effective way to protect you against loss. Take an inventory and start shopping around. You may be surprised how easy it is to get affordable coverage.
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