6 Essentials to Look For in Your Renters Insurance Policy

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Person fills out an application for a Renters Insurance policy.

No one likes to think about losing all their possessions — or even losing a few of them. But if a devastating fire or storm hits your apartment or a car veers into your living room, everything you own can be lost in an instant. You may not think you have a lot of valuable things now, but when they’re gone, the emotional and financial loss you incur can be devastating. Renters insurance can ease that pain, not to mention keep you covered in the event of several other catastrophes.

Of course, renters insurance policies have a lot of variables to them. Before you sign anything, you’ll want to check each of these sections carefully to make sure your essential needs are all being met.

Coverage Limits

Understanding this section can be tricky because of the wording. Coverage is broken down into two categories. For example, you can have $20,000 coverage for property and a much lower limit for personal property. That means the $20,000 covers only the structural damage, but not all the stuff inside like furniture, electronics, and jewelry. In many cases, the latter items may be worth more than the structural loss. Many policies have caps of around $1000 for lost electronics, for instance, which probably won’t be enough to cover your TV, PC, laptop, game consoles, and audio equipment. So make sure to ask about policies that adequately cover high-end items.

You should also make sure your personal liability coverage is around $300,000. This is especially important if the damage is your fault, such as a candle or kitchen grease fire igniting a devastating blaze in your home. Personal liability insurance also covers you if a person is hurt in your home and they sue you. This could be as simple as slipping on a spill in the kitchen or bathroom or tripping over a throw rug. Someone can also sue you for property damage, such as something falling on their car while it’s parked in your private driveway.

Flood and Earthquake Damage

Just like most types of property insurance, renters insurance doesn’t typically cover every calamity you can imagine, including damage caused by earthquakes and floods. If you live in an area prone to these incidents, you’ll be happy to hear that flood insurance is offered by the National Flood Insurance Program. Earthquake insurance is also available from other sources. Some renters insurance providers even offer flood and earthquake insurance riders for higher premiums.

Replacement Cost of Items

An important choice you have to make when choosing your renters insurance policy involves items that are lost or stolen. In most policies, there’s a difference between actual cash value replacement and the replacement cost of items.

The term “actual cash value” is rather ambiguous. Some courts deduce that it means “fair market value,” which is the amount a buyer would pay a seller if the item was sold on the open market through an ad or on an auction website. That means if you paid $1000 for your PC and it’s five years old, you might get $500 for it. If your renters insurance policy terms state that your losses will be replaced for “actual cash value,” that means you only get $500 to replace your PC.

With a replacement-cost policy, the insurance company pays for the cost of reimbursing the item as new. The catch here is the deductible, which usually ranges between $500 and $1,000. That means if you have $20,000 replacement-cost coverage, you pay the deductible and the insurance company pays the rest.

To make claims easier, keep an inventory of everything you own that’s valuable, including receipts, model numbers, pictures, and anything else you think will help you get the money you deserve.

Security Feature Discounts

Many insurance companies offer significant savings on renters insurance if you have smoke detectors in your home, deadbolt locks on all exterior doors, other types of security systems like gates or electronic alerts, in-home fire extinguishers, and/or working smoke detectors. This may require a visit from an insurance representative to verify the equipment is working, but it’s well worth your time and money to welcome them.

Temporary Housing

If you are the victim of a disaster that makes your home unfit to live in, you’ll need your renters insurance to cover the cost of living off-site until the structure is restored, which could take up to a year or more. During this time, you should do your best to stay informed on current local rent prices, especially if your rent is controlled or you know you pay less than the norm. Make sure your insurance company can cover your living costs, including food, gas, and other incidentals. In best-case scenarios, landlords will also help with these costs, but you can’t really count on that.

Car Theft/Damage

When reviewing rental insurance terms, many people don’t consider the contents of their vehicles. The majority of auto insurance companies cover damage to your car or truck but not what’s inside, including items that are stolen from your car. Check the fine print on your renters insurance policy to make sure they cover phones, laptops, GPS systems, sound systems, clothes, strollers, suitcases, and anything else that’s stolen from your car or damaged or destroyed in a crash.

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