If you rent a house or apartment, your landlord’s insurance will only cover the costs of repairing the building if there is a fire or other disaster. There is no coverage provided to protect your personal property or negligence. You need your own coverage, known as renters or tenants insurance in order to financially protect yourself and your belongings.
Renters insurance includes three important types of financial protection:
- Coverage for Personal Possessions
- Liability Protection
- Additional Living Expenses
The following is a brief overview of what renter’s insurance is and how it can protect you.
A. Coverage for Personal Possessions
- Determining a limit. The first step to insuring your personal possessions is to determine an appropriate limit to replace everything in the even of a total loss due a fire or other covered calamity. The quickest way to do this is by preforming a home inventory. A home inventory will provide a detailed list of all your belongings and associated value.
- Type of coverage. There are two types of coverages available on a standard policy: replacement cost and actual cash value. Replacement cost pays for the cost to replace your property with like kind and quantity. Actual cash value pays to replace your possessions minus a deduction for depreciation.
- What disasters are covered? A standard renters insurance covers you against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (such as when the tenant upstairs leaves the water running in the bathtub and floods out your apartment or a burst pipe). Every policy will have a variety of exclusions with the two most prevalent being flood and earthquake.
- What is a “floater” and do I need one? If you have expensive jewelry, furs, sports or musical equipment, or expensive electronics like a laptop, consider adding a floater to your policy. Most standard renters policies offer only a limited dollar amount for such items; a floater is a separate policy that provides additional insurance for your valuables and covers them if they are accidentally lost. .
B. Liability Protection
- Determining a limit. Liability coverage protects you against bodily injury or property damage caused to others due to your negligence. It pays for both the cost of defending you in court and court awards—up to the limit of your policy. Most standard renters insurance policies will generally provide at least $100,000 of liability coverage, but additional amounts are available.
- What about an umbrella? If you need a higher liability limit, you can purchase a personal umbrella liability policy. An umbrella policy kicks in when you reach the limit on the underlying liability coverage provided by your renters or auto policy. To purchase an umbrella policy, most insurance companies will require higher limits of liability on both your home and auto insurance.
C. Additional Living Expenses
- What happens if I can’t live in my home due to a disaster? If your home is destroyed by a covered claim and you need to live elsewhere, renters insurance provides additional living expenses (ALE). ALE pays for hotel bills, temporary rentals, restaurant meals and other expenses you incur while your home is being repaired or rebuilt.
D. Discounts
Insurance companies often offer discounts on renters insurance if you have another policy with them for your car or business. You can also get discounts if you:
- Have a security system
- Use smoke detectors
- Use deadbolt locks
- Have good credit
- Have multiple policies
- Stay with the same insurer
- Are over 55 years old
If you would like to find out more about a renters insurance policy and how it can protect you and your family, please feel free to give our office a call.
