You’ve found your apartment, signed the lease, and set your move-in day. What’s next? Now you need to purchase renter’s insurance. While some landlords require renter’s insurance for liability reasons, not all landlords do. Purchasing renter’s insurance is an inexpensive way to protect both yourself and your belongings.
When purchasing any type of insurance policy, it is best to both do your own research and to talk with an insurance representative to find out what is best for you. Once you purchase a policy, read over your policy to understand the coverages because policies, coverages, and limits can differ. To help you get started, here are six questions and answers about renter’s insurance.
What is renter’s insurance? Renter’s insurance (or tenant insurance) covers your belongings (electronics, clothing, furniture, etc.), cost of living somewhere else (a hotel, etc.) if you can’t live in your apartment due to covered damage, and liability risks. Renter’s insurance does not cover the dwelling or structure, as this should be covered by the owner of the building.
How much coverage do I need? Before you purchase coverage, you need to calculate the value of your belongings. You don’t have to have an exact number, but you need to know if your belongings collectively equal $10,000, $20,000, etc. To do this, make a list of the items or categories of items you own: television, computer, furniture, clothing, and so on. Beside each item or category, write the value, and then add each value to find your total value.
How much does it cost? A renter’s insurance policy for a typical first apartment has an annual premium of under $200 a year.
What types of losses does renter’s insurance cover? Most insurance companies have a few different coverage options. Here is a breakdown of coverage levels:
Basic coverage
Specific coverages will be listed in your policy and typically include:
Fire or lightning
Freezing of plumbing
Wind or hail
Theft or vandalism
Spoilage of refrigerated or frozen products
Premier Coverage
This level covers what the basic coverage includes plus accidents like:
Damage from spilled paint
Damage from burns on countertops
Power surge damage to appliances
Within these coverage levels, you may choose one of two claim settlement types: actual cash value and replacement cost.
Actual Cash Value: Pays only for the current value of an item, or the cost to repair or replace damaged property minus depreciation. This type of coverage is generally less expensive because it pays less. If you have a five-year-old television, the company will take the cost of a new, comparable model and subtract the amount of depreciation, so you end up with enough cash to buy another five-year-old television, not a new one.
Replacement Cost: Pays the retail value of an item, or the cost to repair or replace damaged property with like item. This type of coverage is generally more expensive because it pays more. If you have a five-year-old television, the company will pay to replace the television with a new, comparable model.
What if I damage someone’s property or someone gets hurt in my apartment? Liability coverage is automatically included in most policies, but you choose how much coverage you want ($100,000, $500,000, etc.). This coverage helps protect you if someone is hurt on your property or if you damage someone else’s property.
Medical coverage is not automatically included in most polices but can be purchased as additional coverage. This coverage provides medical payment if someone else is injured on your property.
Are there limits for items I own? Short answer, yes. Items such as silverware, jewelry, watches, furs, and firearms, among some other items that your insurance representative could list, each have a specific limit on your policy. Unless an item is valued less than the limit on your policy, you need to schedule (or add ) it to your policy and pay an additional premium. You may need an appraisal with a stated value and photographs so you will be paid the correct amount.
For example, if you own a diamond ring worth $5,000, you need to schedule it with specific details like the value, description, carat, cut, etc. If you don’t schedule the ring, you will only be paid the policy limits, which could only be $1,500 or less.
My policy has a deductible; what is that? A deductible is the amount you must pay before your insurance pays. If you have a $1,000 loss, and your deductible is $500, the insurance payout you receive will be the total loss minus your deductible, which, in this case, would be $500. The amount you choose as your deductible often affects your premium. Typically, if you lower your deductible, your premium will rise, and vice versa.
For a first-person account on how renter’s insurance works in real life, read Alissa’s story about what happened when her apartment was burglarized.
