Renters insurance isn’t required by the law or lenders so it is one of the most neglected aspects of smart personal finance. It can be costly if you don’t have renters insurance, especially if a flood drives you out of your lodging or if someone slips and falls on your property and sues. As a result, you could wind up in a deep financial hole or even bankrupt. Also, if a fire destroys or a burglar steals even some of your possessions, you might not be able to afford to replace them. The following is everything you need to know about renters insurance and tips on how to select the right coverage that’s affordable.
What Renters Insurance Is?
Many people choose to rent rather than own a residence to escape the worries of a leaky roof, aging floor coverings and the foundation destroyed by a flood. However, they often are unaware that they should be worried how their apartments and their visitors could be affected by those very conditions – and how much that could cost them. That’s where renters insurance comes in since it is configured to cover the material contents of your residence, legal costs if someone is injured inside and the expenses of living elsewhere when the dwelling is not habitable.
Some landlords require renters to purchase insurance.
According to the Insurance Information Institute, the average cost of renters insurance is about $200. In upscale metro and high-crime areas, the cost could be much more.
Standard policies cover losses related to:
- Whatever crashes through your ceiling because of airplane mishap, damage to trees and snow or ice.
- Fire, lightening and smoke
- Overflow of water from rain, plumbing, household appliance and sprinkler system
- Electrical surge
- Civil unrest
- Car crash
- Volcano eruption
They also cover legal liability and the need for temporary lodging.
Riders to a standard policy or purchase of another policy are needed for certain items such as valuable jewelry, fur coats and collectibles such as art and classic comic books.
A separate policy, as some victims of Hurricane Sandy found out too late, is usually required for flood insurance which is provided by the federal government, but sold through licensed insurance companies. According to the Insurance Information Institute, only about 18 percent of those in the U.S. have flood insurance. The government definition of flooding is the overflow of water from either the ocean/inland streams or from rain storms. Losses from a leak or burst pipe would be covered by standard policies.
Shopping For Affordable Coverage
Since insurance of any kind is an expensive purchase, consumers must shop around for quotes for the kinds of coverage they decide they need. Some large companies, such as GEICO, facilitate free online quotes. For others, you would have to contact those insurance companies by email or phone and then provide details of what you want covered.
Here are factors you have to take into account when shopping for coverage:
- Actual Cash Value (ACV) or Replacement Value: Some policies are written to pay you the value of an item at the time of the loss or the Actual Cash Value. For example, the market value of the television you spent $900 for three years ago may only be $300 since it’s depreciated in value. Other policies reimburse the cost of replacing the item at current prices or Replacement Value. That kind of television may have a replacement value of $800 or less since the price of that particular once-new technology has declined. Although replacement value policies are more expensive, they are seen as worth it if you have a lot of material property.
- Dollar Amount: Standard policies are sold for a fixed amount of overall coverage, not for individual pieces of property. It’s up to you to do an inventory of what items you want to be reimbursed for if they are damaged or stolen. Based on that, you will decide the amount of dollar coverage to get. At that time you are doing the inventory, you should take photos or videos of the merchandise in case there is a dispute about if they had existed and their value. Receipts could prove useful also. Keep those in a container which is fire-proof and water-proof.
- Amount Of Deductible:The higher the deductible, the lower the premium will cost. A high deductible is usually recommended because you probably will not be making a claim unless there is a significant loss. That’s because filing a claim is a serious undertaking. It goes on record with the insurance company and stays there for a specified period. Within that time period, it could raise the cost of coverage if you move and try again to get renters insurance or you could be turned down.
- Dogs: Before selecting a breed of dog, renters have to be aware of which insurance companies won’t cover.
- Discounts: There are a number of ways to bring down the price of the premium. Bundling this coverage with your auto insurance usually results in a sizable saving. That’s why many deal with one company for both. Other discounts are available for those over the age of 55 and the retired. There are also savings for that broad category of protective devices such as smoke and burglar alarms and anti-theft mechanisms such as deadbolt locks.
- Amount of Coverage for Liability:Accidents could happen to guests and, if they sue, the legal, medical and rehabilitation costs can be huge. That’s why some experts advise you to purchase more than the standard amount of liability coverage.
Renters insurance is a key investment in financial security as well as peace of mind. At stake is your ability to have the material possessions you need to function, temporary lodging if catastrophe drives you from your residence and the financial resources to absorb the expenses if an accident occurs under your roof.