Renters Insurance Basics
A move to a new apartment is no simple task. You have to worry about paying deposits, transferring the utilities over to your name, starting your cable service, and more. With so much to do, an insurance policy is probably the furthest thing from your mind. However, purchasing renters coverage is just as important as your other move-in tasks. Don't make the same mistakes many renters make when they move into a new place. Renters coverage is a form of home insurance for people who rent their homes. You might live in an apartment, duplex, or home, but if you rent your place of residence, you need renters insurance. In this post, we'll discuss the ABC's of renters insurance, including standard coverages, covered perils, and types of policies.
Standard Coverages
Every basic renters insurance policy will come with two main protections: physical damage coverage and liability coverage. The physical damage component of the policy will pay out benefits if the belongings you store in your rental are lost or damaged. For instance, if your computer equipment were stolen from your apartment, the physical damage portion of your policy would reimburse you. Secondly, renters insurance policies offer liability coverage. This portion of the policy will pay for your legal defense and any judgments against you if you are sued for an accident or injury that occurred on your property.
Covered Perils
In the insurance industry, the typical renters insurance policy is known as "HO-4" coverage. This type of policy will protect you from 17 different perils, including:
- Falling objects
- Lightning or fire damage
- Theft
- Vandalism
- Wind and hail damage
Replacement Cost Coverage vs. Acutal Cash Value
Aside from the level of coverage you select, the biggest decision you will have to make in purchasing renters insurance is whether to go with replacement cost coverage or actual cash value coverage. With actual cash value renters coverage, the insurance company will only pay you for the present-day value of the lost or damaged item(s). For instance, you may have bought a computer two years ago for $900, but after factoring in depreciation, the computer may only be worth $200 or so. In that case, the insurer would reimburse you based on the $200 estimate, not the original purchase price. On the other hand, with replacement cost coverage, your insurer will pay out whatever it would cost to buy the lost or damaged item new today. Staying with the previous example, that would mean you would get $900 or whatever it would cost to replace your computer new.
