In today’s world, we need insurance. Insurance covers us when things go wrong, and provides us with a safety net should something awful happen. This is especially true for those of us who rent an apartment, duplex or other place to live. Renters have most of the same risks that home owners have, such as the need to protect personal possessions and even being liable for accidents that happen within the apartment.
If you do decide to obtain renters insurance, there are various policies and levels of protection available. Not all polices are equal. Also you need to remember just because your landlord has insurance does not mean you have insurance, as by law renters are not covered under the policy a landlord has. The landlords policy simply covers potential structure damage and possibly even damage caused by tenants to the structure, but this does not cover your own personal property. Landlords insurance also does not cover you from being liable for damage that you might cause to the building such as a fire.
Here are the various things to look for in a renters insurance policy to protect your valuables.
Personal property coverage:
All renters insurance polices will cover personal property, however each policy will treat them differently, and not all policies are equal in the level of protection that they provide. When it comes to replacing damaged or stolen property covered by your policy, there are two ways the insurance companies cover you:
Actual Cash Value:
This type of coverage will cover your personal belongings and provide you with money to replace them with one major caveat, which is this type of insurance covers their replacement value minus the cost of depreciation. Depreciation lowers the payout due to the decrease in an items value due to how old the item is, wear and tear, and obsolescence. The formula for depreciation is quite simple actually. If you lost a computer to property damage that had a retail cost of $1000.00 and the computer model had a rated lifespan of 10 years, your computer would lose 10% of its value every year, so if at the time of the loss the computer was 5 years old the actual cash value that this type of policy would pay would be $500.00. Perils that are covered include: Theft, fire and smoke, vandalism and water damage that is not from a flood, also water (sewer) backups are excluded from many renters insurance policies.
Reimbursement Provision: This type of policy covers your items for the full cost to replace them at the time that you make your claim. You do not loose money for depreciation. You typically get paid twice with this type of coverage, the first payment being the actual cash value payment and the last and second payment being a second check to cover the remaining amount needed to replace the item(s) in question. The actual Cash Value payment tends to come quickly and the reimbursement provision payment tends to arrive later.
Other types of add-ons that your insurance company may offer may include these:
Flood insurance: These policies are through the National Flood Insurance plan (NFIP), but your primary renters insurance company will help you obtain this type of policy which covers any and all flood damage. If you live in an area prone to floods this type of policy is highly recommended as water is highly destructive.
Insurance riders for rare or other luxury items: These policy add-ons increase the limits on payments for these types of items.
Loss-of-use coverage: Pays for a place to stay and additional living expenses if your apartment is unlivable due to damage or any covered type of incident.
Sewer or drain backup coverage: Protects you from the serious damage that a sewer back up can do by covering you against losses caused to your valuables.
Earthquake coverage: If you live in an earthquake prone state, this type of policy is highly recommended. It will protect you by covering damage caused by earthquakes.