What to Look for When You’re Shopping for Renters Insurance
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. To financially protect yourself and your belongings you will need your own coverage, known as renters or tenants insurance.
Renters insurance includes three key types of financial protection:
- Coverage for Personal Possessions
- Liability Protection
- Additional Living Expenses
The following checklist can help you choose the right coverage when you are shopping around for renters insurance or discussing your needs with an insurance professional.
A. Coverage for Personal Possessions
1. How much insurance should I buy?
Make sure you have enough insurance to replace all of your personal possessions in the event of a burglary, fire or other covered disaster. The easiest way to determine the value of all your personal possessions is to create a home inventory–a detailed list of all of your belongings along with their estimated value.
The Insurance Information Institute offers free Web-based home inventory software, available at www.knowyourstuff.org.
2. Should I choose replacement cost or actual cash value coverage?
Actual cash value policies include a deduction for depreciation. Replacement cost coverage costs more–but can be well worth the extra expense when the time comes to replace your belongings.
3. What disasters are–and are not–covered?
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 from a burst pipe.) Most renters insurance policies however, do not cover floods or earthquakes. Flood coverage is available from the National Flood Insurance Program and a few private insurers. You can get earthquake insurance as a separate policy or have it added as an “endorsement” to your renters policy, depending on where you live.
4. What is my deductible, and how does it work?
A deductible is an amount of money you pay out-of-pocket before the insurance coverage kicks in. Deductibles are generally available as a specified dollar amount; the larger the deductible, the lower your insurance premium. You will be responsible for paying the deductible each time you file a claim, so keep this in mind when determining your insurance budget.
5. What is a “floater” and do I need one?
If you have expensive jewelry, furs, sports or musical equipment, or collectibles, consider adding a floater to your policy. A floater is a separate policy that provides additional coverage for your valuables if they are lost or stolen.
6. Am I covered if I am traveling or away from home?
Most renters policies include what is called off-premises coverage, meaning that belongings that are outside of your home are covered against the same disasters listed in your policy. For example, property stolen from your car or a hotel room while you’re traveling would be protected.
B. Liability Protection
1. Do I have enough liability insurance?
Renters insurance provides liability protection that covers you against lawsuits for bodily injury or property damage done by you, your family members and even your pets. This coverage pays for both the cost of defending you in court and court awards–up to the limit or your policy. Make sure the amount of liability coverage provided by your policy is sufficient to protect your assets.
Your renters policy should also include no-fault medical coverage as part of the liability protection. Medical payments coverage allows someone who gets injured on your property to simply submit his or her medical bills directly to your insurance company so the bills can be paid without resorting to a lawsuit.
2. Do I need an umbrella liability policy?
If you need a larger amount of liability protection, consider purchasing 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. It will also cover you for things such as libel and slander
C. Additional Living Expenses
What happens if I can’t live in my home after a disaster?
If your home is destroyed by an insured disaster and you need to live elsewhere, renters insurance provides additional living expenses (ALE) coverage, which pays for hotel bills, temporary rentals, restaurant meals and other expenses you incur while your home is being repaired or rebuilt.
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
Companies offer several types of discounts, but these can vary widely by company and by state, so review your options carefully. As always, the same rule-of-thumb applies: Shop around for the best deal.