How Much Renters Insurance Do I Need?
by Ben Bontekoe
While homeowners are generally required by their lenders to provide insurance on their home in the event of damage or loss, renters generally don't have a similar requirement. However, even if you're renting, it's often a good idea to have an insurance policy that covers your valuables. Your landlord's insurance will generally cover the costs to replace your home, it most likely won't replace your possessions.
Renters insurance will help you replace your possessions in the event they are lost due to a fire, various types of accidents or theft, depending on the policy. After paying a deductible, you will be reimbursed for your valuables lost, up to the limits of your policy. It will also cover your expenses if you are forced to live somewhere else due to a disaster covered by your policy, as well as injuries suffered by your guests.
Many renters insurance policies cover the actual cash value of your possessions. This means that they will pay you what items are currently worth. For example, if you have a five-year-old computer, it's likely worth much less than you paid for it, although you'll have to replace it at today's prices. A policy that insures you for replacement cost (that is, the cost to actually replace the items) is more expensive, but will make it easier to replace your valuables.
Although renters insurance premiums may be expensive, the coverage is invaluable if your property is lost or stolen. While you will still have to pay deductibles, renters insurance provides a great deal of assistance in replacing possessions that may be lost or damaged. If someone is injured on your property, renters insurance generally offers liability protection if you are sued.
Be sure you understand what your policy does and does not cover. Most renters insurance policies don't cover earthquakes, floods or damage from hurricanes. If you live in an area where these disasters are likely, you'll probably have to purchase a separate policy. If you have items that are particularly valuable, such as jewelry or antiques, you will probably want to purchase a separate rider for these items, or risk exceeding the limits of your policy.
You should document your possessions in the event that you'll have to file a renters insurance claim. Keep receipts of all major purchases in a fireproof safe or bank safe deposit box. Photograph or videotape each room of your home, and note each item and its value. Be sure to include closets and storage areas. All of this information will make it easier in the event that you need to file a claim.