How to choose the right level of renter’s insurance for you
Whether you are renting an apartment or living in your landlord’s basement, renters insurance is an essential option to consider. Many people don’t realize the property insurance held by the owner of the building usually only covers damage to the structure. Insuring your personal property is your responsibility. In fact, some landlords even require their tenants to carry renters insurance for the renter’s own protection. Obtaining renter’s insurance can provide you with peace of mind that your belongings are protected. How do you know what level of renter’s insurance policy will be the right fit for your needs? A number of factors should be taken into consideration when choosing a renter’s insurance policy.
BASIC POLICY
A basic HO-4 policy will cover loss of common household items in the case of theft or damage caused by a number of factors including, but not limited to, smoke, fire, and faulty plumbing. The basic policy usually also includes “loss of use” coverage. This pays for certain living expenses if your residence is not fit to live in due to damage or disaster. Liability coverage is provided, as well. This means medical costs up to your limit of liability would be paid for any person who was injured while on your property.
REPLACEMENT COST VS. ACTUAL CASH VALUE
When deciding which renter’s insurance policy will be best for you it is important to take inventory of your belongings. Estimate how much it would cost to replace everything you own based on current prices. This is important because often you can choose a policy that provides reimbursement of your personal belongings on a replacement cost basis, rather than reimbursing the depreciated value of the items. Choosing to have items reimbursed at the replacement cost will provide a slightly higher level of coverage than choosing to be reimbursed based on the actual cash value (ACV). Both pay to replace the old property with new property of the same type and quality, but the ACV includes a deduction for depreciation of the property.
RIDER OR SEPARATE POLICY
A higher level of coverage might be needed to cover more valuable items or in specific situations. For example, if you own a collection of valuable jewelry, antiques, or specialized electronics you may need to obtain a rider. A rider is simply a written amendment to an insurance policy that alters the terms or coverage of your policy.
The basic policy can have some limitations which often include damage due to floods, earthquake, and some other natural hazards. Those living in a high risk area should consider additional coverage through a rider or a separate policy that specifically addresses these risks.
No matter what your individual needs, having the right renter’s insurance coverage is essential to your sense of security and to your peace of mind.