Six Tips to Help you Understand Renters Insurance

1. Renters Insurance is Cheap

You can expect a renter’s policy to cost you less than $20/month.  Many auto carriers also offer discounts if you bundle your renters with your auto policy.  In some cases the discount to your auto policy is so substantial as a result of bundling that the renter’s policy is almost free.  So for the cost of a pizza each month you can protect yourself from substantial financial hardship.

2. Replacing Your Stuff is More Costly Than You Think

We routinely underestimate the cost of replacing everything we own.  Think about it, how much would it cost to replace every single item in your apartment if the building were to burn down?  Every article of clothing, dishes and cookware, furniture, electronics and other gadgets, you get the idea.  The culmination of all of these items results in a hefty price tag.  A price tag most of us could not afford and would result in us needing to start from scratch.

3. Your Landlords Insurance Does Not Cover Your Stuff

Your landlord’s policy (in most cases) covers the building and includes liability coverage.  They may have a policy that includes a little coverage for the appliances they own in the building, but it’s very limited.  Your landlord’s policy is specifically meant to cover damage to the building and to protect them from any lawsuit resulting from owning the property.  Their policy does not include coverage for your contents.

 4. Understanding the Difference Between Actual Cash Value (ACV) and Replacement Cost Coverage

Actual Cash Value coverage pays to replace your items at their value at the time of loss.  Basically what that means is you receive payment based on depreciation.  Let’s say you have a computer that’s two years old, your payment would be equal to the cost of a two year old computer.  If you wanted to buy a new computer you will need to cover the difference.

Replacement Cost coverage pays for the actual cost of replacing your belongings.  So if you have a two year old computer, you would be reimbursed for the amount it would cost to buy a new, similar computer.

In most cases as an agent I find it appropriate to insure my clients with replacement cost coverage.  There are a few exceptions, but most clients prefer to be reimbursed for the full amount it costs to replace their belongings.  Typically we can expect about a 10% difference in yearly premium between the ACV and replacement cost coverage, with the replacement cost coverage being more expensive.

5.Renters Policies Include Liability Coverage

 Liability coverage insurance is important because it provides protection for incidents occurring at your home.  If someone injures themselves in your apartment the policy would cover medical bills and the resulting lawsuit up to the policy limits.  If your bathtub overflows and damages someone else’s property your liability coverage provides protection.

 6.Renters Insurance Provides Coverage for Living Expenses

If your apartment was damaged to the point you were forced to live elsewhere while repairs were being completed, your policy would cover those costs up to the dollar amount specified on the policy.  So, if there was a fire that caused damage to your apartment and you needed to stay in a hotel while the repairs were being made, your policy would pay for a hotel room and meals.

Are you currently renting?  If you have any questions about your current renter’s policy, or need help with a new one, please do not hesitate to reach out. 

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