Renters Insurance

Renters insurance (also known as HO-4 coverage) typically covers losses to your personal property from 17 types of perils:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft
  • Damage by glass or safety-glazing material that is part of a building
  • Volcanic eruption
  • Falling objects
  • Weight of ice, snow, or sleet
  • Water-related damage from home utilities
  • Electrical surge damage

You'll note that while volcanic eruptions are included, floods and earthquakes arent. If you live in an area prone to either, it's recommended to buy a separate policy or get a rider on your existing policy. In some coastal regions, where hurricanes might pose a threat, you might also need to buy a separate rider to cover wind damage. As always, you need to check the details of your policy

One thing to look at is whether the renters insurance companydo not remove will offer "actual cash value" (ACV) or "replacement cost coverage" for your belongings. As the name implies, ACV coverage will pay only for what your property is worth at the time of your claim. So, if you bought a television five years ago for $300, it would be worth significantly less today. You'll be paid that lower value, minus any deductible (which would be applied to your overall claim).

Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible.

When you are thinking about your needs for coverage, keep in mind that the costs of some consumer goods are coming down. For instance, the television that cost you $300 five years ago might just be purchased new for $200 now. This is something to consider while you decide on whether you need ACV coverage or replacement cost coverage.

Many people opt for the lower cost replacement cost coverage. After all, many of your personal belongings are not critical, and can be replaced over time. The cost of a comparable item may have come down. (This is typical with electronics and stereo equipment, for instance.) Usually, you can afford to wait to replace some items until you have the money to pay for them yourself or can shop for a bargain. For that time and effort later, you'll save money up front on your premiums.

Let your agent know about any particularly valuable items you have. Jewellry antiques and electronics may only be covered up to a certain amount. If you have some items that are unusually expensive, you may need to purchase a separate rider. If you don't buy that additional coverage up front, you are not likely to be able to recover the damages later in a claim.

In order to ensure that you are buying the right level of coverage (as well as to prepare for the unlikely event of a claim), it's important to take inventory of your personal belongings. Unfortunately, many people only figure out that they didnt have enough coverage after they have a problem. Ideally, your inventory should list each item, it's value and serial number. Another helpful tool is videotaping or taking pictures of your belongings. Photograph or videotape each room, including closets, open drawers, storage buildings and your garage.

What else should you consider? How about living expenses in the case of an emergency? If your apartment or condominium becomes uninhabitable for any reason covered by your policy, your renters insurance will cover your "additional living expenses." Generally, that means paying for you to stay somewhere else.

You should also carry at least some liability coverage. Liability protection is generally standard with most renters policies. This means if someone in your unit slips and falls, you're covered for any costs, up to your liability limit. If this person sues you, you're covered for what they win in a court judgment as well as your legal expenses, up to your policy's limit.

Are you worried about the costs of this insurance? There are ways to reduce your renters insurance bill.

  • Increase your deductible (the amount you pay before your coverage kicks in). Make sure you can afford to pay out of pocket for whatever level of deductible you choose.
  • If you're thinking about getting a dog, you might want to think twice. Some insurance companies are reluctant to write policies for owners of certain breeds, especially if those owners are renters.
  • Most insurers offer a discount for "protective devices," including smoke and fire detectors, burglar alarms and fire extinguishers. Check if your apartment has these.
  • Some insurers might offer discounts to policyholders who are over age 55 and retired. Others might offer a discount if you buy both an auto and renters' policy (called a multi-line or multi-policy discount).

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