Renters’ Insurance Basics

The Basics of Renters’ Insurance

Too many renters don’t give a thought to “homeowners insurance”. They’re renting after all and haven’t got anything to protect, right? Wrong. What happens when your TV, computer, utterly state-of-the-art audio system, or ipod are all ruined because the guy upstairs forgot to turn off his bathtub and it flooded you out? In many cases, the landlord’s homeowners’ insurance will cover the cost to replace the damage done to the home itself – but not to your ipod. Renter’s insurance may also pay for you to stay somewhere else while your apartment is being repaired due to a fire or flood and protects you from liability should someone sue you for injuries that occurred in your unit.

How does it work? A renter’s policy (generally known as an HO-4 policy) typically provides policyholders with a fixed amount for all your possessions and provides coverage for specific “perils” such as:

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

If you have expensive items to insure, ask about having an endorsement added to your policy to cover those items – and get them professionally appraised!

ACV vs. replacement cost. Renter’s policies allow you to insure your belongings for the actual cash value (ACV) or replacement cost. ACV reimburses you for the value of the property at the time of loss. In other words, if your computer is old, you will only receive the value of the item at the time it was stolen or ruined. Replacement cost coverage reimburses you for the amount it costs you to replace your property. Obviously, replacement cost involves a higher premium. The key is to take an inventory of your items and assign values to everything – you’d be surprised at what you find!

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