Like homeowners insurance, renters insurance includes three key types of financial protection:
- Coverage for personal possessions
- Liability protection
- Additional living expenses (ALE)
The following questions will help you choose the right coverage when you are shopping around for renters insurance or discussing your needs with an insurance professional.
Coverage for personal possessions
Coverage for your personal property is a key component of renters coverage, protecting you from theft, fire and a host of other unfortunate events.
1. How much insurance should I buy?
Make sure you have enough insurance to replace all of your personal possessions in the event of a burglary, fire or other covered disaster. The easiest way to determine the value of all your personal possessions is to create a home inventory—a detailed list of all of your belongings along with their estimated value.
2. Should I choose replacement cost or actual cash value coverage?
Actual cash value policies include a deduction for depreciation (that is, the idea that items lose value over time). Replacement cost coverage is pricier but can be well worth the extra expense if your belongings are damaged or destroyed (think about how much you'd get for your TV used versus how much it would actually cost to replace).
3. What disasters are—and are not—covered?
Renters insurance covers you against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (such as from a burst pipe or when the tenant upstairs leaves the water running in the bathtub and floods your apartment).
Like standard homeowners policies, most renters insurance policies do not cover floods or earthquakes. Flood coverage is available from the National Flood Insurance Program and a few private insurers. You can get earthquake insurance as a separate policy or have it added as an endorsement to your renters policy, depending on where you live.
4. What is my deductible, and how does it work?
A deductible is an amount of money you responsible for paying before your insurance coverage. For example, if you have a $500 deductible and a fire destroys $5000 worth of furniture, the first $500 is your responsibility and your insurance company will cover $4500.
Renters insurance deductibles are generally specified as a dollar amount, which can be found on the Declarations page of your policy. In general, the larger the deductible, the lower your insurance premium.
5. What is a “floater” and do I need one?
A floater is a separate policy that provides additional coverage for more costly valuables if they are lost or stolen. If you have expensive jewelry, furs, collectibles, sports equipment or musical instruments, consider adding a floater to your policy to protect against their loss.
6. Am I covered if I am traveling or away from home?
Most renters polices include what is called off-premises coverage, which means belongings that are outside of your home are covered against the same disasters listed in your policy. For example, property stolen from your car or a hotel room while you’re traveling would be protected.