While just about anyone who has a mortgage is required to have a homeowner’s insurance policy, those who rent – whether it be a house, apartment, or condo – often forgo insurance under the assumption that their landlord’s policy will cover them in case of disaster. Unfortunately this isn’t the case.
Insurance policies held by a building’s owner protect the building’s structure, but any thing inside of the building, your possessions, are not covered. Should they be lost or damaged it is up to you to replace them out of your own pocket, unless you have renter’s insurance.
What does renter’s insurance cover?
Homeowners and renters face the same types of risks but each need a different type of insurance to protect what they have worked for all their lives. Renter’s insurance will reimburse you for damage done to your belongings in the event of:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- An accident caused by aircraft
- An accident caused by a vehicle
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcanic eruption
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
What renter’s insurance does not cover is damage done to your stuff in the event of a flood, earthquake, or hurricane. Some policies do offer supplemental insurance to cover these types of catastrophes. People in areas prone to these types of disasters should inquire about adding these on if possible.
What are the types of renter’s insurance
Renter’s insurance generally falls under two different types when it comes to how you are paid in the event of a loss. The first type is Actual Cash Value, or ACV, which pays you only what your belongings are worth at the time of the loss. For instance, if you paid $1000 for a computer two years ago and it is damaged in a fire your ACV policy will pay you what it is worth, which could be around $500 dollars when you factor in all of the variables.
Replacement cost coverage, on the other hand, will pay out the amount it costs to replace the item. The same computer that was damaged in the fire would be replaced without accounting for depreciation or wear and tear. Of course, replacement cost insurance will have a higher premium cost but it is because it has a higher payout value.
So when you are putting together money for a security deposit, electrical, phone, and other utilities and you are budgeting for rent, make sure to include enough to cover a renter insurance policy to protect the things you have worked so hard to acquire over the years.
This guest article has been written by Jeff Orloff, who is a blogger for http://www.rentersinsurance.org