Reasons for Purchasing Renters’ Insurance

You’ve probably heard all about home owners’ insurance and chances are good you already have auto insurance. But if you’re living in an apartment or other type of rental property, did you know you also need renters’ insurance? Let’s look at a few reasons why this type of insurance is a necessity and what you should look for when buying a policy.

Risks of Being Uninsured

Take a good look at your lease. Most leases specifically state the landlord is not responsible for any loss of your personal items. Let’s say one of your neighbors start a fire in the apartment which ends up destroying most of your unit and most of your belongings. The landlord’s insurance is going to cover the loss of the building but none of your clothes, furniture, electronics, personal items, or even pets. If you don’t have renters’ insurance in this situation, you could be financially devastated.

Here’s another scenario. Your dog bites a friend of your child’s who is staying at your home. The bite isn’t too serious but does require a couple of stitches. Obviously, your landlord would never be responsible for this type of injury. You’d have to pay out-of-pocket unless you have renters’ insurance which will protect you from financial loss in the event of someone being injured on your rental property.

Renter’s insurance is also a good idea in case of most natural disasters, such as tornadoes, hurricanes, lightning, wind damage, falling trees, ice storms, and other calamities caused by Mother Nature’s wrath. If you don’t have insurance, any of these situations could change your life for the worst in a heartbeat.

Renter’s insurance can also provide protection in case your belongings are lost, stolen, or broken. This protection generally applies even when you’re not at your rental property. For example, if your laptop is stolen from your car while you’re on vacation, you may be able to put in a claim for that loss.

Choosing Your Policy

Now that you know renters’ insurance is important. You should begin thinking about the elements of your policy, including the following:

• Deductibles — This is how much you must pay out-of-pocket before your policy’s coverage will begin. Choosing higher deductibles saves you on premiums but may cause you financial hardship when coverage is needed.

• Policy Limits — Most renters’ insurance policies have limits on certain items, such as electronics. Pay attention to those limits and consider buying extra coverage specifically for them to make sure your losses will be covered.

• Replacement Cost or Cash Value — You have to decide which type of coverage you want. Replacement cost means the policy (minus the deductible) will pay to have the same or a similar valued item purchased to replace the old one. Cash value means you receive the depreciated value of the item at the time of its loss. The former type of coverage costs more but may be worth the extra investment in the long run.

These elements of the policy should be considered when making your purchase. Consider making that purchase soon since you never know when you might need it.

June 18, 2009, Posted by Rainy Day Mitch