New to renting? You might be surprised to discover that you have to carry renter’s insurance. Renter’s insurance is a specific type of protection, but it’s often misunderstood.
In this piece, we’ll look at how renter’s insurance works, what rental insurance covers and how much renter’s insurance you should get to stay safe.
The Inner Workings of Renter’s Insurance
Renter’s insurance protects you against complete loss of all your personal belongings in the case of a disaster, such as a fire. In most cases, this extends to your property when staying at a hotel or vacation house, too. Therefore, if you’re heading to the beach and you are robbed, you can utilize your renter’s insurance policy to return a portion of your missing property’s value. Your renter’s insurance policy also offers liability insurance so you’re covered if someone gets hurt on your property, such as if a friend or relative trips going down the stairs.
While this seems cut-and-dry, insurance policies can be very confusing to people who don’t deal with them every day. One confusing term is the deductible, which is how much you will have to pay out of pocket before your insurance will begin coverage. The higher your deductible, the lower your monthly premiums are likely to be.
Another area that can perplex new renters is whether to accept actual cash value or replacement value for belongings. The actual cash value is the amount that your item is worth after amortization. That is, if you’ve had your sofa for a long time and it is destroyed by smoke damage, the actual cash value might be worth very little. On the other hand, the replacement value is what it would cost you to buy a new replacement. Obviously, you’ll probably get more back by choosing the replacement value of items over the actual cash value, but your premiums will also likely increase with this choice.
How to Evaluate Your Renter’s Insurance
Given all these facts, you should sit down with an independent insurance agent and look at all your options when it comes to choosing the right rental insurance for your needs. You’ll want to consider just how much property you have and what it’s really worth. The average figure most insurance carriers use is $20,000, but many people own items worth much less. Be honest about the value of your belongings because this can help you get a better rate.
Another way to lower your rent insurance premiums is to pay everything up front for the year. Often, carriers will give you the choice of paying on a monthly basis, but with incurred interest. Even if you save just $100 by paying everything upfront, it’s more money in your bank account to spend on other necessities.
No matter where you choose to rent, be sure you have a solid renter’s insurance coverage agreement. That way, you’ll sleep easier in you new loft, condo, townhouse or two-bedroom!
