For all you renters out there, do you own a renter’s insurance policy? Renter’s insurance protects you if your belongings are destroyed by fire, natural disaster, or theft. A common misconception is that your landlord’s insurance will cover your belongings if they’re destroyed. Their policy only covers the structure and anything inside that they own, so having your own insurance is a must for renters.
Renter’s insurance is very inexpensive. The average policy is about $15 a month and getting a few quotes online is easy, so there’s no excuse not to have one. For about $180 a year, you can ensure that your possessions are replaced if they’re stolen or destroyed. Some policies also pay for relocation assistance which covers the cost of rent or hotel stays if you’re unable to live at the premises.
One important aspect of renter’s insurance policies to pay attention to is replacement value versus actual value coverage. Replacement value coverage is far superior because it pays you the cost to replace your items, up to your policy limit. But it’s also more expensive than actual value coverage, which factors in depreciation of your items. So with actual value, you’re only getting market value (which may be far less than you originally paid) for your items at the time they were stolen or destroyed. To me, it’s worth the extra cost of 15% or so for replacement coverage.
To buy renter’s insurance, you’ll have to come up with your best estimate of the total dollar value of your possessions. When doing this, you have to distinguish between items with monetary value and those with sentimental value. Items with sentimental value (old love letters, family photos, etc.) can be difficult or impossible to replace, and might not have any cash value. Thus, when calculating the value of your items you should strictly consider monetary value. Based on your estimate, you’ll choose your coverage amount.
One thing I recommend is to walk around your home once a year with a camcorder, smartphone, or digital camera and record all of your possessions. As you go through each room, say aloud what you paid for each item. Store the recording on a CD or USB device at another location. Then, if your insurance company gives you a hard time when you submit a claim you’ll have proof of what you owned.
Some landlords require their tenants to have renter’s insurance. But most do not, so it’s up to you to protect yourself. Don’t let a disaster in your home destroy your finances.