Renters Insurance – Why It’s Worth It
April 1, 2016
If you just signed a new lease, you may not be aware of the importance of renters insurance. You may think that your landlord’s insurance policy covers you. That’s only partially the case. The landlord’s homeowners insurance does cover the structure of the building. It does not, however, cover your personal belongings.
Often young renters don’t think they own enough to warrant the need for renters insurance. Consider the costs of clothing, jewelry, electronics, TVs, computers, furniture, kitchen appliances and utensils. If you had to replace all of your belongings at once, it could add up quickly. According to Bankrate.com, the cost to replace the personal property in a one-bedroom apartment with a single occupant could easily exceed $13,000. Renters insurance on average runs less than $200 annually. That is something to consider.
It is also important to know that renters insurance provides liability protection in the event someone is injured in your rental or if you caused damage to a neighbor’s home. For example, you left the bathtub running and this caused water damage to the ceilings of the person living beneath you. This could be a significant cost to you if you’re not insured.
What type of policy should you get?
So you have decided that renters insurance is worth the cost. There are two types of renters insurance that you can select.
Actual Cash Value (ACV)
The ACV policy will reimburse you for the value of the item at the time it was damaged or stolen. For example, if you purchased a TV for $1500 and it is now five years old, your insurance company may decide it’s current value is only $500. Depending on your deductible, you may not receive money to replace your TV.
The replacement cost policy will not depreciate the value of your loss items. So with this policy you could replace your TV with a current model equivalent to what was stolen or destroyed. A replacement cost policy has a higher premium, but may be worth your time if you have several high priced valuables. This policy may not cover all items so separate riders may be purchased to cover certain valuables to make sure you receive full reimbursement.
How can you reduce the cost of your renters insurance?
If the building has safety measures such as a sprinkler system, security alarm, fire extinguishers or a front desk you may be eligible for reduced rates. Make sure to inform your agent if you have any of these protective measures.
You may also get reduced rates for renters insurance by coupling a policy with your existing auto insurance policy. Combining your auto policy with a renters policy can save as much as 35%, on both policies, with certain carriers.
Does my roommate need renters insurance too?
One way that is not a good idea to save on renters insurance is to split your policy with a roommate. While it is advised that both you and your roommate have a policy, you may not want to find yourself in the unfortunate situation of having to settle how much each person gets from the policy in the event of property loss. In fact, some insurance agencies won’t allow roommates to share one policy. Your agent can help you identify your coverage needs and make sure you and your roommate, should you have one, are adequately insured.