Most renters might not even know what renters insurance is or what it covers. A lot of people are under the misconception that since they don’t own the building they are living in they don’t need insurance. This is wrong. Most landlords only carry insurance that covers what they own: the building. That means everything inside your house that you own is not covered in the case of an accident or theft. You could be living in an apartment one day, a fire could accidentally start, and then you are left with nothing while your landlord collects his or her insurance claims on the building.
So yes, you probably want to get renters insurance if you have valuable things at your rental property that you wouldn’t be able to replace. But what exactly are you getting with your renters insurance? It depends on what type you have. Here are the two basic types of renters insurance explained:
- 1. Actual Cash Value
This type of insurance is going to cover the actual cash value of what your possessions are worth at the time they are damaged or destroyed. So that means you’re going to generally get a lot less money that you will for replacement cost insurance with most of your property. For example, if your apartment burns down in a fire, and you lose all your clothes and a few expensive belongings like a laptop and a television, your claim will only equal what those items are worth now, not what you paid for them. If you paid $1,000 for your laptop three years ago, you might only get $100 or $200 back for it in your claim, or whatever it is going for now. This type of coverage will generally give you less money back unless you own lots of things that are increasing in value, and are now worth more than you paid for them like vintage jewelry or something.
- 2. Replacement Cost
This covers what it would cost to replace the item you lost at current market value. That means they will generally give you back more than an actual cash value plan, but they usually have higher premiums. You will want to make sure that you tell your agent about any particularly valuable items you may have, because they might not fully cover a lot of really expensive items like jewelry.
In general, you will know ahead of time what your plan will cover if you take a good inventory. Make sure you do this right when you buy the plan, and update it when you make other large purchases. The more detailed records you keep of what you have, the more you will be able to get back in claims if something were to happen. Make sure to keep these records in a fire safe place! Plans generally also cover the cost of “additional living expenses.” So if something were to happen to your rental unit to make it inhabitable, it would cover the costs of you staying somewhere else until your place is fixed or you find a new place. Make sure you ask your insurance provider what your plan covers to know exactly what you are getting with your renters insurance.
Stephanie Wilmsmeyer is a State Farm rentersinsurance agent in Columbia, Mo. Find her on Google+and find out what she can do to protect your possessions.