Parents often overlook it when they send their child off to college. Some people renting a house or an apartment don’t even think about it. We’re talking about renters’ insurance. And, like other types of insurance, its value only becomes apparent when you suffer a loss.
Think about all that you have accumulated over the years — jewelry, furniture, appliances, electronic devices, and other household items. Could you easily afford to replace an expensive laptop or a top-of-the line sofa if they were water damaged from a burst pipe or smoke damaged from a fire? Could you handle the extra costs of another rental plus additional expenses if you are forced to move out of your place for a short time because of water or fire damages?
Renters’ insurance protects your belongings from theft or damage. Here’s what you need to know about this type of insurance.
What It Covers
Renters’ insurance generally covers losses due to fire, windstorms, explosions, lightning, theft, and acts of vandalism and generally includes three types of coverage: personal property, additional living expenses, and personal liability.
Personal property
With personal property coverage, your belongings are covered — furniture, clothing, shoes, electronics and devices, appliances and kitchen equipment, home goods, and jewelry. However, you should be aware of your policy’s limits. For instance, certain items such as jewelry, collectibles, and artwork may be excluded from coverage offered by a standard policy if they are above a certain value. In many cases, a policyholder will have the option of adding coverage for personal belongings that exceed standard coverage limits.
Renters’ insurance can provide coverage for most items lost to theft whether you are at home or away from your residence. It also covers theft of personal items from your auto parked on your rental property. However, it does not cover the theft of your auto or parts taken from it, such as wheels or hubcaps.
Additional living expenses
The additional costs incurred when you have to temporarily vacate your damaged apartment and move elsewhere are covered by a renters’ insurance policy.
Personal liability
Personal liability coverage gives you protection in case of a lawsuit if a person is injured in your home, by a pet, or for the accidental damage to a neighbor’s property. The policy generally pays legal costs if you are found liable and taken to court. Guest medical expenses are also typically covered by a renters’ insurance policy.
Floods Are Not Covered
While losses due to certain types of water damage (plumbing or intrusion from a neighboring unit) are covered by a renters’ insurance policy, losses due to flooding are not covered. If the potential for damages due to flooding is high in the locality in which you live, you may want to visit the National Flood Insurance Program for information about flood coverage.
Renters’ Insurance Replacement Cost
This add-on to a renters’ insurance policy provides additional compensation for stolen or damaged personal possessions. It allows you to replace your stolen or damaged items with new, equivalent items instead of paying you for the items’ depreciated value.
Talk to a financial professional or an insurance agent for more specifics on why renters’ insurance should be part of your overall financial planning.
