Are you getting ready to rent a home? Then now is the time to consider renters insurance. Some landlords and management companies require their tenants to acquire renters insurance as part of their lease terms. However, others have no preference one way or the other. Do you need renters insurance? It’s always smart to know what your options are when it comes to renters insurance, as well as to do your research so that you have a better idea of what to expect. To help you out, we’ve put together this handy explainer on everything that you need to know about renters insurance.
What Is renters insurance?
Renters insurance is a form of property insurance that covers losses to personal property and protects the insured from liability claims. This includes injuries occurring in your rental that aren’t due to a structural problem. Injuries due to structural problems are your landlord’s responsibility. Renters insurance protects anything from a studio apartment to an entire house or mobile home.
What renters insurance covers
Renters insurance has three basic coverage components: personal possessions, liability, and additional living expenses.
1. Personal possessions
This coverage is for the contents of your rented dwelling. Typically, named perils include fire, theft, vandalism, plumbing and electrical malfunctions, certain weather-related damage, and other named hazards. Floods and earthquakes, however, are not covered and require separate insurance policies.
2. Liability
Liability coverage protects you up to a certain amount if you get sued for an injury or other damages incurred at your home by other people. It also pays for damage that you, your family, or your pets cause to others. It pays any court judgments as well as legal expenses, up to the policy limit. For coverage higher than that, you need to buy an umbrella policy.
3. Additional living expenses
This coverage means that if your unit becomes uninhabitable due to one of the covered perils, you’ll be provided with some money to pay for temporary housing. Hotel bills, restaurant meals, temporary rentals, and other expenses incurred while your dwelling is being rehabbed are all included.
How much does renters insurance cost?
There are a few different variables that can affect how much you pay in renters insurance. These include the location that you’re renting in (both your state and your specific neighbourhood) and the size and type of building that you’re renting in. As with most things, it pays to do your research when looking for a renters insurance plan and to get multiple quotes so that you can be sure to get the best deal possible.
Cash value vs. replacement cost value
There are two different ways that renters insurance can reimburse you for accepted expenses: cash value payouts and replacement cost value payouts.
Actual cash value
If you file a claim on an actual cash value policy, the insurance adjuster looks at the damage to your belongings and then deducts the cost of depreciation before offering you a claim amount.
Replacement value
On a replacement value plan, the insurance company will pay you the actual cost to replace your items. This type of plan typically comes with higher premiums but proves well worth it if you ever have to file a claim.
