The good news is that renters insurance is relatively inexpensive. When you purchase renters insurance, your belongings are covered against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage—for example, if an upstairs neighbor's tub overflows and damages items in your apartment. However, renters insurance does not cover damage from flooding. Flood insurance is available for renters - contact us for a quote.
Renters insurance includes additional living expenses (ALE) coverage if you are unable to live in your home because of a hurricane, fire or other disaster listed in the policy. ALE pays for hotel bills, temporary rentals, restaurant meals and other expenses you incur while your home is being repaired or rebuilt.
Like a standard homeowners insurance policy, renters insurance includes liability protection. This covers your responsibility to other people injured at your home or elsewhere by you, a family member or your pet and pays legal defense costs if you are taken to court.
There are two main types of renters insurance policies:
- Actual Cash Value coverage pays to replace your possessions up to the limit of your policy, minus a deduction for depreciation.
- Replacement Cost coverage pays the real cost of replacing your belongings (regardless of depreciation) up to the limit of your policy. This will usually cost about 10 percent more but is a much better value in the long run.
The best way to determine how much renters insurance you need is to create a home inventory. This is a detailed list of all of your personal possessions along with their estimated value. An up-to-date home inventory will also make filing an insurance claim faster and easier. See Bob's post from yesterday - HOW TO CREATE A HOME INVENTORY.