Renter’s insurance provides tenants with peace of mind. Renter’s who travel leave their belongings behind as they fly or drive around for days or weeks at a time. With an insurance policy, the renter does not have to worry about their unit, or their belongings, because if anything happens, like a fire or theft, then their belongings will be replaced by the insurance company. Renter’s insurance also provides liability coverage, meaning that if someone other than the renter were to get hurt in, or while using the rental unit, the insurance company would pay their court-appointed judgment.
The settlement claims that the injured party can claim, as well as court costs and legal fees, are also covered by the insurance policy. But, how much insurance do you really need?
In determining the amount of renter’s insurance required, you should calculate the cost of replacing everything you own. As long as your belongings are proven to exist, either by a video recording of your belongings, or through receipts of those belongings, the insurance policy will cover everything claimed. However, before selecting a renter’s insurance policy, make sure that you are aware of what a deductible is, and how it affects your insurance claims, as well as the difference between replacement cost and actual cash value policies.
In order to calculate the cost of all of your belongings, the best option is to make a video recording of everything you own. This gives the insurance company proof that you did own what you claimed for, and the make, model and condition of those belongings would not be in question or doubt. Any expensive items, like high-technology gear, designer clothing and expensive sunglasses should have receipts, so that the claim will cover the replacement of the exact same models.
Replacement cost insurance means that the insured tenant would receive the money required to replace damaged or lost belongings with equivalent models. There is no adjusting for depreciation. Under actual cash policy protection, where a 10-year old television that cost $3,500 when new is damaged or stolen, the tenant may receive only $500 or so when the fully accumulated depreciation is figured into the cost. And, that is before the deductible amount is taken off of the claim’s amount.
A deductible is the cash value that is automatically deducted from any claims. The higher the deductible amount, the lower the renter’s insurance policy will cost. The average renter’s insurance policy has a $500 deductible, meaning if belongings worth $2500 were stolen, the tenant would receive $2000 from the insurance company to replace the belongings.
If you have older belongings, and mostly not in good shape, then purchasing an actual cash value insurance policy would suffice. When you have good belongings, like a new high-definition LCD television and surround sound stereo system, cameras, collections (like coins, sporting cards, etc,), fine china, computers and other high-tech gear, then replacement cost insurance should be your choice. You do not want to replace that high-end digital SLR camera with a cheap, point and shoot digital model.
The actual, overall limit on insurance payouts, as determined by you and your insurance agent, should reflect the overall cost of replacing everything you own. Clothes and furniture included.