How to choose the right level of renter’s insurance for you

Carrying the right level of renter’s insurance is crucial to ensuring your ability to easily recover from a loss. The bare minimal coverage in a basic policy is not enough for many people, so make sure you understand your coverage before you need to use it.

Things to consider when determining the right level of renter’s insurance for your needs include:

The Value of Your Possessions

Most people underestimate the true value of their possessions, discounting how quickly the cost of myriad little items adds up. Start by inventorying everything you own. Include not only the big items like your flat-screen TV and multimedia-enabled computer system, but also all the little things like clothes, books and toaster.

Make a list of everything and the current retail price for each item. Add this all up to determine how much it would cost to replace everything. Gather any additional documentation, like receipts or pictures of the items, and store everything in a safe deposit box or other safe place.

Things like art and antiques do not typically lose value, so exclude those from the above calculations. Instead, have them appraised and insure them separately.

Limited Coverage Items

A basic policy puts limits on certain item that are especially prone to loss, such as jewelry or guns. The limits are usually less than the items are worth, so you may want to buy additional coverage for them.

Losses that occur away from home are typically covered only up to a set percentage of your total coverage. Frequent travelers may find this inadequate.

Actual Cash Value vs. Replacement Cost Coverage

Pay particular attention to the type of replacement coverage a policy offers. An actual cash value (ACV) policy will have lower premiums but may end up costing more in the end, because it will pay only the value of your possessions at the time of loss. Depreciation is based on standard depreciation tables, so if you have a 20-year-old sofa with a supposed life of 15 years, the ACV of the sofa is $0. You would have to pay the entire replacement cost of the sofa.

A replacement cost (RCV) policy comes with higher premiums but will fully reimburse you for all items you replace. Typically, you receive the ACV upfront, and then the difference between ACV and RCV after you submit receipts.

Replacement cost is always the better choice, and, counter-intuitively, becomes more valuable to you the older your possessions are.


Basic policies exclude certain types of losses, commonly floods and earthquakes. If you live in an area prone to an excluded loss, make sure you purchase a policy specifically to cover that.

Liability Coverage

Unless you never have guests, don’t forgo liability coverage. People who entertain frequently will want higher coverage limits than those who have only the occasional visitor.

Take a critical look at all your possessions and your lifestyle to determine the appropriate level of renter’s insurance for your situation.