Understanding the Components of a Renters Insurance Policy

You rent your home and have chosen renters insurance to protect yourself from personal liability and your personal possessions from loss or damage. You want to understand your insurance and the components of your policy. Renters insurance policies contain three components: personal property coverage, medical expense coverage and liability coverage.

Personal property coverage, also known as Coverage C, covers losses to property you own or are using, regardless of its location at the time of loss. Up to $100,000 of personal property can be insured with your policy. Deductibles, from $250 to $2,500, apply and must be paid by you before your insurance coverage begins. Provided that the value of the loss exceeds the deductible assigned to your policy, this coverage will insure a wide variety of personal property, such as a bicycle stolen from the driveway, furniture damaged by a fire, or even luggage lost on a trip overseas. Losses are calculated on an Actual Cash Value (ACV) basis, meaning that your claim check will reflect the actual value of your property at the time of loss and not necessarily the cost required to replace it. To minimize the out-of-pocket expenses needed to replace property insured on an ACV basis, you can purchase the replacement cost endorsement, which changes your coverage so that losses will be calculated based on the cost to replace the lost property at its current price. Other endorsements exist to schedule valuable property on your policy, i.e., provide individual coverage to specific items, listed in the endorsement such as computer equipment or jewelry.

Renters insurance also offers medical expense coverage, which covers medical expenses incurred by anyone injured on your property who is not defined as an insured on your insurance policy. Payments are made regardless of whether you or any other insured is at fault. The standard available limit is $1,000 per person, but can be increased to $3,000 or $5,000 per person upon request. Liability exposures are also covered by your renters policy. This coverage covers bodily injury and property damage that result in your personal liability. You can choose the standard liability limit of $100,000 per accident or opt for the increased limits of $300,000 or $500,000 per accident.

Policies are written on a named perils basis, meaning that losses must be caused by the perils named in the policy to be covered. For example, while the policy covers losses due to fire, storms, theft, and even volcanic eruption, losses caused by earthquakes are only covered if you have the earthquake endorsement attached to your policy.

Renters insurance provides you with protection against personal liability as well as losses and damage to your personal possessions. It is important to understand your policy and the coverage it provides, before you need it. Please take some time to review the components of your renters insurance policy today.