Renter’s insurance is ultimately a very affordable purchase when you weigh it against the costs of having to replace your possessions after a loss. There are ways to help you minimize the expense of an annual policy and still get the insurance coverage you need.
Renter’s insurance policies
You can choose from a Specified Perils or Comprehensive Renter’s policy. Both versions provide coverage for your contents, any damage you or your guests may cause to the dwelling, and liability protection. The difference between these policies is the types of perils covered.
Specified Perils renter’s policies tell you exactly what types of loss you are covered for. These perils generally include unforeseen losses due to fire, theft, impact by vehicle, lightning and explosion, and theft. This type of policy is relatively less expensive than its comprehensive counterpart, and can help you save a few dollars on your premiums. But keep in mind that unless the policy specifically lists a peril, you will not be insured for any other type of loss.
Comprehensive renter’s policies offer the greatest range of protection. In contrast to a Specified Perils policy, a Comprehensive renter’s policy is defined by what is not covered or its exclusions. If you have to make a claim after an unexpected loss, the insurance company must prove that your loss was due to one of the listed exclusions. This type of policy does cost slightly more, but you gain greater protections for the items you own.
Regardless of which type of policy you purchases, the cost is largely based on the value of your contents. The more you own, the more costly the replacement costs after a loss. You may not think that you own very much, but expenses can quickly add up in the case of a total loss. Before buying your policy, conduct a thorough inventory of what you own and research to find out what it would cost you to replace these items. By purchasing the right amount of coverage, you avoid over-insuring and saving yourself some money.
Actual Cash Value vs. Guaranteed Replacement Cost
Actual Cash Value coverage means that any items you need to replace are covered up to the amount of what they were worth at the time of the loss. For example, if your stereo is worth $500, under Actual Cash Value you would be reimbursed for $500 regardless of the real costs of a new stereo.
Guaranteed Replacement Cost coverage lets you replace items based on how much it costs to purchase them today. That $500 stereo may really cost you $800 to replace. With Guaranteed Replacement Cost coverage you will not have to pay the additional expenses out of your own pocket.
Once you understand the type of coverage that is best for your needs, you can find renter’s insurance at a price you can live with.