Renters Insurance

Most people have insurance to cover the loss or damage of significant assets such as a car or home. But suppose you don't own your home. In that case, a substantial asset of yours is left unprotected - your possessions.

Most people own a laptop or desktop computer, clothes, furniture, electronics, plus more. These assets may have been accumulated over years and may not seem worth much. But have you ever considered how much it would cost to replace your possessions if they were lost or stolen? The total may be more than you would expect.

Renter's insurance is generally designed to help cover the cost of replacing your possessions after events such as fire, theft, or vandalism. Coverage varies by policy, and some causes of loss - flooding is a common example - are usually excluded unless you buy separate coverage. Renter's policies may also cover additional living expenses if your apartment becomes unlivable and even your personal liability if someone is hurt while in your home.

This type of insurance also tends to be relatively affordable compared to auto or homeowners coverage. Premiums vary based on location, coverage amount, deductible, and insurer, but many policies fall somewhere in the range of $150 to $300 per year for around $20,000 in personal property coverage and $100,000 or more in liability protection. Your actual cost may be higher or lower depending on your situation.

Choosing a Policy

Before purchasing a policy, make sure you understand the following options, each of which will affect your cost and coverage:

• Policy Value - Coverage well above the total value of your possessions may add cost without adding much protection. But since most people buy and renew each year, it may make sense to purchase coverage slightly above the value of your current possessions.

• Deductible Amount - A deductible is the amount you must pay before the insurance company begins to pay in the event of a loss. Most insurance companies offer a choice of deductible amounts, and choosing a higher deductible often lowers the premium, though the amount of the savings varies by insurer and policy. Just ensure you can afford a higher deductible before choosing a policy based on cost only.

• Actual Cash Value vs. Replacement Cost - In the event of a loss, an insurance company will either pay you the cash value of your possession or the entire replacement cost, depending on your policy type. For example, if your whole wardrobe, from jeans to formal attire, were destroyed, the actual cash value would be the hypothetical value of a closet full of used clothes - far less than the replacement cost (and you would still have to pay the deductible). For many people, a replacement cost policy may be worth the slightly higher premium - but it's worth comparing both options and deciding based on your budget and the value of your possessions.

• Exclusions and Limits - If you live in a flood-prone area, you will likely need separate coverage for that type of water damage. Some policies also limit the amount they will reimburse you for specific categories of possessions, such as electronics or computers. Review any category limits to see how they line up with what you own. If a limit falls short, additional coverage may be worth asking your agent about.

Cataloging Your Possessions

In addition to purchasing renter's insurance, it's a good idea to take a thorough inventory of your possessions. An inventory list can help you substantiate a claim, and many insurers ask for documentation after a loss.

An inventory typically consists of a written list and photos or videos of the actual items in your home. FFor big-ticket items such as furniture, computers, and electronics, it can help to note the make and model of each item. One simple approach is to walk from room to room, filming items with your phone. Be sure to open all closets and drawers, and narrate as you film.

It's a good idea to create a written list of your items in addition to photos or videos. There are several ways to organize your list - you can do it room by room, by category of item (electronics, clothes, etc.), or you can use a home inventory tracking app on your phone.

Finding a Policy

Renter's insurance policies may be purchased through independent insurance agents, directly from insurance companies, or through online quote-comparison sites. These are examples of where to look, not endorsements of any particular company. Many insurance companies also offer discounts for customers who bundle multiple policies together - for example, a discount may be available if you buy a renter's policy from the same company that insures your car.

No matter how you find your policy, be sure to comparison shop and understand each policy's specific exclusions and limits. Without that detail, a lower price may not tell you much, since two policies at the same premium can offer very different protection.