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The Beginner's Guide to Renters Insurance

By: Yuki Graviet Knapp
June 6, 2016

Hearing the words "renters insurance" sends most of us into various states of emotion. Overwhelm, confusion, and avoidance may be some of the first ones to come to mind. Others of us just bite the bullet and move through the process as quickly as possible so we can just be over and done with it, already! But let us not cut ourselves short; here is a beginner's guide to understanding renters insurance that will cover the most important basics, walking you through the entire process of learning, and choosing, and prepping...don't worry. We'll have you in good shape.

Why Renters Insurance?

First things first, let's cover the whole "Why do I need renters insurance anyway?" topic. Here's your answer:

  • No matter how cheaply you bought your home items, clothing, kitchenware, decorative possessions, jewelry, laptops, etc., nothing will be more painful than having to pay to replace all of these things, all at once.
  • Renters insurance provides coverage for your belongings anywhere you go! (Including inside the home; more on that below)
  • Most landlords require it. So there's that.

One note on this: some people incorrectly assume that if your landlord has insurance, that means you're covered under his or her policy. This simply isn't true. The landlord is protected, but you are not. Don't make the mistake of finding this out once it's too late!

Taking a Home Inventory

The first thing you should do when looking into signing up for a renters insurance policy is conduct a home inventory. This is important because...

  • You need to know how much stuff you have and what the total value is, in order to know which policy to buy.
  • Not to mention, it will make the claims process so much easier (and faster!) if you've got an inventory of all your stuff, ready to go.
  • It's also important in order to know how many high-value items you have that may require a rider on your policy, like jewelry, electronics, etc. (A rider is an added coverage to your policy. Your policy provides coverage only up to a certain amount, and this coverage also has a per-item limit value, so if you have something particularly expensive that you'd like insured, add a rider!)

Home Inventory How-To

Conducting a home inventory can seem overwhelming or boring, it's true. But it's worth making sure that all of your belongings are covered, because things can start to add up quickly when it comes to replacing or fixing the things that you own, and you don't want to find out too late that the coverage limit on your policy is too low. If you're not a columns and rows type of person, make a video to document your stuff! Or use an app! Sortly and Encircle are some of the top-rated apps for conducting a home inventory. Here's what to include for each item in your inventory, no matter how you do it:

  • Description of the item
  • Serial number
  • Purchase date
  • Estimated value (or the exact value, if you have the receipt!)

Choosing a Policy

Once you've conducted your home inventory and have a good idea of the overall value of what you own, and what type of coverage you might need, it's time to choose a policy! There are two types of policies you can buy when it comes to renters insurance:

  1. Actual Cash Value policy - where you will be compensated for the value of your item at the time that it was lost, damaged, or stolen due to fire, theft, or vandalism.
  2. Replacement Cost policy - where your insurance company will compensate you for the amount that you need in order to newly replace the item that was lost, damaged, or stolen, due to the same circumstances.

Which policy you choose largely depends on how much your personal property is worth, as well as how you would like your items replaced. Keep in mind that the differences between these two types only applies to your stuff, whereas coverage for liability and additional living expenses are generally the same or similar across any policy. (For more about liability and additional living expense, continue reading.)

Deciding How to Sign Up

If you have a spouse, this one’s pretty easy: you get to sign up for, and purchase, one shared policy. You can also do the same with your significant other, or with a roommate. If you have multiple roommates, keep in mind that there is a limit on the number of people you can have on a shared policy. Also, most policies don’t cover theft by a roommate, so if you’re suspicious, err on the side of caution and just purchase a private one for yourself.

What Renters Insurance Doesn't Cover

Earthquakes. Which is really not the best thing for those of us in good ol' California, though you can check to make sure you get a policy that either allows you to add on earthquake coverage or has it built in.

Floods. Which can get confusing, because renters insurance covers water damage, right? Right you are! But it doesn't cover water damage as a result of a natural flood. Renters insurance will cover, however, water damage in the case of something like your pipe breaking or your upstairs neighbor leaving their sink running, that causes damage to your stuff.

Renting or Subletting to someone else. If someone else is in your home as a renter or subletter and they steal your stuff, renters insurance won't cover it. This means you'll want to make sure you keep all your belongings in a safe and secure place while letting out your home to other people.

What Renters Insurance DOES Cover

Liability. For example, if you throw at party at your place and things get a little out of hand, your insurance will typically provide some amount of personal liability coverage. Depending on the policy, it might also help cover medical costs for other people's injuries that occurred at your home. And if you're the one who gets out of hand at someone else's party, your renters insurance will typically help pay for replacing any items you may damage.

Items stolen, lost, or damaged while you're traveling. Your renters insurance coverage typically extends anywhere you go in the world, so your laptop that was stolen in Europe? Covered. Something taken out of the back of your car? Covered again. Everything blow up in your hotel and your favorite watch gets charred? With all your renters insurance ducks in a row, you're covered and good to go.

Additional living expenses. If your home isn't inhabitable due to an incident that's covered on your policy, fear not! The additional living costs that you'll incur in staying somewhere else (as well as other expenses that go along with that) will be covered by your insurance.

Every policy is different of course, but these are the primary basics that you should know, and most renters insurance policies you look into will cover (or not cover) all the things we just listed above. Renters insurance can feel overwhelming or seem like just a huge pain to deal with, but you'll be super glad to have it when your laptop is stolen or something burns up or everything gets drowned in pipe water. Sounds dramatic, it's true, but it can really happen (and has happened to many)! Don't be one of those. Clench your fists, grab some coffee, and just do it!

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