Renter's Insurance: What You Need to Know
When disasters strike your home, fires, flooding, earthquake - these things don't differentiate between renters
. This means that renters still need some sort of insurance to protect themselves, possessions and family
. Renters insurance covers the replacement of cash value of your belongings, liabilities, as well as any living expenses incurred in case your home becomes unlivable. So, what do you need and how much insurance should you get? To help you answer those questions, here are the things you need to know about renter's insurance.
Renter's insurance works much in the same way as homeowner's insurance, except that you don't have to get the home or apartment
structure insured in case it gets damaged (that's the owner's job!) However, you do need to protect YOUR things inside. The basic homeowner's insurance, called the HO-4, protects you from the most common distasters namely, fire or lightning, windstorm or hail, explosion, riots, damage from aircrafts and vehicles, smoke, vandalism, theft, volcanic eruption, falling objects, damage from the weight of ice, snow or sleet, water and steam from appliances, freezing from appliances, and from electrical currents. It's interesting to not that while volcanos are covered, earthquake and flooding are not. So, if you live in a place that has low elevation or known to be near a fault line, you need these additional riders.
Now, aside from the bad things that can happen to your stuff, you may want to think about what happens to people inside your apartment. You may still be liable if people get injured in your apartment. An additional liability coverage, which should protect your net worth, should be added.
Next, you may also want to think about what happens should your apartment be destroyed? Because it may take a long while before it gets rebuilt. You'll have to find a temporary place to stay while you find a new apartment. In this case, you'll want to add more coverage to pay for your hotel fees in case this happens.
Since you're getting insurance to protect your stuff, you'll have to decide if you want actual cash value (ACV) or replacement costs. Replacement costs is more expensive, because the company will pay for getting you another computer, couch, TV etc. However, ACV means you'll get cash. Now, while this may seem like a better deal, but insurance companies will take into account how much your item was worth when it was destroyed. So, if your 5 year old TV was destroyed, then you'll only get a fraction of the amount in cash.
There's no one formula to find out what you need. It's best to look at your assets and your net worth when it comes to deciding on renter's insurance.