Rental Property Insurance Advice

Renters insurance, also called tenants insurance, is classified as Form 4 homeowners insurance, and is designed for tenants who wish to insure their items against loss whilst they are living in a rental accommodation such as an apartment or a house which they do not permanently own.

Typically, the main reason why people take out this type of coverage policy is because they fear that their expensive items such as their television, laptop computer or stereo equipment will be damaged or stolen during their tenancy.

As a result, insuring such items can be a simple way to give yourself some peace of mind when living in your rental property by minimizing your risk of suffering from large uninsured losses. And considering the fact that rental insurance typically costs only $10-$25 per month, most tenants should find it an affordable form of coverage to have.

Coverages Provided By Renters Insurance

Whilst renters insurance certainly will protect personal possessions from loss, it does a lot more than this as it offers similar coverage to a standard homeowners insurance policy, except that it does not offer structural coverage for the building but only contents coverage for the items within it.

You can for example, receive additional living expenses coverage with renters insurance. This can be useful in the event that you ever need to vacate your premises such as due to fire or water damage, and need live elsewhere while your home is being restored.

During this period, you will receive compensation from your insurer for any expenses that you incur which are beyond your normal everyday expenses. Typically, this will include expenses relating to food, such as eating out at a restaurant, and expenses relating to transportation, such as money spent on taxi cabs or additional fuel for your vehicle.

You won’t however, receive coverage for property damage. This means that you will have to pay for any repairs to your rental accommodation if the damage caused was determined to be your own fault and is not covered by your landlords lease agreement.

Another beneficial form of coverage provided by a renters insurance policy is coverage for medical bills should anyone be injured in your home. For example, if someone injured themselves falling down your staircase, then your insurer would cover any medical expenses they incurred as a result of their injury. This coverage also extends outside the home, such as in the front or back garden or on a balcony.

Insuring Your Personal Property

In order to fully benefit from the contents coverage that renters insurance provides you with, it is important to make an accurate valuation of the items that you own.

One common mistake that people make when taking out renters insurance is to completely undervalue their personal possessions and become underinsured as a result.

In such cases, when it comes time to make a claim, they find that their insurance limit for contents coverage is not enough to pay for the replacement of all their items. This means that if they want to replace the rest of their lost or damaged items, then they will have to do so out of their own pocket.

A good tip to ensure that you are fully protected with renters insurance contents coverage, is to first add up the value of your most valuable items. This could include things such as furniture, your TV, your computer, your stereo system and any other valuable items that you have.

Once you have calculated a final valuation for your personal possessions, then double the amount that you came to and use that figure as your replacement value for your contents coverage policy limit.

In the event that you ever need to make a claim, you should have enough money to replace all your major items and will still have money left over for the small things which you may have forgotten to include in your previous valuation such as clothing, silverware, towels and other miscellaneous household items. You will most likely find that you will even have money left over to replace other items such as a bike or sporting equipment.

Note: When living in a rented unit you will not be insured by your landlords insurance, as that typically only insures the building and not your own personal contents inside of it.

Cash Value Vs. Replacement Cost

If you are given the option between an actual cash value and a replacement cost coverage policy, then go for the replacement cost coverage.

With actual cash value coverage, you will only receive about half of what your item was worth when you originally purchased it. But with replacement cost coverage, you will receive full compensation for how much that item would cost you to buy again new.

Although a replacement cost policy is more expensive to take out, it is worth it in the long run because it will save you much more money if you ever need to make a claim to your insurer. With actual cash value coverage it will cost less to maintain, but because you don’t receive full compensation on your claim items it ends up costing you more if you do make a claim.

Insuring Yourself Against Greater Risk

Standard renters insurance, or homeowners Form 4, will provide you with broad contents coverage. This means that you will be protected against specific losses which have been listed in your policy agreement, typically, this will include 15 named perils.

However, any loss that you suffer which has not been specifically listed in your policy you will be held liable for, and so will have to pay for the cost of the repair or replacement of that item. This obviously exposes you to a certain degree of uninsured risk which you may not feel comfortable carrying.

For additional expense, you can take out what is known as a special contents coverage or open perils policy that will insure all your items against loss no matter what that cause of loss was due to. The only things that you won’t be insured against will be a few specific exclusions listed on your policy, such as losses due to war, which for most people won’t really be exclusions at all.

If you have very expensive items in your house and/or have young children or teenagers, then taking out special contents coverage is strongly recommended as it provides you with much greater protection at minimal extra cost.

Personal Liability Limits

As with homeowners insurance, renters insurance comes with a standard automatic $100,000 worth of personal liability coverage. However, whilst this may sound like a lot, in reality it is not, and you are strongly advised to increase this limit to provide you with proper coverage.

Generally, $300,000 to $500,000 worth of additional coverage should be adequate for most families. Considering that this will only cost you around $20 to $25 respectively a year extra and provide you with much more extensive coverage, it is certainly something that is worth doing as it could save you a lot of money in the event that you ever need to make a claim.

It is also recommended that you have the same limits for your other insurance policies, such as for your car and health insurance. Since you never know what type of insurance you will need to make a claim on in the future, having a balanced level of coverage will ensure that you are adequately protected against all major risks in all the major areas of your life.