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You Need Renter's Insurance to Cover Your Personal Possessions and Liability When You are Renting

Aug 17, 2007
If you don't own your own home, and are renting instead, you may think that you're covered by your landlord's insurance policy. The fact is, though, that you're not - a landlord's property insurance covers damage to the structure of the property itself, but it does not cover your personal possessions or liability. For that, you need renter's insurance.

Standard Renter's Insurance Policies

A typical renter's insurance policy will cover you for the following types of damage:

- Fire and smoke
- Windstorm, hail, and lightning
- Ice, snow, and sleet
- Explosions and volcanic eruptions
- Aircraft and ground vehicles
- Riots and other civil disturbances
- Vandalism and other malicious destruction
- Falling objects
- Water damage caused by home utilities, and damage caused by electrical surges

If the property you are renting becomes uninhabitable due to these types of damage, your renter's insurance will cover your displacement costs. Usually this means that your insurance will pay rent for another property while your original property is repaired, or until you relocate to a permanent home. This coverage is typically limited to 30-40% of the total value of your policy. There is typically a time limit attached to this type of coverage - once you reach the limit, the insurance will no longer cover expenses. The time limit varies depending on the specific policy, but is usually no longer than twelve months. Some insurance companies cover you for what they term "a reasonable length of time". If this type of clause appears in your policy, try and get your company to explicitly state what they consider reasonable, to prevent the possibility of an unwelcome surprise if you end up in a situation where you need to make this type of claim.

Renter's insurance has another benefit which you may not have considered. Your renter's insurance also covers you for liability, meaning that if someone is injured while on your property, you are covered for the cost up to your liability limit (which is determined by your specific policy terms). This means you are covered for that person's medical expenses, legal costs if they should decide to sue, and any damages they might be awarded.

Note that flood and earthquake damage is not on the coverage list - a standard renter's insurance policy does not cover these types of damage, because these phenomena tend to be restricted to certain parts of the country. If you live in an area where such things occur, then you'll need a separate policy if you want coverage. Additionally, if you live in a coastal region where hurricanes may be particularly destructive, extra coverage might be required for windstorm damage.

Guaranteed Replacement Cost Coverage

Another important factor to consider when shopping for renter's insurance is whether the policy will cover "actual cash value" or "replacement cost". Actual cash value means you are covered for the value of your possessions at the time damage or theft occurred, not what it cost you to buy them. Guaranteed replacement cost coverage is a good idea for items that depreciate quickly, such as electronic and computer equipment.

Reduce your Rental Insurance Costs

The amount you'll pay for insurance depends on your location, your deductible, the company and policy you choose, and on whether or not you decide to pay for additional coverage. Take the time to shop around a few different companies to get the best rates. These days, most companies offer reduced premiums if you install smoke and fire detectors, burglar alarms, and fire extinguishers on your property. You can also reduce your premium by paying a higher deductible.
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