Basics – Renters Insurance Plan

Whenever disaster takes its toll, it does not choose to hit rented buildings or owned homes. Therefore, renters occupying these spaces also face the same risk as homeowners. A landlord or a condo association may have insurance policies that protect the building structure but not your personal items inside them. A renters insurance plan however is designed to protect your personal belongings inside the structure in case of disaster.

What the standard renter’s policy cover

Insurance companies have grown to be more specific in their coverage and have several types of residential insurance policies. There is a policy designed for home renters, while another policy for condo owners. Both policies cover losses to personal property from the following 16 types of perils:

1. Lightning and fire
2. Hail and windstorm
3. Explosion
4. Civil commotion or riots
5. Damage caused by aircraft
6. Damage caused by vehicles
7. Smoke
8. Malicious mischief and vandalism
9. Theft
10. Volcanic eruption
11. Falling objects
12. Weight of snow, sleet or ice

13. Accidental overflow or discharge of water or steam from within a plumbing, air-conditioning, heating, or from an automatic fire-protective sprinkler system, just plainly from a household appliance.

14. Sudden and accidental cracking, burning, tearing apart, or bulging of hot water or a steam heating system, an automatic fire-protective system or an air-conditioning system.

15. Freezing of a heating, air-conditioning, plumbing, or an automatic fire-protective sprinkler system, including a household appliance
16. Sudden and accidental damage from artificially generated electrical current but does not include loss to a transistor or a tube or similar electronic component.

However, floods and earthquakes are not on the list. Living in areas that are prone to floods and earthquakes will require you to buy a separate policy or get a rider. Some coastal regions where hurricanes pose a threat would also need a separate policy to cover wind damage. Be careful about this additional coverage. Limits might not be sufficient to cover your needs when disaster strikes.

Comparing the Replacement Cost and the ACV

Always declare your valuable items to your agent in detail. Determine if your insurance company will offer the replacement cost or actual cash value (ACV) coverage for your personal belongings.

The ACV coverage will pay only the worth of the property the time it was damaged or stolen. Example; if you bought a laptop for $500 seven years ago, the insurance company pays only what the item is worth today, less deductibles.

The replacement cost coverage on the other hand will actually pay the amount to replace the items you lost, minus deductibles. In some regions, insurers quote you the replacement cost coverage by default, but most insurers write ACV coverage only.

Though replacement cost coverage will cost more in premiums, it will serve a better purpose when you need to file a claim. Include particulars in your valuable items such as jewelry, electronics, antiques and paintings but might only be covered up to an amount insufficient for their replacement.

For unusually expensive items, like a diamond ring, paintings and antiques, you will need to purchase a separate policy. Without a separate policy for expensive items you cannot recover the full losses once it goes beyond the renter’s policy limit.

Prepare a full inventory of your personal belongings

Prepare an inventory of all the personal belongings you have in the house. List every item, with its value and assign serial numbers. Videotape or photograph each room, including open drawers, closets, plus garage and storage buildings. Safe keep receipts of major items in a fireproof vault or cabinet.

The Insurance Information Institute has the free inventory software that can help you create a room-by-room inventory of personal items.

Additional living allowances when disaster strikes

If a fire happens due to any reason covered by the policy, your condo or home could become uninhabitable. Your renters’ insurance policy will cover the additional living expenses you need, meaning paying for shelter to live somewhere else.

Additional liability benefits for renters’ policies

Most renters and condo policies have standard liability protection too. The coverage means if someone in your unit falls and slips, the injury costs can be claimed up to its liability limit. And in case the person will sue you, the policy will not only cover for what they win in a court judgment but the legal expenses as well, up to your policy’s limit.

Keeping your premium low

To keep your renters’ insurance premium low actually depends on a number of controllable factors. These factors include; your insurance deductible, the region you live in, programs and policies of insurance companies, or whether you need any additional coverage at all.

These are some ways to reduce your renters’ insurance bill;

1. Increasing your deductible, which is against the amount you pay before your coverage start is one strategy. Make sure you can afford the deductible you choose.

2. Some insurance companies are reluctant to write polices for homeowners with certain breeds of dogs. You have to think twice before getting one.

3. Insurance companies also offer discounts for installed protective devices like burglar alarms, fire extinguishers, fire and smoke detectors.

4. Insurers also offer discounts to policyholders aging 55 and retired.

5. Some insurance companies offer discounts if you purchase both an auto and renters insurance plan, also known as the multi-line discount.