Understanding Renters Insurance

Homeowners insurance is taken out by a homeowner to protect their financial stability against any event that may happen to their house. It protects the person from losses of one’s home, its contents and covers the homeowner against any accidents that may happen in the home (subject to the insurance policy details and intricacies).

This is all well and good for those that own a home or property, but what about those that are renting the property? What about those that are living in a property that someone else owns? Well, for those in that situation, you will need something known as renter’s insurance.

The landlord’s insurance will cover the cost of any repairs that have to happen to the building. Why would this be? Because that is their responsibility. The first thing you need to understand about your position is that you are not liable for anything that happens to your rented property by accident. Obviously, if you purposely cause something to happen, you are liable.

What does renters insurance cover in the way of personal possessions?

Renters insurance covers loss of possessions such as electronics, luggage, furniture, appliances and other things of that nature. The sorts of events that a standard insurance policy covers are loss of possessions through fire, smoke, theft, vandalism, explosions and water damage.

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renters insurance guide

A lot of insurance policies will not cover natural disasters such as earthquakes and floods, which is why you often see governments reaching out to support those who lose their possessions through these events.

Replacement vs cash value

Different renters insurances will let you choose between replacement or cash value. Most of the time replacement policies will prove to be more valuable. This is because (though they are a little more expensive) they are much more likely to supply you with a completely new appliance or electronic, despite your original object being worn or old.

Whereas cash value policies often fall short of a full reimbursement is where depreciation comes in. Insurance companies will often do their utmost to find ways of not paying you back the full price of an item that has been stolen or damaged. If they find that you owned it for 5 years before the even happened, this will factor heavily in the cash they pay out to compensate your loss.

Deductibles

Deductibles are a very important part of your renter’s insurance policy. If you look at the ‘Declarations’ section of the contract you sign when taking out your policy, you will often find deductibles mentioned.

Let’s understand this using an example. Say for instance, you take out an insurance policy with $1000 worth of deductibles attached to it. If your house withstands $10,000 worth of damage, $1000 of that damage has to be handled by you. The remaining value of the damage will be handled by the policy, but $1000 is deducted from what the insurance company has to pay out.

This being the case, deductibles are an extremely important part of a renter’s insurance contract put in front of you.

Liability protection

Another thing that is commonly covered by the majority of renter’s insurance policies is liability protection. This protects the renter from lawsuits concerned with bodily injury or damage to the property done by you or your family members. This means the cost of you defending yourself in court is paid, up to the limit set out in your policy.

Renters insurance will usually come with medical coverage too. This means that if someone were to injure themselves on your property, all they would need to do is submit their medical bills directly to your insurance company in order to receive reimbursement.

One may consider even getting an umbrella liability policy, but only if they find they often have trouble when it comes to lawsuits being held against them. An umbrella liability policy helps those that’s original liability protection insurance has dried up and already run out.

Additional living expenses

So if you’re house is completely destroyed by one of the many things covered in your renter’s insurance policy, you may be wondering where you can possibly live while your insurance company try and sort out the details of what your entitled to.

Your friends are all full up and busy and hotels are way too expensive to put you up for a long time. Well, oftentimes the insurance policy you take out will also cover what is known as additional living expenses (ALE). This part of the agreement helps you to cover hotel bills, restaurant outings and any temporary rentals you have to get due to living elsewhere whilst your house/flat is sorted out.

As you can imagine, these sort of expenses can stack up, especially if you don’t know exactly when you’ll be able to get into your house again, so an agreement when it comes to additional living expenses is vital.

The trick to using ALE successfully is to not try and take your insurance company for fools. Only bill what you genuinely know you bought or rented through not having access to your house. If you try and charge them for 5-star restaurants and penthouse suites, they may have something to say about it!

Discounts

So, now that we know all we need to know about renter’s insurance, what sort of discounts can you get when applying? Well here’s a handy list.

If you have a security system, smoke detectors or anything else that supports the safety and security of your house, you may be eligible for a discount. If you have good credit the insurer will probably allow you to have a discount, and the same goes for if you have dealt with the insurer before, or you are over 55 years of age.

Remember, if any of these apply to you, you need to make sure you mention it when applying for renters insurance. You never know what might help you save money.

Disclaimer: Our service is not intended to be, nor should it be construed as financial advice. We help our readers make informed decisions via impartial information and guides. Where appropriate, we may introduce partner companies who can provide services relating to financial products.