If you rent a house or apartment and experience a fire or other disaster, your landlord’s insurance will only cover the costs of repairing the building. To financially protect yourself, you will need to buy renters or tenants insurance.
Just like homeowner’s insurance, renter’s insurance includes three key types of financial protection:
- Coverage for personal possessions
Protecting you from theft, fire and host of other unfortunate events.
Covers you against lawsuits for bodily injury or property damage done by you, your family members and even your pets.
- Additional living expenses (ALE)
Provides coverage if your home is destroyed by an insured disaster and you need to live elsewhere for a time.
The big difference is that renter’s insurance doesn’t cover the building or structure of the apartment—that’s the landlord’s responsibility.
The following 11 questions will help you choose the right coverage:
- How much insurance should I buy?
Make sure you have enough insurance to replace all your personal possessions in the event of a burglary, fire or other covered disaster. The easiest way to determine the value of all your personal possessions is to create a home inventory—a detailed list of all your belongings along with their estimated value.
- Should I choose Replacement Cost (RC) or Actual Cash Value (ACV) coverage?
Actual cash value policies include a deduction for depreciation (that is, the idea that items lose value over time). Replacement cost coverage is pricier but can be well worth the extra expense if your belongings are damaged or destroyed (think about how much you’d get for your TV used versus how much it would cost to replace).
- What disasters are—and are not—covered?
Renters insurance covers you against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (such as from a burst pipe or when the tenant upstairs leaves the water running in the bathtub and floods your apartment). Like standard homeowners’ policies, most renter’s insurance policies do not cover floods or earthquakes. Flood coverage is available from the National Flood Insurance Program and a few private insurers. You can get earthquake insurance as a separate policy or have it added as an endorsement to your renter’s policy, depending on where you live.
- What is my deductible, and how does it work?
A deductible is an amount of money you are responsible for paying before your insurance coverage. Renters insurance deductibles are generally specified as a dollar amount, which can be found on the declarations page of your policy. In general, the larger the deductible, the lower your insurance premium.
- What is a “Personal Article Floater,” and do I need one?
A floater is a separate policy that provides additional coverage for more costly valuables if they are lost or stolen. If you have expensive jewelry, furs, collectibles, sports equipment, or musical instruments, consider adding a floater to your policy to protect against their loss.
- Am I covered if I am traveling or away from home?
Most renters police include what is called off-premises coverage, which means belongings that are outside of your home are covered against the same disasters listed in your policy. For example, property stolen from your car or a hotel room while you’re traveling would be protected.
- What is Liability Insurance?
This coverage pays for the cost of defending you in court, up to the limit of your policy.
Your renter’s policy should also include no-fault medical coverage as part of the liability protection. Medical payments coverage allows someone who gets injured on your property to simply submit his or her medical bills directly to your insurance company so the bills can be paid without resorting to a lawsuit.
- Do I have enough Liability Insurance?
Make sure the amount of liability coverage provided by your policy is enough to protect your financial and other material assets in the event of a lawsuit.
- Do I need an Umbrella Liability policy?
If you need a larger amount of liability protection, consider purchasing a personal umbrella liability policy. An umbrella policy kicks in when you reach the limit on the underlying liability coverage provided by your renters or auto policy. It will also cover you for things such as libel and slander.
- What does ALE (Additional Living Expenses) cover?
This portion of your rental insurance policy pays for hotel bills, temporary rentals, restaurant meals and other expenses you incur while your rental home is being repaired or rebuilt. Essentially, it covers the expenses you would not have to incur if you had your usual roof over your head.
- How much does ALE cover?
Most policies will reimburse you the full difference between your additional living expenses and your normal living expenses; however, there are generally limits as to the total amount the insurer will pay or time limits specifying how long you’re eligible for the ALE payments. Make sure you’re comfortable with the limits of the policy you choose.