Renters Insurance: What It Does and Doesn't Do

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Most people do not sit around waiting for the worst to happen. However, with a nearly 10 percent unemployment rate, it takes only a bit of common sense to assume that increased criminal activity in the U.S. might soon follow.

"When I bought a home I was required by the banks -- who have a vested interest in the property -- to get homeowners insurance," says Shani Griffith from Brooklyn, New York. "When I sold my house and started renting, it just never occurred to me to get renters insurance, and no one made me do it."

The funny thing about thieves is that you can bet they don't care if you own your home or rent it. They only care about what is inside. As renters, you might be asking yourselves if you are able to incur any additional expenses at this time in your lives -- much less one rooted firmly in "what if." Should you even bother with renters insurance? And if you do, how will it benefit you and how not?

Here are the answers you've been waiting for:
• Renters insurance does pay for the contents of your home, should they be stolen or damaged, for around $10 a month. This amount typically covers around $60,000 in damages.

Renters insurance does not pay for stolen collections, like your priceless baseball cards, and/or valuables, like jewelry and your great-grandmother's china, for the same $10 a month. To cover these, you will have to prove their worth up front, and will likely pay more to insure them.

Renters insurance does cover damage to your belongings from events as varied as theft, fire and broken pipes that lead to water damage.

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Renters insurance does not cover damage from most natural disasters including hurricanes, floods and earthquakes. But you can buy additional insurance that will cover you if it is a major risk where you live.

Renters insurance does protect you in the event that you cause damage to your rental such that your landlord will hold you accountable.

Renters Insurance does not protect you should you cause damage to your rental, unless you make sure you are protected with renters liability insurance -- so check with your broker.

Renters insurance will replace (for example) your 2-year-old flat-screen TV with a TV of similar quality if you have full replacement coverage.

Renters insurance will not replace your 2-year-old TV outright if you are covered by ACV or actual cash value insurance, which is cheaper -- but will only pay you the amount you paid for the appliance, minus two years' depreciation. Double-check your plan to ensure that you end up getting what you meant to pay for.

Renters insurance will cover you if your dog drops a chew toy in the toilet and your 7-year-old tries to flush it down, causing a pipe to break that leads to damage to your belongings.

Renters insurance will not cover a leaky roof that you and your landlord knew about, but decided to neglect, and that eventually led to rain on your pillow. So don't neglect your apartment. As wear-and-tear adds up, get it fixed.

"I definitely regretted [not having renters insurance] big time when I was robbed one afternoon, while I was at work, and unable to recoup any of my losses," says Griffith. "For such little cost, it is a mistake I will not make again."


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