Renters Insurance: Why You Need It

renter's insurance break ins
When Stephen Slaybaugh returned to his two-bedroom apartment in Columbus, Ohio one evening after work, something was not right.

"At first I thought my girlfriend had just left a bunch of things strewn about," he says. "Then as I walked through the apartment, there was stuff she obviously wouldn't have left out. Then I noticed the lock on the door was busted. Someone had broken into the apartment."

The thieves had made off with his laptop with a new hard drive, an electric guitar and two concert tickets. "They just took things that they could leave the apartment with fairly unnoticed," he guesses.

Because Slaybaugh has renters insurance, every item was replaced. "I was especially impressed, because even though the computer was several years old, they paid me what it would cost to get a comparable computer at the time of the theft -- as opposed to just paying the cost of the old computer."

Here is what you need to know about renters insurance:

Signing up for renters insurance is easy to do and, once you get it, is no greater a drain on your monthly expenses -- and perhaps even less -- than a daily coffee habit. But most importantly, when you have renters insurance and disaster strikes (whether by burglar, flood or fire), knowing that you won't be couchless, computerless or television-free for long, might be exactly the consolation you need to get you through the mishap.

1. What does renters insurance cover?

Standard policies will likely cover your possessions from the following occurences:

• Theft
• Damage from impact due to airplanes or vehicles
• Damage from impact due to falling objects
• Damage from ice, snow, hail or sleet storms and their aftermath
• Damage from windstorms
• Lightning strike
• Explosion
• Volcanic eruption
• Fire and smoke damage
• Vandalism
• Riot or civil unrest
• Damage from faulty plumbing, heating, air-conditioning, sprinklers, electrical wiring or household appliances

If your home should for any reason become unlivable due to any of the above, renters insurance will generally contribute to or pay entirely for temporary housing.

Liability protection also usually comes standard with most policies. Therefore if someone falls while on your property and sues you, your legal fees as well as the court judgment could be entirely covered. Items stolen out of your car are also, generally, covered under most plans.

You can also add personal property protection plans for a few dollars more per month. That way, if your laptop or bicycle is stolen when you are out and about, you are covered. (Make sure you check the deductible. Usually these policies only cover items valued at or over $1,000 unless otherwise stated.)

Floods, earthquakes and hurricanes are almost never included in standard renters insurance. If you live in an area prone to any or all of those natural disasters, you must get separate insurance.

2. What types of renters insurance are there?

There are two basic types -- actual cash value and replacement cost coverage.

• Actual cash value (ACV) coverage will refund the amount that the item is worth at the time of damage or theft. In other words, a 10-year-old stereo system, even if you paid $1,000 when it was purchased, will be worth significantly less than that today.

• Replacement cost coverage will pay out what you will need to replace the item today. In other words, if you paid $700 for your computer model three years ago, today a comparable model might cost $900. You will be covered to buy the more expensive model.

The difference in monthly costs between the two types of renters insurance is often negligible. Some might argue that replacement-cost coverage is a substantially better value. The premium on a replacement-cost plan is only a couple of dollars more per month.

3. How do you get the lowest premium?

Insurers will typically look at where and how you live, when pricing your premium. But there are a few things you can look for when renting an apartment -- or encourage your building management to add to your existing rental.

• Install deadbolts on doors
• Install smoke detectors and sprinkler systems
• Get bars for first-floor windows
• Get a burglar alarm
• Make sure that there are working fire extinguishers on the premises

You can also do a few things to get discounts on your premium.

• Quit smoking
• Don't own pets
• Be over the age of 55
• Combine your auto insurance and your renters insurance

4. What information about my property will I need to give to the insurance company?

Once you have chosen the insurance that you want, go through and inventory your belongings. Even if you don't keep receipts, take photographs and write down the brands and models of everything that you own -- including serial numbers. Keep in mind that most collectibles are not covered by basic renters insurance and require additional coverage.

When you are ready to choose your insurance policy, the easiest way to begin is to go to websites where you can compare quotes.

Once you have chosen the right package, you will find yourself prepared for almost anything.

"It's horrible having your apartment broken into," says Slaybaugh. "It gives you a feeling of vulnerability, knowing that someone can break in and take your things. But with renters insurance available for under $20 dollars a month, when something like this happens, at least it's not the end of the world."
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