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Understanding Rental Insurance Policies

The most common type of home insurance is for a property that is owned, but there are also policies written for tenants that are currently or will be renting a property. While renters’ insurance does cover the contents of an apartment or rental home from theft, natural disasters, and other issues, there are other reasons why you may wish to invest in a renters’ insurance policy. A full renters’ insurance policy will provide a greater level of coverage than just making sure that a costly computer will be replaced in the case of an accident.

One of the main benefits of renters’ insurance that is often overlooked is the expense of living somewhere else if a natural disaster or other event occurs that makes your dwelling uninhabitable. On top of the trauma of losing your home, you are also faced with incremental costs to find an alternate place to live. In worst case scenarios, where your home is completely destroyed, this may also include the loss of all of your personal possessions. A renters’ insurance policy that covers the cost of finding an alternate home provides that peace of mind that you won’t be left homeless in the event that the worst occurs.

On short notice, the costs associated with finding an alternate home may involve immediate hotel expenses, followed by a hurried search for a more permanent home. The accelerated timing of these events, compared to a planned search for a new home, can increase the costs of finding alternate living arrangements. While rental reimbursement coverage won’t last forever, it should cover a reasonable time period involved with taking the steps necessary to find an alternate home, without having to rush the process as hotel bills mount.

The most common (and hopefully valuable) function of a renters’ insurance contract is to protect personal belongings against the most common perils (which are usually named in the policy). The most common peril that could cause damage to personal property is theft or vandalism. In these situations, a renters’ insurance policy will reimburse the policyholder the actual cash value of the items minus the deductible that must be paid. There are limits on the reimbursement value of certain types of property (such as cash or coin collections), so be sure to understand those limits when reviewing and comparing renters insurance quotes. These limits may be well below market value. If additional coverage is necessary, a rider can be purchased to increase the coverage limits or to specifically identify (and cover) high value items. While these riders involve additional cost, the expense is usually very affordable.

The deductible is an important concern for anyone thinking about renters’ insurance and should play a part in making a well informed decision. As with other types of insurance, the amount of the deductible will dictate the premium payments, with a higher deductible resulting in lower premiums. However, if a person lists items that total $1,000 and have a deductible of $800, it may not be worth paying for the renters’ insurance premium for what amounts to only $200 worth of coverage. Granted, there are other aspects such as rental reimbursement to take into consideration. Additionally, if you have few valuable possessions, most people still have clothes, furniture and basic electronic devices. The cost of replacing these can add up, so be sure to take them into account when determining the value of your personal possessions. In general, a relatively low level of coverage is extremely affordable, making the added peace of mind well worth the cost.

Most insurance plans for renters cover fire, water damage, theft, and liability issues that are the responsibility of the renter. A full listing of the named perils will be included with each policy and should be carefully reviewed before agreeing to the insurance plan.

One question that often appears in discussions about renters’ insurance is whether the belongings of a roommate will be covered by the policy. For standard renters insurance policies the answer is no as the items that are covered only apply to ownership by one person. A solution to this is to have all of the roommates living in a common dwelling space purchase individual policies to make sure that everything is protected. When you first complete the paperwork for the policy, a full inventory of valuable items will need to be completed and turned over to the insurance company.


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