Renters insurance is a great way to protect your personal living space and the things you use most often. When choosing your renters insurance, consider the following tips to determine which policy is best suited to protect you, your belongings, and your bank account.
1. Check the term of your policy
When purchasing home insurance, always compare apples to apples. One of the ways online insurance comparison platforms post extremely low rates compared to the competition is by posting semi-annual rates as opposed to annual rates. So when renters find a rate online that is significantly lower than the current annual policy price, they jump on the deal. Only after the tenant reads the articles of incorporation (or hopes to read them) do they see that the insurance is good for six months, not a year.
2. Determine what renters insurance does not cover
When tenants purchase insurance, not everything is covered. Floods, earthquakes, mudslides, war, nuclear disasters, property neglect (e.g., failure to protect your property at the time of the loss or immediately after), intentional loss or destruction, and government actions are not covered. Therefore, if you live in a high-risk flood zone and you think your renter’s insurance will cover you, you should think twice. Tenants are required to carry separate insurance for flood damage. However, tenants should consider one exception for flood damage. If the flood damage is due to an insurable accident, such as a faulty washing machine flooding the apartment, the damage is covered up to the insured amount.
3. Know what your tenant’s insurance covers
In a typical renter’s insurance policy, there are 16 “risks” or scenarios covered by the renter’s insurance. However, not all properties are protected in the same way. There are restrictions on the types of valuables that can be insured. For example, jewelry and electronics can be insured up to $500. However, if your room is broken into and your brand new laptop is stolen. You will only be insured for up to $500. Before signing a contract, look around your rental and take pictures or videos of your valuables. Be sure to show these valuables to your agent or insurance company. And inform them of their value and the fact that they are items you want to protect.
4. Understand that your belongings are not 100% insured
Car rental insurance is a good way to protect your belongings, but insurance companies do not give you carte blanche if your belongings are damaged. Depending on the policy, the renter may be responsible for the deductible. The deductible is the amount that is “deducted” from the final amount payable to the insurance company. It is the initial cost incurred by the renter. For example, if the renter’s deductible is $500 and the damage covered by the insurance is $5,000. The renter must pay the first $500 and the insurance company the remaining $4,500.
5. Understanding the value of the property to be protected
Renters insurance covers the value of your property, but does it also cover the current value or the value of the property at the time of the original purchase? This is the difference between the Actual Cash Value (ACV) and the Replacement Cost Compensation (RCC). If your property is damaged or stolen, the insurance company determines the value of your property. Based on the current value of a three-year-old television set, not the cost of a replacement set. Replacement cost compensation values your property at the amount it would actually cost to replace the lost and found. This is important because, in the event of a loss, the amount you will have to pay out of pocket could be much higher than expected if you have purchased replacement cost insurance rather than LCA insurance.
However, the premiums are lower for policies with LCA coverage because the insurer has to pay less in the event of a claim. You need to ask yourself if you want to pay more upfront because you know you’ll pay less in the event of a claim, or if you want to pay a lower premium upfront in the hope that you won’t have a claim. The choice is yours.
Lily Poole is a Property and Home Insurance officer by profession. She is pretty well experienced in the homeowners insurance nyc condo and accounting field. Moreover, she has an impressive profile in the training and development industry.