Right now, there are many of you out there that read my blog and you rent an apartment, house, or you live in a dorm. And I can bet that there are many of you renting an apartment or living in a dorm room without paying for renters insurance. There are many types of insurances out there that just aren’t necessary for what you get in coverage, but renters insurance is coverage that you must buy today. If you think you can’t afford it, you’re wrong. You might have to give up a couple of small luxuries per month to pay for it, but the peace of mind is worth it.
How much does it cost?
This depends on how much coverage you buy and where you buy it from. If you buy $25,000 to $40,000 in coverage from one of the national companies, it will range from $15 to $30 a month. The coverage is VERY cheap of what you get in return. The price also depends on what type deductible you choose which range from $100 to $1000. I suggest going with a $500 deductible on a renter’s policy. It keeps the price low, but it’s not too large of a deductible to make a huge hit in your financial situation.
What does it cover?
Generally, a renter’s policy is what the insurance world calls a, “Named Peril” policy. This means that your policy lists the perils that are covered under the policy such as theft, wind, water, lightning, fire, vandalism, and other less occurring incidences. If the cause of your loss isn’t listed, then it’s not covered. That’s how a “named peril” policy works. Generally, earthquake and flood are not covered, but you can usually add them on as coverages for an additional premium.
THE TWO COVERAGES IN A RENTER’S POLICY
Difference between Actual Cash Value and Replacement Cost Value:
Here is the equation for Actual Cash Value: (replacement cost value - depreciation) = Actual Cost Value. So, when your policy is paid based on ACV, the insurance company will determine the current market replacement cost for the damaged item, then assign a depreciation usually based on a percentage, subtract it from the RCV, and give you the actual cash value of the damaged or stolen item.
Replacement Cost Value is determined by how much something is worth in today’s market. So, if you bought a computer in 2002, and it was stolen in 2008, the insurance company would not be able to give you something of like, kind & quality, because the technology has increased so much and the prices have gone down so much in that timeframe. What they should do is do research on that original model and determine if that was a low, medium, or high grade model, and then pay you based on what it would cost to buy you a low, medium, or high grade model of that particular brand in today’s market. Replacement cost coverage DOES NOT ALWAYS mean that if you bought something for $1,500, you will receive $1,500 from the insurance company. It’s true for items like furniture, but not for electronics.
Things to remember:
If you have any questions, don’t hesitate to email me.
2 Responses
Joseph T. Becher
February 27th, 2008 at 3:43 pm
1This is very good information. More renters, Property Managers and Property Owners should read your comments.
Statistics show that 76% of Apartment residents do not have renters insurance. As you have indicated it is very affordable. So why are so many are uninsured? Some reasons: the resident does not want to ccontact the traditional insurance agent, they think the landlord’s insurance covers them, they don’t have “enough” valuable property, there are many more.
One more thing to consider, the best renters insurnace policies also cover additional living expenses should the insured premises be uninhabitable due a loss covered in the policy.
Thanks for writing a very comprehensive article,
Sincerely
Joesph T. Becher
SimpleTruth
March 17th, 2008 at 2:54 pm
2Good post! I had renters insurance when I was renting an apartment awhile ago, and as you mentioned it’s relatively inexpensive… especially when you factor in ‘piece of mind’.
Fortunately, I never had to use it, but it was nice knowing that I’d be covered if one of my neighbors were to leave the iron on one day. So, I agree… a person should seriously consider getting renters insurance if they are renting.