Insuring Your Home: Owning Vs Renting
Whether you are paying a mortgage or rent, it is important to insure your home against potential disasters. But it is also vital that you understand the difference between homeowner’s and renter’s insurance—though similar, the two are tailored to fit the unique needs of your living situation. Below, you will find an overview of each type of policy before we dive more deeply into renter’s insurance and the ways it can help protect you (and your possessions) regardless of the coverage provided by your landlord.
The Major Differences
Homeowner’s insurance covers the actual structure you live in, as well as the totality of your possessions. Because the insurance company is protecting the entire home from a variety of potentials disasters—theft, flood, hail, fire, etc.—homeowner policies are typically more expensive than renter’s insurance. As a renter you are not responsible for insuring the actual building in which you reside. Your landlord will pay for coverage of the actual building, but you will still be responsible for insuring your personal property and liability. It is important that you never assume your landlord’s insurance will cover anything you own in or around the property.
Renter’s Insurance: Personal Property
Imagine sitting in your apartment on a chilly winter day, when suddenly there is water pouring down from your ceiling. You rush to move your electronics and other valuables out of the way, but there is only so much you can do to mitigate the damage. You eventually find out your upstairs neighbor’s pipes froze and burst, which led to the waterfall in your own space. Without renter’s insurance, you would likely be responsible for replacing all your damaged belongings—that could be thousands of dollars in costs. Having a comprehensive renter’s insurance policy takes away that potential financial burden, covering the cost of repairing or replacing your personal belongings.
Replacement Cost vs. Actual Value Cost
Pay special attention to the type of coverage offered by a policy. Whereas replacement cost will pay what it costs to replace the items lost or damaged at current prices, actual value cost will only pay what the possessions are worth at the time of the damage or theft. Your twelve-year-old laptop, for example, would not be worth much. Receiving actual value cost could still leave you with a sizable personal expense when you go to replace it. Replacement cost, however, would supply you with the funds to purchase a similar laptop in today’s market.
How much are my possessions worth?
It can be difficult to determine how much your collective possessions are worth, so it is a good idea to take photos or video of each room in your home. You should also make a list of your possessions, including as much information as possible. This is especially true for high-ticket items, like electronics, collectibles, jewelry, and fine art. When possible, include serial numbers, receipts, appraisal documents, and any other information that will help ensure you receive proper compensation in the event of a loss. There are apps, like Encircle and Sortly that can help with this entire process.
Renter’s Insurance: What else is covered?
In addition to your personal possessions, many renter’s insurance plans will cover medical expenses when someone injures themselves in your home, relieving you of liability. If you are forced to temporarily vacate or move due to damage of your living space, your policy can also cover the cost of you living in another space until the damage is repaired. Not every policy will include these coverages, especially if you are looking for the cheapest policy available, so be sure to read the coverage information thoroughly before you decide on a carrier and policy. It’s important to note along with what is covered, what is not covered are earthquake and flood damage. A trained insurance agent can help you decide if you want to add these coverages to your policy.
How do I shop for a renter’s policy?
With insurance companies advertising on social media and third-party websites, how can you tell if a carrier is reputable? Make sure to do your homework. Reserve time to research agents or companies you are interested in. Look into a company’s financial strength, talk to people you trust, pay attention to reviews that include words like ‘ripoff’ or ‘scam’, and check out their online business and social media presence.
Once you have narrowed down the carriers you want to compare it is worth taking time to think through the pros and cons of online shopping. The process is quick and easy, which means you can shop at your convenience. You will have control over the details of your policy and can tailor it in real-time, but you will also be solely responsible for making sure you understand what you are purchasing. Speaking to an agent might take more time, but they will work with you to make sure you are receiving all the coverage you need. Regardless of how you go about shopping, be sure to compare prices and policy details thoroughly, paying particular attention to liability limits and deductibles.
How can I reduce the cost of my renter’s policy?
The cost of your renter’s insurance is determined by the same information that applies to homeowners’ policies: the amount of coverage you want, the location of the rental property, and the deductible you choose. Living in a flood zone, for example, will raise your insurance costs whether you rent or own. In either scenario, choosing a higher deductible will lower your monthly costs. Finally, you can reduce your overall insurance costs—whether your rent or own—by investing in additional security features, like fire, smoke, and carbon monoxide alarms; burglar alarms; deadbolt locks; and fire extinguishers.
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