Is Renter's Insurance Worth It?
Renter's insurance policies provide policy owners with financial liability protections and other benefits at affordable costs. These insurance plans pay for property damages as well as reimbursements for insured valuables that are lost, damaged or stolen. Although renter's insurance are generally optional purchases, the risks that are covered under these policies make it worth purchasing.
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Benefits
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Renter's insurance provides benefits to help policy owners recover financially from several incidents. Policies cover the costs to fix or replace damaged valuables including cars, jewelry, furniture, dishes and clothes. Renter's insurance also covers the medical expenses of third parties who are injured while on the insured properties. These policies also provide financial assistance to policy owners to relocate when their insured rental properties become unlivable due to damages. Any claims made are paid up to the policy's coverage limits.
What It Covers
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There are many risks that are covered under renters insurance policies. These insurance plans cover losses due to fire, lightning, volcanic eruptions, theft, riots and vandalism. Policies also pay for damages caused by cars, aircrafts, falling objects, windstorms, hail, riots and plumbing, heating and electrical systems. However, most policies do not cover damages caused to the rental properties' physical structure, according to the Insurance Information Institute.
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Features
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Policy owners can choose to be compensated on an Actual Cash Value, known as ACV or replacement cost basis. ACV coverage pays policy owners for the actual value of the lost property instead of the price it was purchased for. For example, if a laptop was bought for $300 two years ago, insurers will only pay what it is worth at the time the claim was submitted minus the deductible. Replacement costs coverage pays the policy owners the amounts they purchased the damaged properties for. However, premiums for this coverage are higher than ACV.
Considerations
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In exchange for insurance coverage, renters pay premiums as their forms of consideration. Premiums are based on several factors, including the coverage amounts, geographical areas and deductible amounts (money policy owners must pay before insurers cover any claims). For this type of coverage, renter's insurance policies are fairly inexpensive. MSN Money reports that basic renters insurance coverage can cost between $150 to $300 per year. However, policy owners can lower their insurance costs by adding protection systems to their rental homes and apartments, such as fire and burglar alarms, and also by increasing their deductible amounts.
Warning
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There are certain activities that are not covered by renter's insurance. These policies do not cover damages caused by earthquakes and floods, according to Insure.com. Also separate policies must be purchased to protect rental properties from hurricanes as well. According to FindLaw, renter's policies may not cover damaged or stolen equipment and supplies used in home-based businesses.
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