When you rent your home, the property owner’s insurance protects the structure of the home as well as the plumbing and electrical work. It does not protect any of your personal belongings inside the home. Renters who wish to protect their personal property need to purchase their own insurance policy, known as renter’s insurance. This insurance helps them replace their property if it is damaged due to no fault of their own or stolen.
A basic renter’s insurance policy covers damage to your personal property due to theft, vandalism, fire, damage from ice or snow, damage from lightening, smoke damage or water related damage from a leaking pipe or appliance. As with any insurance policy, you need to pay your deductible and the insurance company covers the remainder of the damage. Renter’s insurance policies only cover damage caused by acts of weather, or cases of theft, they do not cover damage you did to your own property accidentally, or damage to the landlord’s property.
Most renter’s insurance policies come with liability protection. This liability coverage pays for a guest’s medical bills if they are injured on your property and protect you from a lawsuit. Renter’s insurance policies also pay for the cost of temporary living, such as a hotel room stay, should your rental become inhabitable due to a fire, severe structural damage or flooding from the plumbing system. However, the insurance company will only pay around 30 percent to 40 percent of the total value of your policy for temporary living arrangements, according to MSN.
Actual Case Value Vs. Replacement Value
Renter’s insurance claims pay out according to either Actual Cash Value or Replacement Value. Actual Cash Value pays you for your property’s worth now and not its original value. Most property, especially electronics and household appliances, decrease in value over time, your claim may be less than what you need to replace your stolen or damaged property. Replacement Value insurance policies pay you based on the original cost of your property, or based on an average value of the property you are trying to replace if you do not have a receipt or inventory for the missing property. Most insurance companies offer both types of policies.
Most renter’s insurance policies do not cover damage to property due to flooding caused by weather, wind damage caused from high winds, such as those during a hurricane, or earthquake damage. Renters who live in areas prone to major weather disasters, especially coastal areas, may want to purchase an add-on to their renter’s insurance policy that will cover their property in the event of a natural disaster. Renter’s who own expensive jewelry or electronics may also wish to purchase additional policy add-ons to cover these items.