How Does Rental Insurance Work?

When moving into a new apartment or rental house, the decision to add renter's insurance is an important consideration.

Whether you are renting a home, an apartment or a condo, renter's insurance can help protect against the loss of your personal property in the event of fire, theft or natural disaster. When you obtain a renter's insurance policy, you pay premiums to the insurance company, which then promises to reimburse you when you file a claim for loss or damages.

Standard Coverage

Renter's insurance works just like homeowner's insurance. When damage occurs, your personal possessions within the building are covered. According to Insure.com, typical renter's insurance coverage protects your personal property from an array of basic perils, including damage from fire or lightning, wind, explosions, plus damage from smoke, aircraft and vehicles. Renter's insurance also typically covers damage from such accidents as burst plumbing, hot water heating, air conditioning malfunctions and frozen pipes. Another common category of protection is against theft, vandalism or damage caused by riots or civil unrest.

Cost of Replacement

When buying renter's insurance, you'll have to decide what level of protection you need to replace your damaged or stolen possessions. You can either choose to replace through "actual cash value" or through "replacement cost." According to InsuranceRate.com, coverage through actual cash value will pay only what the possession is worth today. This means that if you purchased a PC 10 years ago, the insurance claim would only cover what the same computer is worth today. In other words, not much. Replacement cost coverage compensates you for what it would cost to replace the item. In this case, your damaged or stolen computer you would be replaced at the cost of today's computers. Replacement coverage typically costs more in premiums but the pay out is greater, too.

Premiums

One common reason people avoid renter's insurance is the cost. However, according to Insure.com, you can reduce your premium by following some basic steps. One way to reduce the premium is to increase the amount of your deductible. You can also reduce your costs by installing basic protection devices such as fire alarms, fire extinguishers or anti-theft devices or deadbolt locks.

Inventory

If you do decide on renter's insurance, according to Insure.com, make sure to take inventory of all of your possessions. Having the inventory either saved electronically or stored in a safe places, such as a locked fire box, will assist you in claiming your possessions if theft, fire, or some other problem arises.

References

• Insure.com: Renter's insurance
• InsuranceRate.com: Renter's insurance basics