Can You Borrow on Renter's Insurance?
Renters insurance isn't a loan source for policyholders. However, a policy might save renters a lot of money in the end if their belongings are damaged or stolen. That's because landlords usually insure the buildings they own, but they're generally not responsible for buying insurance that protects their renters' belongings.
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Policy Terms
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Renters insurance policies aren't like cash value life insurance policies that allow policyholders to borrow money against the cash value accumulated in their accounts. People who do borrow money from a life insurance policy actually get a loan from their insurer, who uses their account as collateral for the loan. The main purpose of renters insurance is to protect policyholders from having to pay all the costs to replace their belongings destroyed by a fire, vandalism, windstorm or some other peril. Reimbursements, not loans, are available to policyholders who file a claim for damage covered under the terms of a renters insurance policy.
Reimbursements
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The reimbursements that renters insurance policies provide depend on the type of coverage that renters choose. Actual cash value coverage pays policyholders for the value of possessions at the time they're damaged or stolen. Replacement cost coverage reimburses a policyholder for the amount it costs to replace damaged or stolen items, regardless of their current value. Renters may need to purchase extra coverage if they have high-value items, such as furs and antiques. Standard policies limit payouts on some items, and renters may not get enough money to replace expensive items without additional coverage.
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Inventory
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It's worth the trouble to write a list of your belongings and take photos of them to serve as proof of their value and condition if you have to file a claim with your insurer. Insure.com recommends including the estimated value of your possessions on your list and keeping receipts for your most expensive items. Insurance companies investigate claims before reimbursing policyholders for their losses. People who don't have photos to show they owned the items they are including in a claim along with their original condition may receive a much smaller payout than they need to replace their belongings.
Living Expenses
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One particularly important feature of renters insurance is that it generally covers extra living expenses people incur if their rental homes are uninhabitable. For example, renters insurance usually covers the costs of a hotel stay and meals if a fire destroys a policyholder's apartment building. The amount of money provided for living expenses in such cases varies among insurers.
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