Renters Insurance Coverage

If you're new to renter's insurance policies, you may not know what a typical insurance policy contains or how it works. The first thing to understand is that the majority of renters insurance policies are what is called 'all peril' or 'named peril'. This means the insurance contract spells out the types of risk it covers; anything not on that list is not covered. However, many companies offer endorsements, riders or add- ons which can be purchased for additional coverage from excluded risks.

One of the most common types of renter's insurance policies, HO-4, covers damage due to wind, lightening strikes, fire and smoke, accidental flooding (such as from a bathtub that overflows), theft and vandalism. A personal property coverage amount must be chosen, (usually between $10,000 and $35,000); in the event of one of the named catastrophes, damage to your electronics, furniture, books, clothing, appliances, kitchen items, toys and the like are covered up to that amount, less the deduction. Note that 'up to' means that if your damages are less that the full amount, you will receive the lesser amount, minus the deduction. If the policy is an Actual Cash Value policy, the insurers will depreciate all claimed damages to their current cash value before subtracting the deduction. The remainder is the payout. While this type of policy is cheaper to purchase, the ultimate payment the renter receives is also less. The policy might contain a replacement cost option, however, in which case all lost or damaged items are replaced with new items of a similar type and quality.

Many people are surprised to find that renters insurance also covers personal liability. If you are found liable for unintentional injury that occurs at your home or away from it, your renters insurance will cover you. This means someone visiting your home that slips on a wet kitchen floor, suffers a broken leg, sues and wins will be paid by your insurance. It also means that if, while playing golf, your ball goes awry and knocks another player out, you are also covered. (One thing these policies don't cover is pets; you'll need to get a separate pet insurance policy for that.)

Many renter's insurance policies offer a number of endorsements that can be added onto a basic policy to cover specific items or risks. Some of the more common endorsements include a higher valuable items limit, identity theft and sewer/ septic backup. If you own furs, collectable art, jewelry, collectable coins, musical instruments or other items that are limited in terms of value by your policy, consider purchasing a rider to increase that limit. Identity theft riders help you quickly reestablish your credit history and regain your identity in the event it is stolen. Should your belongings become damaged from a failure in the septic or sewer systems, this type of rider not only repairs or replaces your personal items that have been damaged, it will also help pay for the cleanup.

You'll also want to check your policy for 'loss of use' and consider adding it as a rider if it isn't standard. This means in the event your rental becomes uninhabitable, the insurers will pay for hotel and other temporary living expenses.

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