Renters Insurance Simplified
Are you one of the 37 percent of renters who have a renters insurance policy? Whether your rental agreement requires it or you make the choice to protect the contents of your rental property, this type of policy can provide peace of mind. It can come in handy if you face unexpected situations, like theft or fire, or if an individual is injured while in your home.
But do you fully understand what the policy covers and what to expect should you file a claim? Here's a breakdown of a few important points.
Replacement Cost Value vs. Actual Cash Value
There are two choices when it comes to how renters insurance values belongings. Replacement cost value determines the amount paid out for a claim based on the present-day cost of buying the same item. Other policies may use actual cash value (ACV), which takes into account depreciation due to normal wear and tear. This type of coverage will pay out less than current market value.
A deductible is an out-of-pocket amount a policyholder is responsible for when a claim is filed. In general, the higher the deductible, the lower the monthly insurance premium. Once the deductible is met, the insurance company handles the remaining cost.
Most insurance companies offer discounts if you bundle renters insurance with other policies, such as auto insurance. Safety equipment, like fire alarms and security systems, may result in a reduced rate. Age, good credit and a claim-free history are other factors that insurance companies may consider for discounts.
If after a careful inventory of your personal possessions and net worth you determine you need a higher degree of liability coverage, you may decide to purchase an additional umbrella liability policy. This option provides coverage on top of other policies, kicking in once those have been maxed out.