Renters Insurance 101: 10 Questions to Ask Yourself

If you rent an apartment or house, it’s possible your landlord will ask you to obtain a renters insurance policy. Even if they don't, a renters insurance policy may still be a good idea. You may be wondering what exactly renters insurance is and what it covers. As you shop around to pick a policy, be sure to ask yourself these crucial questions to better understand your options.

Question 1: What Does My Renters Insurance Cover?

Starting with the most basic question, you should understand what it is you’re insuring. Renters insurance actually covers the property inside the apartment - i.e. your possessions. The apartment or house itself is covered under the landlord’s insurance policy. Depending on your policy, renters insurance can also sometimes cover hotel stays and other amenities in the event of property damage that forces you out of your home.

Additionally, if someone becomes injured at your house, renters insurance can often be used to help cover their medical bills or lawyer fees in the case that they try to sue. And vice versa, it can be used to help pay for damages you cause at someone else’s house as well.

Question 2: Is Everything In My Apartment Covered?

Renters insurance has two types of coverage limits: overall and individual limits. Overall limits refer to the maximum amount your policy will pay out to cover all property, and the individual limit applies to the maximum amount your policy will pay out for specific items. This usually applies to expensive items such as electronics, jewelry, or rare collectibles.

Question 3: What Does Renters Insurance Protect Against?

Renters insurance covers loss or damage due to:

• Fire or smoke
• Lightning
• Vandalism
• Theft
• Explosion
• Windstorm
• Some types of water damage (ex. pipe burst)

Question 4: Are There Different Types of Policies To Consider?

Yes, renters insurance policies are typically either cost value or cash value policies. A cash value policy will cover the cash value of the damaged/lost item at the value at which the item was purchased minus depreciation. For example, if you bought a television for $600 three years ago, but it’s determined to only be worth $200 today, you’d get $200. Alternatively, a cost value policy covers the cost to repair or replace the item at the value it’s worth today without depreciation costs. While you’re likely to get a better payout from a replacement cost value policy, these tend to be more expensive than the cash value alternatives.

Question 5: Do I Need To Inventory My Stuff?

While technically you don’t have to, taking inventory of your things and what they’re worth now can help the process tremendously should you need to make a claim. And taking stock of what you own before you purchase a policy can help you determine how much coverage you should be buying. 

Question 6: How Do I Figure Out How Much My Things Are Worth?

You can create something as simple as a spreadsheet, or you can use certain software or smartphone apps to help you find out the value of certain items and keep track of what you own. If you own especially rare or valuable antiques or jewelry, it’d be wise to have these appraised as well. For these types of claims, insurers will often ask for an appraisal report.

Question 7: Are My Things Only Covered If They’re At Home?

No, your possessions are covered inside and outside of the home. If your laptop is stolen from your car, for example, it’s possible that your policy could cover the theft. Certain policies can extend to covering your property while on vacation as well. In some cases, however, coverage for items stolen or damaged off-premise (out of the house) may be limited depending on your policy. The insurer may only cover a percentage of the policy’s maximum payout for off-premise property replacements.

Question 8: Does My Policy Cover My Roommate?

Typically, renters insurance does not extend to coverage of a roommate. There are certain instances where roommates can be insured under the same policy, but in most cases, it is advised that each roommate find their own insurance policy. Renters insurance does, however, typically cover family members living in the home.

Question 9: I Keep Seeing the Word “Peril.” What Does It Mean?

Peril refers to the incidents that your renter’s insurance covers, or the specific reason for the loss. Not all policies cover the same perils, which makes it important to do your research when selecting the right policy for you.

Question 10: Are My Pets Covered Under My Insurance?

Renters insurance policies have a personal liability section to them, which will typically cover pets to some extent. There are certain additional riders or policies you can purchase to extend this coverage, including a pet damage rider. This will cover the damage a pet has done to the apartment or house beyond what the landlord held as your security or pet deposit.

If your landlord has asked you to purchase renters insurance, use this opportunity to get well-acquainted with your options. Do some research to learn more about the types of policies that may be best for you and how much coverage you’ll need to get. Taking preemptive measures now to find the right policy could provide peace of mind later down the road.

As always, if you need financial advice on choosing the appropriate insurance policy or anything else in your financial plan, feel free to...