An Easy Guide to Renter's Insurance

By DoItYourself.com Staff

Many people incorrectly assume that if they don't own any fabulous jewels or top end electronics that property insurance is something that should be reserved for property owners. But renter's insurance is a good investment for anyone.

Depending on the location, renter's insurance can cost as little as $100 a year, but expect to pay more in burglary-prone areas like college towns or in disaster prone areas. The key is knowing that the cost of the little things around the house can add up if they are destroyed by fire or stolen in a break-in, so a small investment can save big heartache.

Here are some basic ideas of what to look for when shopping for renter's insurance and some of the things that are important to know.

First, discuss the difference between replacement insurance and standard insurance with the insurance agent. Renter's insurance is most useful if it covers the replacement costs of your property, rather than its actual worth. Remember, if you bought your television three years ago, its value isn't very high, but the cost to replace it may be as much or more than you paid for it. The same goes with computers and most electronics.

Next, be sure to discuss what exactly the policy covers. Some renter's insurance policies will cover things like laptop computers and cameras if they are stolen from your locked vehicle. Some cover flood damage, earthquakes and fires, and others specifically exclude natural disasters. Some also exclude damage to your property caused by the landlord's lack of maintenance, so be sure to find out exactly what the policy covers.

Another good thing to talk to your agent about is policy limits and how they apply. Some policies specifically limit the types of electronic goods that can be replaced by your renter's insurance and some set low limits on the maximum amount that is reimbursable for computer equipment. If you have a lot of expensive software or computer peripherals, it is probably worth listing them separately in the policy to insure they are covered.

You will also want to discuss collections and specific valuables with your insurance agent. For example, compact discs would be covered under the household goods portion of your renter's insurance policy, but a large collection may quick exceed what the insurance company believes to be reasonable. At $15-$20 each, the cost of replacing CDs adds up quickly.

Many policies also set a $5,000 maximum for jewelery reimbursement. If you have lot of inexpensive jewelery or a few very nice pieces, you may want to consider specifically listing them in the policy with a provision to cover additional jewelry value. These provisions, sometimes called riders, may cost an extra few dollars, but help assure you that everything is covered.

It is also a good idea to take a household inventory and store it off premesis so that if you have an emergency, you already have a list of the things you will want and need to replace. Most agents recommend taking pictures or video of your household items, but an actual list is important as well. With a physical list there is a place to store make, model and serial numbers for your electronics and to list things you are likely to forget, like the hundreds of dollars of software on your laptop.

A list also is easier in the event of a disaster because you are not having to try to look at a heart-wrenching video of your former home and make a list of all the stuff that was in it. The other advantage of making a list is that it gives you an opportunity to evaluate the value of the items in your home.

Surprisingly, many people under estimate what it would cost to replace everything in their home. A $50,000 policy can be eaten up in no time if you have a computer, a couple of appliances like a television and dvd player, clothes, medication and household goods like pots and pans. Even a closet full of clothes could be a major expense to replace all at once. A good insurance agent will help you evaluate your needs and sell you a policy accordingly.

Some agents may underestimate the value of your possessions, especially if you have a lot of video games, collectibles, or music. The best way to protect yourself is by completing that home inventory and knowing what it would it would cost to bring yourself back to the lifestyle you are accustomed to. But even without doing the work ahead of time, investing in a renter's insurance policy is a great idea. After all, some coverage is better than losing it all.

© Doityourself.com 2006