When moving to a brand new home, renters insurance is generally the last thing some people think of. Cable, internet and phone seem to be the priority for the majority. A lot of people today tend not to appreciate that the landlord’s insurance policy only insures the building itself and not their personal possessions. This is exactly why you must always have renter’s insurance. It can be incredibly expensive to replace your valuable possessions or defend yourself against liability lawsuit.
There are actually two types of home content insurance – HO-4 for renters and HO-6 for those who own condos. Theft, fire, criminal damage and smoke are some of the things these policies will protect you against. Earthquakes and floods, however, are not by default included in renters insurance. Such cover can be acquired individually or added to your policy at extra cost, obviously.
When figuring out the total value you want to insure your personal belongings against, there are two important things. Actual cash value (ACV) and replacement cost coverage. Undoubtedly, you can easily guest what these phrases mean, but lets explain them quickly. If you got a laptop for $600 a couple of yours ago and it gets damaged today, ACV will be much lower because the item has lost some of its value. On the other hand, replacement cost coverage will pay out as much as it costs to buy a new laptop from the shop.
However, you will need to pay more if you want replacement cost coverage. Some argue that its much better value for money to get ACV anyway.
Its a common practice for very valuable objects, like antiques and jewellery, to be mentioned on the policy explicitly. Its even better if you have receipts or certificates, which indicate the value of such objects.
If your home is ruined – what happens?
In case your place of residency becomes uninhabitable due to fire or smoke, your renters insurance policy will cover your “additional living expenses” (ALE). You may need to temporarily live in a hotel or another flat within the same price range. Typically, the limits for ALE are 30-40% of the total insurance policy value. There is also a limit for the period of time for which additional living expenses cover is valid and that’s usually 1 year.
Renters liability cover is yet another typical benefit. You probably wander what do you need liability protection for? It protects you in case an individual chooses to take legal action against you for getting injured in your house. This part of the insurance policy, as you may suspect, has limits too – do keep them as high as you can as legal actions are expensive!