Renters Insurance: Questions & Answers

If you plan on renting an apartment or other residence as opposed to buying your own home, you have to get acquainted with a somewhat different path toward insuring the possessions housed in your new living space. Instead of buying standard homeowners insurance, you need to purchase renters insurance.

The more you understand about renters insurance before making your move, the more easily you can select the right type and level of coverage to suit both your needs and your budget. Take a look at the following questions and answers about this affordable yet critical form of financial protection.

What Does Renters Insurance Cover?

Renters insurance covers the value of your personal possessions against damage, destruction, or other losses. Examples of covered incidents might include a fire that consumes your belongings, a burst plumbing pipe that floods the apartment, and damage due to lightning strikes, smoke, an explosion, and acts of theft or vandalism.

Renters insurance also provides liability coverage. If you, your pet, or your family members damage the property or cause an injury to someone else on the property, liability coverage can help protect your finances against a potentially catastrophic lawsuit. It can even cover your legal expenses if such a case goes to court.

You might need to move out of a destroyed apartment until the management company can complete repairs. Renters insurance can come to your rescue in these situations by providing additional living expenses (ALE) coverage. ALE may include meals, housing, and other expenses directly caused by the covered incident.

One surprising thing that renters insurance can protect you from is fraud. A thief who breaks into your apartment may steal your checks or credit cards as well as other possessions, racking up fraudulent expenses with their ill-gotten gains. If you experience this crisis, your renters insurance may cover some of the financial losses that result from these fraudulent activities.

What Does Renters Insurance Not Cover?

As helpful as renters insurance can be, it does not cover every kind of expensive challenge a renter might face. For instance, it will not cover damage or destruction caused by some natural disasters. Don't expect renters insurance to reimburse you for damage from an earthquake or naturally-occurring flood.

Renters insurance doesn't necessarily cover every kind of personal property. While your policy will compensate you for lost clothing, furnishings, electronics, and household appliances, it won't cover your car or other possessions kept outside the apartment. In addition, if you have roommates, they must cover their own possessions separately.

Your renters insurance policy won't cover losses caused by the tenant's neglect. For example, if you allow an obvious termite infestation to run wild and destroy your wooden furniture, your policy won't cover that damage. Nor will your policy cover liability for dog bites if you own what your manager regards as a dangerous dog breed.

How Much Renters Insurance Do You Need?

You might not get the final say over how much renters insurance you purchase. Apartment managers routinely require renters to hold a certain minimum amount of liability coverage as a move-in condition. Policies typically cover $100,000 in liability and $30,000 in personal property, with ALE equaling 40 percent of the personal property limit.

Beyond these basic numbers, you should also think about the total value of your personal possessions. Renters insurance normally reimburses policy holders for the actual cash value of their property, not the replacement value. Your insurer may allow you to upgrade to replacement value, but you'll likely pay higher premiums.

How Much Does Renters Insurance Cost?

Renters insurance can prove quite affordable compared to some other kinds of coverage. On average, a policy that covers $25,000 in personal property costs just $150 per year, while a policy offering $50,000 in personal property coverage averages $218 per year.

Like other forms of insurance, renters insurance imposes premium payments as well as a deductible, the amount you must pay out of pocket before the policy starts to cover your losses. If you want to pay a lower premium, opt for a higher deductible. If you'd rather minimize the deductible, opt for higher premium payments.

If your apartment holds especially valuable possessions such as furs, original art, jewelry, or fine collectibles, a standard renters insurance policy may not cover those possessions to anywhere near their replacement value. If you face that challenge, you may need to pay more for a floater policy that provides extra coverage.

Some personal liability lawsuits can exhaust your liability coverage quickly. For the ultimate in protection, consider supplementing your renters insurance with umbrella insurance. Umbrella insurance can greatly extend your liability limits, not just against accident injuries and medical expenses but also against slander and libel lawsuits.

If you could benefit from the guidance of a skilled, experienced insurance team when selecting your renters insurance coverage, turn to Illinois Insurance Center. We can help you choose the right policy or combination of policies to give you the peace of mind you need as a renter. Contact us today.