Do You Need Renter's Insurance?

When it comes to renter's insurance, most of us fall into one of three categories. There are the experienced ones who already have it. Then the puzzlers, thinking, "Renter's insurance, why?" And there are the well-meaning but slightly-stressed who say, "Renter's insurance, I've been meaning to check into that."

If you rent, it's always a good idea to think about renter's insurance from time to time, to determine whether you need it and to revisit your policy and make sure it's serving you well.

What it is and what it covers

Renter's insurance covers all the contents of your apartment, from the four-poster bed right down to each pair of jeans. It doesn't cover the building itself. So, for example, if a rainstorm blows water into the apartment and destroys your couch, it's covered by a renter's insurance policy. But if you kick a hole in the door in a fit of anger, it's not covered.

Renter's insurance generally covers the following (though you should get details of any policy you're considering before you sign up):

  • damage from smoke or fire
  • loss or damage from windstorms, lightning or explosions
  • water damage from plumbing leaks
  • loss from theft

In areas with special risks like flood or earthquake, some policies will offer an add-on payment to cover you.

Renter's insurance also covers any of your household property -- including your bike but not your car -- that is lost or stolen whether it's in your apartment at the time of loss or theft or not. In other words, if you ride your bike to work, leave your favorite ski jacket at a restaurant and drop your sunglasses on the sidewalk and return to find that all three are gone, your renter's policy will cover you.

Do you need it?

Whether you need renter's insurance depends on what you have in your apartment. If you've just moved into a new place and have only a bunch of hand-me-down dishes and an old easy chair to your name, it probably doesn't make sense to make payments each month to insure it. But if you've accumulated electronic equipment such as a TV, stereo or computer or even a refrigerator, and if you've bought an apartment full of furniture, you might start thinking about insuring against theft or damage.

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If you travel a lot and want peace of mind each time you leave town, insurance helps. That way you can rest assured that you're covered in the event of a break-in. And if you work at home and have accumulated a lot of office equipment, you might want to insure it.

A renter's policy will generally cover the contents of your apartment up to whatever dollar amount you decide everything is worth. As with many insurance policies, you're responsible for paying for any losses up to your deductible, then your policy kicks in and pays anything above that.

Bear in mind that individual expensive items will need to be insured separately rather than lumped into your overall policy. If you have a computer worth more than about $5,000 or a piece of jewelry that's worth more than about $1,000, you'll typically have to insure those pieces individually.

Tips

  • If you have an auto insurance policy with a carrier that offers a renter's policy also, you may be able to get a better deal.
  • Always shop around to get the best policy.
  • Ask whether you can get a better rate if you live in a safe building with gates and a security door.
  • Make a list of what's in your apartment, to make it easier in case you ever have to make a claim.
  • Find out whether your policy is for actual cost, which is the amount you paid for each item that's insured, or replacement cost, which is the amount it costs to replace each item
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