Imagine coming home to find all of your possessions destroyed in a fire or other catastrophe. Your landlord’s insurance policy won’t protect you; it covers only the building repairs, not your personal belongings. That’s when it pays to have the best renters insurance in place for your needs.
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Renters insurance reimburses you to replace personal items lost due to disaster, theft, vandalism or other unexpected events. Think how much it would cost to buy new furniture, appliances, clothing, jewelry and everything else. In comparison, renters insurance is relatively cheap: The average policy costs $188 per year, according to the Insurance Information Institute.
Picking the right policy: 6 common scenarios
|You have a roommate||Some insurers allow roommates to share a renters insurance policy, in states where it’s allowed. But just because you can doesn’t mean it’s a good idea. Before you sign a policy, have a frank discussion with your roommate about how to share insurance payments — especially if your roommate has a lot of stuff that could drive up the cost of the quote. Be sure you agree, too, on the type of renters insurance coverage you’ll get.|
|You are on a tight budget||To reduce the policy cost, consider increasing your deductible. That’s the amount deducted from your claim check for a property loss. But first ask yourself: How much can you pay out of pocket in the event of a covered loss?|
|You would want brand-new items if your stuff was destroyed||Buy a renters insurance policy with “replacement cost” coverage. It typically costs a bit more than an “actual cash value” policy, but it pays to replace your possessions with similar new ones. Lost your TV in a fire? Replacement cost coverage pays for a brand new one just like it.|
|You own expensive items like jewelry||Renters insurance typically caps the amount it pays for jewelry theft at $1,500. If you want to cover the full value of your jewelry and other high-dollar items, buy what’s called a rider or endorsement. Riders are also good for covering the full value of things like antiques and firearms.|
|You have a dog||A lawsuit against you over a dog bite could ruin your finances for years. If you want coverage for this, make sure dog bites are covered by the liability portion of your renters insurance policy.|
|You want extra liability protection||Buy an umbrella or excess liability policy, which gives you an additional layer of liability coverage above the limits of renters insurance. Liability protects against lawsuits for bodily injury or property damage you or your family or pets cause to others.|
What your policy will cover
Renters insurance does more than pay to replace your things. A standard renters policy also includes liability coverage, which pays for damage and injuries you might cause to others. For example, if someone is injured in your apartment because of your negligence and sues you, your policy would cover you for that person’s medical bills.
Renters insurance also covers you for additional living expenses, such as the cost of a hotel room, if your home is destroyed in a disaster covered by your policy.
Whatever policy you choose, make sure you understand what it covers so you can take full advantage of its protections when you need them.
Choose the best renters insurance for you
When looking for the best policy, it’s smart to start with the five insurance companies that ranked highest in a 2015 J.D. Power survey of renters insurance customer satisfaction:
- USAA (open only to active and retired military and their families)
- Erie Insurance
- American Family
- State Farm
The J.D. Power survey included 14 major insurance companies, but smaller and regional insurers can also provide good service and competitive rates. Although renters insurance is affordable, it’s best to shop around to find the best policy for your needs. Prices vary from company to company and state to state. Be a smart shopper by getting several quotes.
The relatively small amount of money it costs to buy a renters insurance policy can be well worth it if catastrophe strikes.
This post was updated. It was originally published Dec. 8, 2015.
Image via iStock.