Property Manager – Granada Hills
What renter’s insurance plans usually cover
Much like a homeowner’s insurance policy, renter’s insurance policies typically cover fire, theft, vandalism, utility malfunctions (plumbing and electricity), weather related damage and a host of other hazards.
Two things you should be aware of in regard to what renter’s insurance policies will and won’t cover:
- Flooding and earthquakes are not included. If you live in an area prone to either you may need to get specific policies to cover those hazards. For flood insurance look at the National Flood Insurance Program.
- Any hazard that isn’t specifically listed isn’t covered! If your renter’s policy doesn’t list water damage from faulty plumbing, then you aren’t covered for it.
Renter’s insurance policies, like homeowner’s policies, are characterized by a lot of assuming as to what’s covered.
Never assume something’s covered when it comes to renter’s insurance!
How much coverage should you buy?
The answer to this question will depend on how much money you have tied up in personal possessions.
For some people, a few thousand will be enough, while for others $100,000 won’t be sufficient. You should have at least a rough idea as to how much your possessions are worth and be guided by that estimate.
For most people, coverage equal to at least $25,000 to $50,000 will be enough. But if you have certain items that are worth a substantial amount of money, such as jewelry or antiques, you should consider getting additional coverage for those items (this would likely be a rider or a floater which will most likely require an appraisal). Make sure you discuss any special valuables you own when pricing out policies.
For example, after I proposed to my soon-to-be wife we made sure her ring was covered in our rental insurance. We had to go get her ring appraised and then we sent the appraisal to our insurer as proof of its value.
If you work at home make sure your equipment, like your computer, is covered. There could be a cap on their payout and if you have specialty equipment you might not get the full value back.
Personal liability coverage
Most renter’s insurance policies will also offer some liability coverage.
Customers may also choose how much liability coverage they need, depending on their budget and the amount of protection they feel most comfortable with. Liability coverage will help protect a renter if they are sued due to an accident that happened in or on the property they rent. (Imagine you host a party and a friend’s friend comes and trips on your carpet and breaks their wrist — You are at risk of being sued for liability.)
Replacement Cost or Actual Cash Value (ACV)?
Renters can choose from policies that will pay the replacement cost or Actual Cash Value (ACV) of their belongings.
Actual Cash Value
An actual cash value (ACV) policy will reimburse you only for the current value of the item lost.
This is what cash value is like — you’ll get what the insurance company thinks your stuff is worth today, after you’ve worm it out for a bit.
There’s nothing wrong with kind of policy, you just need to understand what it is.
Why would you even take such a policy? Cost is one factor; since ACV policies pay out less in benefits, they’re also generally less expensive to buy. If the choice is between an ACV policy and no renters coverage at all, you’d be better to take the ACV than to be uninsured.
Another reason might be if you’re a very frugal type who avoids buying new and prefers second hand merchandise. Since what ever you buy will be closer to actual market value, the ACV policy may suit your needs perfectly. A cash value plan is good if you don’t have a lot of stuff to replace and/or your cash-strapped as it will cost you less.
Replacement cost
Under a replacement cost policy the insurance company will reimburse you for the retail value of the items that you’ve lost. In other words, with a replacement cost plan you’ll get full replacement value, not the depreciated value.
If for example you lost, among other things, a living room set that you paid $2,000 for, and the set is five years old, the insurance company will reimburse you for the full $2,000. The fact that the set is five years old and worth far less on resale isn’t an issue. You will be in a position replace your set with a comparable, brand new one.
For most people, this will be the better policy to have, though it will be more expensive (you get what you pay for, right?).
Here’s another example to help understand Replacement Cost vs. Actual Cash Value — If you paid $500 for a computer you would think that’s what you would get if something should happen to it, right? Not necessarily. With Actual Cash Value (ACV) the insurance company takes into account how long you have owned the computer to figure out it’s value. It’s like if you were selling it on Craigslist. You wouldn’t get the new value of the computer. You might only get $100 of that $500 you paid. And if you need a computer you would have to shell out the difference to buy a new one. This is a bit of information many people don’t know about or understand until they need to make a claim.
FROM: http://freefrombroke.com/
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