Renter's insurance is designed especially for people who live in apartments and rented houses. It not only pays to replace your personal property when it's damaged by fire, tornadoes or other devastating losses-it also pays for items that are burglarized or vandalized. It even pays for water damage to your belongings if your upstairs neighbor's water pipes break and leak all over your stuff.
Renter's insurance does not pay for damage caused by floods or earthquakes. If you want to cover those risks, you need to buy a separate policy for each. It also doesn't pay for damage caused by your intentional acts.
Additional Living Expenses
If you are forced to move out of your apartment while repairs are made, or until you can move to a new apartment, a renter's insurance policy can also pay for your "additional living expenses." This coverage pays for the cost of temporary lodging and a portion of your costs for eating in restaurants when you're no longer able to prepare your own meals.
Replacement Cost versus Actual Cash Value
For a little extra premium, you can upgrade your coverage to pay for the actual cost to replace a damaged item with a brand new item. For example, if your policy pays for "actual cash value," the payment for your damaged sofa will be based on the cost of your sofa minus depreciation for age, wear and tear, and any prior damage. While you paid $1,000 for that sofa five years ago, it was worth only $400 just prior to your loss. But, if your policy covers "replacement cost," you will receive payment to purchase a brand new sofa of similar size and quality as the original sofa.
If you have expensive jewelry, collectibles, art, silver, or antiques, you must "schedule" these items with the insurance company in order for them to be fully covered. Your company can also tell you what appraisals, if any, are needed to schedule items. Check with your insurer or agent about the kind of items that need to be scheduled, and what limits your policy has on specific types of items.
Renter's insurance also provides coverage to you if someone gets accidentally injured in your apartment or if you accidentally start a fire in your apartment. If the injured person sues you and wins, you are covered up to the liability limits of the policy, plus any legal expenses.
Attached are checklists that will help give you an idea of what to consider when taking inventory of the articles you own. Be sure to add any of your own articles that you consider to be valuable. Keep these in a safe place with your policy.