The percentage of Americans renting their homes rather than buying has been rising steadily. Most renters appreciate the importance of having renters insurance. Even among those who don’t, policies are common as landlords often require them as a condition of the lease.
But knowing that you need a policy and choosing which policy is right for you are very different things. With so many factors in play, how do you choose a policy? Here are the easy steps to picking your policy that every renter needs to know.
How to Choose a Policy
Many renters start searching for a policy by asking “how much is renters insurance?” This, however, is perhaps the worst place to start.
Even comprehensive renters insurance policies tend to cost only a few dollars per month. Very different policies can cost about the same. This means that you can get excellent cheap renters insurance, but only if you base your decision on something other than cost.
Instead of starting with cost, then, renters should follow these steps when choosing a policy.
- Decide what types of coverage you need
- Know the difference between “actual value” and “replacement value” policies
- Decide on your deductible
- Talk to a reputable insurance company
Each step can take as little as a few minutes.
Decide What Types of Coverage You Need
Renters insurance can cover a wide range of costs. These include:
- Basic property insurance coverage (furniture, appliances, personal possessions)
- Rental property liability insurance coverage (when someone is hurt in your apartment or you cause damage to someone else’s property)
- Living expenses (the cost of food and hotels if you are temporarily forced out of your apartment due to damage)
- Extra coverage riders (for expensive or specialty items)
Every renter will need enough basic property insurance to cover their belongings. They will also need liability coverage, which tends to come in standardized amounts. Living expenses and extra coverage riders may be optional depending on your situation.
To determine what you need, take an inventory of your belongings. Assign each item a value. Have items appraised, if necessary.
This will give you a strong starting point for selecting coverage and make it clear if you need any special riders.
Actual Value vs Replacement Value Policies
Actual value policies insure your property for its current market value. Replacement value policies insure things for the amount it would take to replace them.
So, for example, imagine that you own a couch that is six years old and cost $1,000 brand new. An actual value policy would insure your couch for its current depreciated value, say $300. A replacement value policy would insure your couch for the $1,000 it would take to replace it with a new couch of equal size, quality, and design.
Replacement value policies cost more because they pay out more in the event that your items are damaged or destroyed. They can be worth the cost, however, if you have limited funds and would not be able to put any out-of-pocket money toward recovery in the event of a disaster.
Choosing which type of policy is better for you is a key step in determining how much coverage you need to carry and selecting the best renters insurance possible.
Decide on Your Deductible
Your deductible is the amount of money you must pay out of pocket before your insurance kicks in. Say, for instance, that your deductible is $500. If your apartment is broken into and your things are stolen, you must put $500 towards replacement items before your insurance will kick in and pay out the remainder to which you are entitled.
Policies with higher deductibles tend to have lower premiums. Policies with low deductibles have higher premiums since there is more risk that the insurance company will need to pay out a larger sum in the event of a claim.
Renters who can afford to pay more out-of-pocket will benefit from choosing a high-deductible plan. Renters who cannot afford unexpected out-of-pocket costs should choose low-deductible plans. This choice can make all the difference in the event that you need to make a claim.
Talk to a Reputable Insurance Company
There are other factors to take into consideration when choosing a policy. For example, depending on where you live you may need specialty insurance coverage such as :
- Flood insurance
- Earthquake insurance
- Volcano insurance
A reputable provider can help you identify what types of catastrophe insurance may be appropriate for you. They can also help you identify:
- Any unique or specialty items you own that need extra coverage
- Instances in which umbrella policies or other supplemental coverage may be appropriate
- If you are eligible to save money by bundling policies
For example, purchasing life insurance, car insurance, and renters insurance through the same company can often get you better rates and more comprehensive coverage.
Finally, a reputable insurer can help you address any other questions you may have. They can assist you in making sure you’re asking the right questions and educate you on the options available to meet your specific needs.
How Long Does Choosing Renters Insurance Take?
Choosing a renter’s insurance policy doesn’t have to take long at all. For many renters, the most time-consuming part is taking stock of what they own so that they have a clear idea of what coverage they need. For others, choosing between an actual value and replacement value policy can be the sticking point.
Once you know what you want, however, actually selecting a policy is quick and easy.
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Have questions? Let our experienced agents help you dial in the coverage and policy that’s best for you right now.
