What To Look For In Renter’s Insurance

Posted by Richard on August 6, 2020

Before you find yourself standing outside watching your belongings burn up with your apartment, consider buying renter’s insurance.
It doesn’t cost that much. For about $16 a month, you can be reimbursed if your possessions are destroyed by a disaster.
According to the Insurance Information Institute, renters are the majority in the U.S., but only a third of them carry renter’s insurance. Yet, while property owners insure the structure, renters are on their own in cases of fire, theft, wind or hail damage, or even rioting.
You’ll have to make several decisions when you apply for renter’s insurance.
The first is on the deductible. If you make a claim on your policy, the insurer will subtract a deductible from what they pay. You can choose this amount when you buy your policy. If you have a high deductible (meaning in case of a claim the insurer will subtract more), then you will pay less for your policy. Deductibles typically run from $500 to $1,000.
Another decision you will have to make in buying renter’s insurance is how the insurer will pay you. You have two choices:
Replacement Cost Value – This is the cost to replace an item with a new one. There will be limits on items. A fancy music system might only be covered for $3,000. With your deductible of $500, you would be paid $2,500 to replace the item.
Actual Cash Value – If your policy pays ACV, then the policy pays based on what the item is worth today. If the music system was expected to last 10 years, and it is destroyed by fire in three years, it would be valued at 30 percent less than you paid for it. That is 10 percent per year. The $3,000 system would be valued at $2,100 and then the $500 deductible would be subtracted. That makes the payout $1,600. The ACV policy pays less but it also costs less.