Renting an apartment or home is something that most of us do at least once during our lives. There are many reasons why people choose rentals. For some, an apartment is a rite of passage into young adulthood; for others, it is a necessary stop between primary residences. Still others view rentals as an inexpensive alternative to mortgage payments, homeowners insurance and property taxes.

Common Misunderstandings

Whatever the reason, it is important that those choosing to reside in a rental understand the importance of maintaining adequate insurance coverage. Indeed, one of the biggest misconceptions among renters is that they and their belongings are covered by their landlord’s insurance policy. In reality, this is most often not the case.

While the landlord’s policy does cover the structure, it does not cover the property of the residents. As a result, if the building or home you are renting is totally destroyed by a fire, the landlord’s insurance will cover the cost of replacing the structure, but it will not pay to replace your property. Similarly, if a pipe in your apartment breaks and causes a flood, any of your property that has been damaged by the water is not covered by the landlord’s policy.

Who Needs It?

Another common misconception is that in the case of two or more roommates sharing an apartment, it is not necessary for each roommate to have their own policy. It is important to understand that renters’ insurance only covers the possessions of the listed policyholder. As a result, if an apartment is being shared by four people, each person should have their own insurance. Another option is to have one policy that covers each roommate, but this is something that needs to be specifically requested.

How it Works

There are essentially two types of coverage; coverage that provides the replacement value of an item and coverage that provides the actual value. The type of coverage you choose will depend largely on the type of property you own. Expensive electronic equipment such as computers, video equipment and televisions tend to depreciate quickly making their actual value significantly lower than the cost of replacing the item. If you own a significant amount of electronic equipment, you should choose a policy that will provide the replacement value, that is, what it will cost you to replace the item at the current market price. Obviously, this type of coverage will be a little more expensive, but the peace of mind it affords is generally worth the added expense.

Liability insurance, which will protect you in the event someone is hurt while visiting your home, is generally included in the standard renters’ insurance policy. You should check to ensure the coverage offered is adequate and consider additional coverage if you deem it necessary.

Similar to homeowners’ insurance, you should also consider making an inventory of your valuables. This will not only help your insurance agent determine which type of coverage is best for you, it will also come in handy in the event you need to submit a claim.

What does it Cost?

Renters’ insurance is relatively inexpensive. On average, $10,000 in coverage costs $150 per year while $30,000 in coverage will run about $350. Obviously, if you have expensive jewelry or other types of valuables, your premiums may be higher.

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