Renters Insurance: Beyond Basics

Whether you are determining which renters insurance plan to go with or still deciding if you want to carry a policy at all, you want to feel secure in your choice. It is essential to know more about how renters insurance works, what it does and doesn’t cover, and how to get the most from your coverage.

Renters insurance is like a homeowners policy for renters. It is carried by many tenants and required by many landlords because it covers you and your stuff when disaster strikes. Your landlord’s insurance only covers the structure of the building and the liability related to owning a rental property. Should something happen that damages or destroys your belongings, you’ll find that it’s a lot more affordable to carry insurance than replace everything you own.

If you go with a standard, no-frills policy, the coverage is a significant help in the case of a disaster. The basics that are covered in a standard policy most often include:

• personal belongings
• liability and medical coverage
• relocation and temporary housing

Having protection for these items or situations might be all you need to safeguard your personal bank account if you have property damage due to perils stated in your policy, such as:

• theft
• vandalism
• smoke and fire
• plumbing-related damage
• weather-related damage

But if you have valuable items, such as antiques, jewelry, artwork or collections, you will need to carry additional coverage to make sure your policy can reimburse you if something happens to them. This coverage is called “scheduled personal property coverage,” and it can be a lifesaver for those with pricey things.

When you choose the amount of coverage you would like for your renters policy, you might think you can just bump that dollar amount up to make sure your guitar collection or vintage watch is secured. But the way insurance works, you’ll find that certain items have coverage limits, or limits of liability.

This means your policy will have a limit on how much they’ll reimburse you for certain items within your total coverage limit. This doesn’t mean you can’t protect those items against loss. It just means you must tell the insurance company exactly what you have, document everything carefully and purchase additional coverage.

Scheduled coverage is an add-on, sometimes called a “floater” or an “endorsement,” and will cover those things that your regular policy couldn’t replace under standard limits. Things like:

• jewelry and timepieces
• art
• antiques
• firearms
• electronics
• photography equipment
• silver
• crystal
• sports equipment and bicycles
• furs
• collectibles
• tools

For items such as these, your insurance will want documentation: receipts, valuations or appraisals. Each piece you want to be covered must be scheduled for coverage. To get these kinds of records, you’ll need to do a thorough home inventory.

Don’t forget to count anything you have in a storage unit too. Many standard renters insurance policies cover off-premises belongings.

​Read More:​ How to Calculate the Value of Personal Property

The renters insurance cost of additional coverage will vary, depending on the value of the items you are insuring. Most scheduled personal property should be reimbursed at ​replacement cost value​ (RCV) instead of ​actual cash value​ (ACV).

The difference between these two property valuation types is in how much you get paid out, based on the deprecation of the item. Replacement cost covers the object as if it were brand-new or in perfect condition, whereas actual cash value thinks of the item as “used” and reduces the payout accordingly.

When covered by a scheduled endorsement or floater items are most often covered at replacement cost value, without depreciation.

Obviously, tacking on additional coverage will boost the dollar amount of your renters insurance quote. But what factors might affect the price of a standard policy? There are several.

​Read More​: How Much Is Renters Insurance? 5 Companies Compared

The higher the amount of coverage you apply for, the higher your monthly premium will be. How can you know the amount of coverage you need? A careful household inventory will lead the way.

​Read More:​ Household Inventory List for Insurance

Renters policies also cover any injury to your guests or medical bills related to an injury. Both Lemonade and State Farm list the liability coverage of a typical liability insurance policy as ​$100,000​. As that increases, so will your premium.

Replacement cost value coverage will cost more than ACV because the cost to the insurance company varies depending on whether depreciation is taken into account or if the company pays the total replacement cost.

Note that while ACV coverage may cost you less in the short term, it may add up when you have a claim. You may need to add your own funds to cover the total purchase price of replacement items.

The renters insurance cost of additional coverage will vary, depending on the value of the items you are insuring.

The deductible is the amount you pay out of your pocket when you have a claim. The higher this amount, the lower your monthly premium.

Where you live, for instance, the country vs. the city will impact the cost of your coverage, depending on how at-risk your possessions are.

If you’ve had a history of claims against your policy, insurance companies will know. Any time a claim is filed against an insurance policy, you can count on increased premiums.

​Read More​: Does a Renter's Insurance Claim Affect Your Rates?

You may receive discounts for security systems, sprinklers or fire extinguishers. Many companies offer discounts for bundling policies too. If you already have car or business insurance, check with your current company.

​Read More:​ What Is a Car & Renters Insurance Bundle?

Your personal coverage under renters insurance only won’t cover the cost of repairing anything that happens to your building – that is the landlord’s job. The building owner must ensure their rental property is a safe and habitable place to live.

There are a few other items or situations your policy won’t back you up on:

• ​Pest infestation:​ Even if the rodents or insects damage your property, your policy won’t cover it. Most states put this responsibility on the property owner to maintain habitability, as long as the tenant is not proven to be the source or cause of the infestation.
• ​Roommate’s belongings:​ Your policy is for the policyholder’s personal property and, as such, will not cover your roomie’s things – unless your roommate is your spouse, child or family. If your roomie is close enough, you may choose to add them to your policy as an “additional insured.”
• ​Damage due to certain natural disasters​​:​ Floods, earthquakes or sinkholes are generally not covered. You can check into separate flood insurance or earthquake insurance if this is of particular concern where you are renting.
• ​Stolen car:​ If you have belongings in your car, those will be covered. But if the vehicle gets stolen or the sporty new tires go missing, that is not covered.
• ​Damage from a sewer backup:​ Water damage is a tricky thing. If it’s caused by internal plumbing, it is usually covered. If it’s from a sewer or flooding, it’s not covered.

Of course, not every policy covers the same things, so it’s always important to do your research and talk to an agent about coverage options before you purchase coverage.

​Read More:​ Natural Disasters & Your Home: What Renters and Homeowners Need to Know

You know your belongings are covered when they are safe within your walls, but what about when you carry your laptop to the local coffee shop or bring your fanciest camera along on vacation? If the item belongs to you and the risk is one named as covered on your policy, your policy protects you (almost) everywhere you go.

Liability coverage is standard within renters insurance policies. It covers your guests, should they slip and fall in your bathroom or burn themselves while cooking dinner. This coverage protects you against legal action and covers any resulting medical expenses.

Your guest’s property has coverage, too. If a guest’s property is damaged or stolen while visiting you, your policy will cover the loss.

​Read More:​ Does Renters Insurance Cover the Insured in a Slip & Fall Injury?

If your home is damaged to the point of being uninhabitable, your renters policy will help pay for temporary relocation and additional living expenses. Coverage will include housing, meals and storing anything that wasn’t damaged in a safe place. It’s important to know exactly how much is covered so you don’t go overboard. You will have to pay anything above what your insurance company allows.

​Read More​: Does Renter’s Insurance Cover Relocation from Mold?

Filing a claim is simple. Review your policy and call your agent to talk through filing the claim. Other steps include:

• inform your landlord of damages
• contact police in the case of theft or vandalism
• save receipts for any clean-up or repair supplies you purchase
• take photos and document damage

The company will perform an investigation. Most companies make it easy to check in on claims throughout the process.

​Read More:​ How to Fill Out Insurance Claim Forms

Most companies have online applications that take well under 30 minutes to complete, and some even return a quote almost instantly. Before you sign up, complete the inventory of your personal items. Once you have an idea of how much coverage you need, think about the factors which influence your monthly premium and determine if you need any add-ons for valuables or collections.

You can adjust a renters insurance policy to fit your budget and your lifestyle. It’s always important to consider all your options, know how much coverage you need and speak to an agent when you have questions about a policy.

For all the benefits and safeguards it brings, renters insurance is a very affordable way to have peace of mind in your rented home.