There are likely a lot of things going through your head when moving into a new apartment, including finding the best renters insurance company to protect your items in your new home. Insurance can be complicated, so to simplify it a little, here’s a list of the top five things to consider when purchasing renters insurance.
Replacement Cost or Actual Cash Value Coverage?
Your renters insurance policy for your apartment will cover your items in one of two ways: replacement cost or actual cash value. Replacement cost coverage means that if you have a claim for a damaged or stolen item, your insurance policy will cover the cost to purchase the item new at that time. If you have actual cash value coverage, you’ll get reimbursed for the item’s depreciated value, meaning the amount of money the item is worth considering its age and condition.
Imagine your apartment is broken into and the burglar steals your 5-year-old TV. If you have replacement cost coverage, your renters insurance company will cover the cost for you to buy a new TV as a replacement. If you have actual cash value coverage, you’ll get reimbursed for the value of the TV at the time of the theft. Since it’s 5 years old, you’ll likely get less than what you paid for it and not enough to fully cover the cost of a new TV.
Purchasing replacement cost coverage is more expensive than actual cash value, but it will provide you more financial assistance if you experience a catastrophe in your apartment.
Choose the Right Coverage: Add Additional Coverage as Needed
When buying renters insurance coverage (yes, you truly need it), you want to make sure you buy adequate coverage for your items. The best way to do this is to take inventory of all your items and how much they cost. This can help you determine the appropriate coverage limits for your policy.
If you have any high-valued items, such as jewelry, fine arts or certain electronics, consider purchasing additional coverage to protect these items. Some high-valued items may exceed the coverage limits on your policy, which is why it’s a good idea to consider increasing your coverage on these items.
Do You Have Roommates?
While you might share certain expenses with your roommate — the cable bill, electricity bill or groceries — renters insurance may be something you want to think twice about sharing.
Whether your roommates are covered under your renters insurance policy is subjective. The only surefire scenarios in which roommates would be covered are if they are your spouse or are related to you. If you rent an apartment with your sister and you have a renters insurance policy, her items would typically be covered under your policy. Be sure to check the specifics of your policy to determine coverage for relatives and spouses.
If your roommate isn’t related to you, though, the situation is a bit different. Each roommate should consider getting their own renters insurance policy as a policy is generally designed for one person and their belongings. Unlike family members and spouses, unrelated roommates aren’t usually covered by your policy.
Some companies may allow you to add a roommate to your renters insurance, but your premium may be higher. It can also create sticky situations in splitting the cost or if the roommate moves out. Additionally, if your roommate has to make a claim, the claim will go on your personal insurance history, potentially leading to more expensive premiums for years to come. The average yearly cost of renters insurance in the United States is under $200 — splitting renters insurance with your roommate may not save you money in the long run. Having separate policies can make each roommate responsible for their own insurance records and protection.
Earthquake or Flood Coverage on Your Renters Insurance Policy?
In most cases, earthquake and flood coverage don’t come standard on renters insurance policies. There are exceptions, such as a USAA renters insurance policy, which includes both earthquake and flood damage on its standard policies.
Depending on where you live, you may want to consider adding earthquake or flood coverage to your renters insurance policy if it’s not already included. Certain areas in the United States have a higher risk of damaging earthquake or flooding catastrophes. The United States Geological Survey (USGS) has information that can help you determine the risk of earthquakes in your area. As for flooding, any area can be affected by it, but it’s more likely to occur in areas that experience natural disasters, such as hurricanes or prolonged periods of heavy rain and areas along a body of water. FEMA’s Flood Map can help you determine if your home is in a flood zone.
Understand What You’re Covered For?
There are typical perils that most renters insurance companies cover and understanding which ones your policy covers is important. Some of the common covered perils include theft, vandalism, fire, smoke, water damage by burst pipe or appliance malfunction, explosion and windstorm damage. Water damage commonly not covered by a general renters insurance policy includes flooding from natural disaster and water backup from sewers or sump pump failure.
Also be sure to understand the different coverage types included on your policy. Renters insurance policies usually offer personal property protection and liability coverage. Liability provides coverage for accidental injury to other people in your rented unit as well as assistance in a lawsuit situation.
When shopping for renters insurance, it’s important to remember that all policies and insurance companies differ. Spending a little extra time doing your research ahead of time can save you money and the financial burden of an uncovered claim down the road.