By deciding to get renters insurance, you have made a smart decision.
Renters insurance is a good defense against some things in life you have no control over – such as your cell phone getting stolen on the subway or your apartment catching fire because your neighbors left their candle on.
So, the question should never be whether or not you need renters insurance, but how much of renters insurance you need.
Also, how much coverage you need is based on your circumstances. Your coverage cannot be the same as your neighbor’s or friend’s needs. This means that your policy is unique to you based on your particular lifestyle.
So, how do you figure out how much renters insurance coverage you need?
What Does Renters Insurance Cover?
The amount of renters insurance you will need depends on what your renters insurance policy covers.
Any renters insurance policy is made up of three specific components that provide separate types of protection.
- Personal property coverage
- Liability coverage
- Loss-of-use coverage
Personal Property Coverage
This involves reimbursement for your personal belongings if they are stolen, damaged, or destroyed by a covered (named) peril. The common covered hazards include fire and lightning, theft, vandalism, smoke, windstorm, and hail.
This encompasses financial protection if you cause damage or unfortunately someone gets hurt on your property and they need medical attention or decides to press charges against you. It will cover medical expenses and sometimes legal fees.
Loss -of-Use coverage
This involves reimbursement for the cost of additional expenses, such as a hotel or a new rental, if your home or apartment becomes unsafe to live in because of a covered peril.
Your policy might have all or some of these coverage categories. For example:
If a fire has destroyed your property, your renters insurance policy’s personal property coverage will compensate you for the loss. If someone is injured during a fire in your apartment, your liability coverage would pay for the medical examination.
If, after the fire, the apartment needs repair, your loss-of-use coverage will pay for you to relocate and stay elsewhere temporarily.
Furthermore, if while staying at that temporary place, you damage the TV, your renters insurance liability coverage will pay for the repair.
How Much Renters Insurance Do I Need?
The renters insurance you purchase should be enough to cater for all your coverage needs while you are renting the apartment.
When you wish to decide how much renters insurance is enough for you, the major decision you are making is setting the limits of your coverage. This is in terms of your property coverage, your liability coverage, and your loss-of-use coverage.
Rather than guessing how much renters insurance coverage you need, you use guidelines to help you figure out the actual worth (in financial terms) of your belongings.
The worth of your belongings determines what your limits should be and how much premium you can afford.
What Should I Consider When Calculating How Much Coverage I need?
What You Own
Personal property coverage is perhaps the key reason most people purchase renters insurance policy.
Take a home inventory of everything that you own along with details about how old they are, purchase price or current value, and other identifying information. Completing a home inventory gives you an estimate of how much property coverage you need.
You will also get a rough picture of how much it would cost to repair or replace your personal belongings in case they are damaged or stolen.
Determine Your Desired Deductible
Figure out how much deductible you want to pay and choose the right amount for you.
A deductible is an amount of a covered loss or liability that you pay out of your pocket. It is the amount that will be deducted from your claim, and any payout by your insurance company.
Consider how much of this amount you can afford. Opting for a higher deductible lowers your premium. However, if you are cash strapped and need your insurer to pay for as much as possible, choose a lower deductible.
Assess Your Liability
If, for instance, someone injured themselves in your apartment during a fire, would you be able to cover their medical bills? What about the legal bills if they decided to sue you?
Your renters insurance policy protects you from such liabilities that you are legally required to pay. It will also protect you in case you or a member of your family causes damage to other people’s property.
Assess your insurance policy for the types of liabilities available. You also need to understand how much you can afford from out-of-pocket for personal liability in your renters insurance policy.
Unless you know what the future holds, it is not easy to determine how much personal liability coverage to get. Your landlord might have a specific coverage request – or you might be on your own to decide.
Additional coverage is an additional liability insurance policy that covers you when you reach the limit on your renters policy. It also protects you from slander and libel.
Check if you need additional coverage keeping in mind that renters insurance coverage has specifically named perils. Renters insurance does not cover perils such as natural disasters like earthquakes and flood losses.
Your insurer may also limit coverage on some home items such as expensive jewelry, computers, and firearms.
Before you sign your renters insurance policy document, ensure you know its coverage limits.
This way, you will know if you need special insurance coverage. You can talk to your agent about extending your limits, or you will schedule endorsements to get additional coverage for the non-covered perils or valuable items.
Check with your insurance agent about the availability of bundling options. Insurance companies will often offer you significant discounts if you buy more than one policy with them. For renters, if you bundle your auto insurance with your renters insurance policy, you will get a discount.
Does My Location Influence My Renters Insurance Price?
The answer is Yes!
Where your apartment is located plays a significant role in determining the rate or premium of your renters insurance.
Prices of renters insurance vary based on your neighborhood, city, or state. Safer locations and low-crime areas translate to lower rates. The same applies to a location near a fire station that can be salvaged quickly and easily.
You might save some money.
How Do I Lower My Renters Insurance
You can lower the price of your renters insurance before you make a purchase.
You will only need to do a few things to lower the price of your renters insurance premium and qualify for specific discounts:
Pay a higher deductible so that you lower the insurance premium.
Install safety devices such as fire extinguishers, smoke alarms or deadbolt locks to
improve your credit.
How much renters insurance you need depends on a variety of factors.
These factors are often spelled out in your policy document. Factors such as where you live, the physical state of the property you are renting, how much liability you can afford out-of-pocket. Also the value of your personal property which translates to the cost of replacing or repairing your belongings if they were destroyed in a disaster.