Renters face the same risk as homeowners in cases of disasters striking their home. Your landlord or condo association may have insurance, but this protects only the building, not your things in it. Renters insurance can protect your belongings in case of disaster.
There are several types of residential insurance policies. The HO-4 policy is designed for renters, while the HO-6 policy is for condo owners. Both HO-4 and HO-6 cover losses to your personal property from 14 types of perils:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcanic eruption
- Falling objects
- Weight of ice, snow or sleet
- Malfunctioning plumbing, heating, air-conditioning, fire-protective sprinkler system or household appliance: accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or bulging; or freezing.
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component).
Floods and earthquakes aren't on the list. If you live in an area prone to either, you'll need to buy a separate policy or a rider. In some coastal regions, where hurricanes might pose a threat, you might also need to buy a separate rider to cover wind damage. (See "Do you need disaster insurance?")
Actual cash value vs. replacement cost
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible.
In some regions, most insurers write ACV coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim.
Let your agent know about any particularly valuable items you have. Jewelry, antiques, and electronics might be covered up to a certain amount. If you have some items that are unusually expensive, such as a diamond ring, you'll probably want to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the full loss.
To ensure you are compensated for any belongings you lose from a fire, storm or other catastrophe, you should inventory all of your personal belongings. Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place.
Footing the bill when your home is unlivable
This coverage has a limit of about 30% to 50% of the total value of the policy. So, if you're insured for $100,000, your "additional living expenses" limit will be $30,000 to $50,000, depending on your policy terms.
Your insurance company will continue to pay while your home is being repaired or rebuilt, or until you permanently relocate. Sometimes 12 months is the longest an insurance company will continue paying. With some policies, you're limited to what the insurance company considers a "reasonable length of time."
Liability protection is also standard with most renters and condo policies. This means if someone in your unit slips and falls, you're covered for any costs, up to your liability limit. If this person sues you, you're covered for what they win in a court judgment as well as your legal expenses, up to your policy's limit.
Keeping your premium low
There are ways to reduce your renters or condo owners insurance bill.
Increasing your deductible (the amount you pay before your coverage kicks in) is one strategy. Make sure you can afford whatever deductible you choose.
If you're thinking about getting a dog, you might want to think twice. Some insurance companies are reluctant to write policies for owners of certain breeds. (See "Your dog's bite could bankrupt you.")