How to Choose the Right Renters' Insurance Coverage for Your Personal Belongings
Learn how to do a personal property inventory and choose renters' insurance coverage for your personal belongings.
If you’re renting a home, there are a wide variety of renters’ insurance options and companies to choose from. With the sheer amount of choices, finding the right renters’ insurance for you, at the best price, may seem like an overwhelming and daunting task. You can make this process simpler by documenting your property, identifying your coverage needs, figuring out what you can afford, and shopping around for the best rates.
Document Your Belongings with a Personal Property Inventory
Before you decide how much coverage to purchase, you first need to document your belongings and figure out their monetary value. This will give you a good indication of how much coverage you’ll need. Make sure to include anything that you want to protect, even if you may think it’s not worth much. The best approach is to go room-by-room and take photos or videos of your belongings. Write down each item as well, documenting serial numbers, brands, and model numbers, if applicable, as well as date of purchase; keep copies of all receipts and warranties. For items that don’t have identification numbers, such as family heirlooms and jewelry, consider getting them appraised so that you’ll have written receipts of their worth.
The easiest way to organize your personal property inventory is to categorize each item on your list. For example, your appliances list can include your washer, dryer, dishwasher, furnace, air conditioner, and vacuum cleaner. An electronics list can include televisions, phones, cameras, and computers, while a general household list can include rugs, bookcases, lamps, dishes, sofas, and chairs. Other examples include lists for garage and patio items, bathroom items, and home office items.
Although it’s time-consuming to do this type of inventory, it’s the best way to ensure you’ll choose the right amount of coverage. To make things a bit simpler, use one of the free inventory forms available online, such as the Insurance Information institute's (III) Know Your Stuff Home Inventory software and app. Refer to the III website for other types of home inventories.
Choose the Right Amount and Type Coverage
Once you have a good idea of what you want covered and the value of your belongings, you’ll need to decide on the amount of coverage. Keep in mind that most insurance companies will not pay by the dollar amount for each item, but instead a sum amount of all of your valuables. For example, if you figure your belongings average around $20,000, then a $20,000 coverage policy would be appropriate for you. A $10,000 policy is usually the smallest amount of coverage, but you may need to buy additional protection for natural disasters and high-value items. Also, you’ll need to decide if you want cash value or total replacement value coverage.
Cash value means that your covered items will be worth the depreciated value. The cost of replacing these items is determined by when each item was purchased. For example, a $400 phone today will not have the same value in a few years from now. Wear and tear is also taken into consideration if you choose cash value. Exceptions are items that do not depreciate in value over time, such as certain jewelry and antiques.
Total Replacement Value
Total replacement value will cover the costs of your property today, regardless of whether it was purchased today or five years ago or more. So if you wanted to replace your two-year old phone, it would have the market value of a current phone with the same specifications. Total replace value coverage usually comes with a higher premium amount.
Learn the value of renters' insurance, see The Benefits of Having Renters' Insurance.
Decide if You Need Additional Coverage
Standard renters’ insurance will provide coverage in the event of unintentional accidents, theft, fire, hail, and rain,up to the limits of your policy coverage, and within certain parameters. There are additional types of coverage you may want to consider buying.
Floaters and Riders
Floaters and riders, also known as scheduled personal property coverage, allow you to increase your coverage for certain items only, such as an expensive piece of jewelry or another valuable item.
Although purchasing this type of additional coverage will increase your insurance payments, it will also allow you a wider range of benefits. For instance, standard renters’ insurance will protect your item from theft, fire, and accidents, but floaters and riders will protect a valuable item should you lose it while outside of your home, or if you drop it in a drain or pipe. In most cases, you’ll need to have each valuable item professionally appraised.
In addition, it’s important to remember that each item must be covered individually. For example, you’ll need to purchase coverage for one piece of jewelry and then purchase additional coverage for another piece of jewelry.
Natural Disaster Coverage
Flood, hurricane, earthquake, and tornado insurance are considered optional coverage in most instances, and if you live in an area prone to these natural disasters, it’s definitely something to consider. Check the website of the Federal Emergency Management Agency (FEMA) for maps of areas at high risk of floods, earthquakes, and other natural disasters.
Figure Out Your Deductible
When purchasing renters’ insurance, you’ll need to determine how much you can pay in the event your property is damaged. For example, if your $3,000 television is stolen and you want to file a claim to replace it, you’ll need to pay an out-of-pocket amount first, called a deductible. A typical renters’ insurance deductible will range anywhere from $500 to $2,000, depending upon the type of coverage you select. The higher your deductible is, however, the lower your premium will be and vice verse. Keep in mind, though, that you need to choose a deductible that you can afford and that you’re comfortable paying should damage or loss occur.
Shop Around for the Right Company and Price
Shopping for renters’ insurance is a matter of matching a company’s product to your means and needs as a consumer. There’s no such thing as one-size-fits-all renters’ insurance, and each company has its own prices and options. Similar to homeowners’ insurance, your premium will also depend on what state you live in, your deductible, and if you plan to add additional coverage. Your premium will also depend on your neighborhood. High-crime areas tend to have higher payment amounts than safer, low-crime neighborhoods.
Once you start shopping around for a quote, be sure to ask the same questions of all companies in order to get the most affordable and appropriate premium. Some websites, such as rentersinsurance.net make it easy to compare quotes from several different insurance companies.
And keep in mind that the premium is not the only factor to consider when deciding which company you should choose. You’ll also want to do your research on each individual insurance company, including their reputation, claims history and practices, and any additional coverage options. In addition, it’s crucial to read each policy’s fine print before choosing. Some renters’ insurance companies will attach additional charges and fees that can end up costing you more than you think.
Check Out Discounts
Many renters’ insurance companies will offer various types of discounts. For example, if you have any other type of insurance, such as automobile insurance, you may be eligible for a discount if you buy renters’ coverage from the same company. Additionally, you may be eligible for discounts for purchasing certain home safety features, including alarm systems and smoke detectors.
Also, some insurance companies offer lower rates to retirees, discounts to members of various organizations, and good credit score discounts. The best way to find out which companies offers discounts that apply to you is to inquire with each company.