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You would be surprised at the number of renters who stumble through their rental days totally unprotected from the many perils which can bring devastating losses raining down upon you. From the loss of your personal belongings to the lawsuit brought by someone who fell over your garden hose, renter’s insurance is the kind of protection you absolutely need.
How much renter’s insurance you buy will depend upon the value of your belongings, your net worth, and how much you’re willing to gamble. (Also called risk tolerance.) A basic renter’s insurance policy will give you coverage against personal liability, loss of your personal possessions both on and off the premises, will pay for medical treatment and, finally, give you additional living expenses if you are not able to live in your rental for a period of time following a loss.
Basic coverage usually begins at about $10,000 and can go up as high as you need it to. The first step in determining how much rental coverage you should purchase is to determine how much it would cost to replace your personal belongings. You can do this by preparing a preliminary inventory list. On it you should put the name and make of the item and any special details about it, the approximate date you bought it and approximate cost.
Your inventory list should include everything from the contents of your silverware drawer to the hand towels in your linen closet. Remember, these all have value and will need to be replaced in the event of a loss. Your personal clothing and your electronic devices must be itemized as well. If you own expensive jewelry or items of high value, discuss them with your insurance agent as he may wish to cover them on a separate rider. These more expensive items may need to be appraised in order to establish a firm value.
There are two ways insurance companies write contents insurance. There is ACV – actual cash value – which will pay you the value of your items as of the day of loss. This means if you have 46 pair of shoes, you will be paid for 46 pair of used shoes at about the price you would pay at a local thrift store.
The second and most useful kind of contents insurance pays you the Replacement Value of your belongings. In other words, this policy will pay you what it will take to go out and buy/replace those same 46 pairs of shoes at today’s cost. Naturally, this kind of insurance costs a bit more, but it is worth the extra in most cases. (Often the insurance company will ask you to buy these items then give them receipts before they will reimburse you. Even at that, it is the better way to go.)
In order to create your inventory with as much accuracy as possible, visit your favorite department store. Walk down the aisles with a notepad and, when you see something you own, whether it is a tube of hand lotion or a set of steak knives, write it down.
You will discover that you have a big investment in your personal belongings. Sheets, pillowcases, pillows and blankets for your bed, as an example, will cost you approximately $135.00 per set to replace if you buy moderately priced items. If you are like most people, you have three sets of bedclothes for every bed in your house.
Finally, you should go over your list with your insurance agent. He or she will be able to advise you about how much insurance you’ll need to cover your belongings.