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If you are on your own for the first time and have just moved into your first apartment, you may not be ready to talk about insurance. You still have to get the internet connection and the cable television service arranged for! However, this needs to be one of your first considerations as you launch your new life.
A common misconception among first-time tenants is that the landlord’s insurance will pay for a tenant’s possessions in the event of a fire. This is not the case! Your landlord’s insurance only covers the structure itself. As a responsible tenant, it is your responsibility to protect your own possessions from loss. You can do this easily and affordably by obtaining a renter’s insurance polity.
In addition to covering the cost of your belongings, renter’s insurance can protect you in many other ways. For example, if you accidently start a fire that burns your entire building to the ground, there may follow a spate of lawsuits and judgments in which you will be required, because of your negligence, to pay for the belongings of everyone who was living in the building.
Most of us don’t have the wherewithal to replace our own belongings, let alone the belongings of seven other families. Nor do we have the money to hire an attorney and defend ourselves against a lawsuit.
Nevertheless, as with auto insurance, you are going to be held responsible for the losses your actions cause others. You are responsible for your own actions and your own negligence. It doesn’t matter if you have no assets to cover such a judgment. Your paycheck may be attached as well as anything you own, or will own in the future, can become payment for that judgment.
So, a renter’s insurance policy comes into play.
A renter’s policy will cover just about any kind of peril you can think of. Two exceptions are flood and earthquake. (If you live in an area where these threats are common, you must purchase a special policy to cover losses in these circumstances.) Among the threats your renter’s insurance will protect you from are: Fire, lightning, vandalism, smoke, explosions, windstorms, aircrafts and other falling objects, water damage from broken pipes, riots, electrical surges and theft.
There are two ways in which your agent may write your personal property coverage. If you have an Actual Cash Value policy, it means that the insurance company will pay for your belongings’ actual cash value. That means that the seventeen pair of pillowcases you have in your linen closet will probably be worth a quarter a pair. This is, of course, not anywhere close to what you will need to replace them.
You will want your policy to pay the cost to replace your belongings, so make sure your agent writes a Replacement Cost policy. This will cost you a little more, but will be worthwhile in the event of a loss. (Remember, your technology may have been state-of-the art when you bought it three months ago, but it depreciates and becomes obsolete almost immediately. If you only have an ACV policy, you’ll have to come up with a lot of out-of-pocket money to replace your techno-toys.)
If you have items in your home which are of special value like jewelry, antiques or heirlooms, you need to discuss this with your agent. There are special policies available for items which cannot be readily replaced.
Finally, a renter’s policy will generally make provisions for additional living expenses if you are forced out of your home or apartment by a covered loss. These expenses can add up quickly if you must eat at restaurants and sleep in motels. Be sure that your policy covers these needs as well.