Renters Insurance

If you rent, it's tempting to think that all your responsibilities and worries shift to your landlord; however, you'll be in for a shock if the building you're living in is damaged by a fire or assaulted by thieves. Your landlord will be protected because he or she has insurance on the property. But you won't be protected if any of your belongings are damaged or stolen. For less than the cost of a daily newspaper, renter's insurance is a commonsense investment.

A renters insurance policy costs so little - less than $200 annually - that it would be difficult to come up with any rationale for not insuring your electronics, your clothes, your valuables, your furniture - all of which can add up to tens of thousands of dollars to replace. Considering that you are constantly exposed to any number of perils beyond your control, such as fire, smoke, vandalism, theft, water damage, this low-cost insurance is probably the best bargain you will find among any type of insurance policy.

Renters insurance provides multiple protections beyond just the replacement or reimbursement of stolen or damaged property. It will also reimburse you for costs incurred while living away from the property while it is being repaired or rebuilt. Generally, it covers the difference in the cost of your regular living situation and the added expense of food, shelter, and transportation you need to spend. In addition, a renters insurance policy may cover your legal expenses should you find yourself the target of a lawsuit by anyone who is hurt while inside your home.

When considering a renters insurance policy, it is important to understand the ways in which you will be reimbursed for stolen or lost items.

Replacement-cost: This type of policy reimburses for the cost to fully replace your property up to any limits stated in the policy.

Cash value: This policy will only reimburse you for the amount that the property is valued at the time of the theft or damage. So, conceivably, you may not receive near enough money to buy a new and equivalent item.

While the replacement-cost policy is usually more expensive - as much as 15 percent more - the return on that small, extra investment can be substantial. Also, if you need to protect any valuable items, such as expensive jewelry or collectibles, you will need to have a floater attached to the policy that specifically covers those items.

One thing renters tend to ignore is the value of the liability coverage available in these policies. Most policies include liability coverage of $100,000. If you think about the average lawsuit or medical claims filed by someone who injures their back walking down a flight of stairs, $100,000 may only be a starting point. With some companies you can ask for more liability coverage - up to $300,000. Take it if you can get it as it will only cost you a small additional premium.

For many people, renting can feel like a liberating experience compared to owning a home, but there is nothing liberating about it if your home is damaged or invaded. Renters insurance is a must.