Renters Insurance: A Cheap Way to Protect All Your StuffBy Sheree R. Curry
You’ve seen them on the TV news; standing out on the sidewalk watching as their apartment building goes up in flames. Their electronics have melted down to nothing; their couch stood no chance again the fire, the wooden dresser is scorched, the clothes inside ruined with the smell of smoke. Victims are almost always at a loss about how to replace their possessions.
Renters insurance would be a very good start. Although most mortgage companies mandate that homeowners carry insurance, there is no such watchdog over the majority of renters. And surprisingly, more than half of renters do not carry insurance for their personal belongings.
More than 81 million Americans rent in the U.S. and about 50 million of them do not have renters insurance. A consumer survey conducted for the Independent Insurance Agents and Brokers of America found that nearly two-thirds of those living in U.S. rental properties are going without renters insurance. A national consumer telephone survey asked people living in rental properties whether they had renters insurance; 64.4 percent said "no."
Many renters say they do not purchase insurance because it's expensive. However, many of them hadn't bothered to look into the actual costs. The average cost of renters insurance is $12 per month for about $30,000 of property coverage and $100,000 of liability coverage.
Renters can choose between two types of insurance policies: The "actual cash value" package or the "replacement cost" package. Actual cash value pays to replace your possessions minus a deduction for depreciation up to the limit of your policy. This means that the $1,500 computer workstation you purchased five years ago will be replaced at the cost it was worth today, possibly $500 —that wouldn't be enough for you to go out and buy a new one. Replacement cost pays the actual cost of replacing your possessions up to the limit of your policy.
So if it would cost you $1,500 to replace your five-year-old computer today, then you'd get $1,500 from the insurance company. The difference between the two types of policies is usually just a few dollars a month.
In some cases, however, big-ticket items, such as computers and some jewelry or furs, will need to be documented beforehand with the insurance company, and a special floater or rider will extend the coverage of these items.