Monday, May 11, 2020

What Does a Renters Insurance Policy Actually Cover?

Renters insurance provides more than just coverage for your personal belongings. Find out what else is covered under these policies, including liability protection and loss of use.

Most people pay for renters insurance coverage for one of two reasons. First, they might bundle renters with auto insurance to save money. Insurance companies often provide a significant discount for doing so. Others have renters insurance because their apartment manager or landlord requires such coverage. Unfortunately, many tenants fail to see the value in this coverage and don’t think they need it. Most often, this is erroneous thinking.

How Much Does Renters Insurance Cost the Average Person? 

Renters insurance policies provide a number of coverages to policyholders. The average policy costs between $100 and $250 per year based on actual coverages chosen. Without a doubt, policyholders and potential policyholders need to understand what these policies provide. A renters policy does more than cover someone’s belongings after all. Far too many people don’t even know about other included coverages or optional coverages with their policy.

Main Coverage: Personal Property Protection

First and foremost, a renters policy provides protection for an insured’s belongings. This is often referred to as personal property protection. Insurance carriers may offer anywhere from $15,000 to $200,000 in coverage for personal possessions. In simple terms, an insured’s belongings will be replaced in the event of a covered peril causing their loss. Covered perils often include fire, theft, and a variety of other situations. Earthquake and flood are usually excluded perils.

It’s important to keep in mind that renters policies often cover an individual’s belongings in the rented property and outside it. Certain categories of items may come with specific limits of coverage within the overall personal property protection amount. Luckily, those limits can often be increased through various means. An individual will pay their deductible in the event of a loss, and then lost or damaged possessions will be replaced.

Replacement can occur on an actual cash value (ACV) basis or replacement cost basis. ACV simply means the insurance carrier factors depreciation into the equation. On the other hand, replacement cost will replace a given item at its current market cost. Everyone understands the basics of personal property protection. If a covered peril causes loss to personal belongings, those items can be replaced by using coverage afforded by the renters policy.

Other Included Coverages: Medical Payments and Liability Protection 

However, most policyholders don’t understand what else is covered in their policies. Many renters policies offer medical payments coverage and liability protection. Medical payments provide compensation to individuals who suffer an injury on the policyholder’s property. The policyholder doesn’t have to be at fault for the injuries for coverage to kick in. For this coverage, payments are often made after health insurance has been used to cover the injury.

Medical payments coverage can range from $1,000 per occurrence to $5,000 or more.

Liability protection, on the other hand, is perhaps the most important coverage provided by renters insurance. When someone becomes liable for harming another individual, they might find themselves the subject of a lawsuit. In covered instances, a renters policy will help an individual defend themselves in court and from judgments stemming from the lawsuit. A liability incident doesn’t have to arise on the tenant-occupied premises, either.

Entire books could be written about liability and how important this coverage is today.

Optional Coverages: Scheduled Personal Property and More

As previously mentioned, renters policies often include limits on certain types of personal property. If a claim exceeds a given category limit, then policyholders would receive no extra coverage for a given item. Common categories with limits on coverage include jewelry, firearms, furs, and camera equipment, among others. It should be noted that these restrictions may vary from state to state and company to company, so tenants need to be careful.

Most renters policies allow for what’s known as scheduled personal property. An individual can schedule individual items for higher limits than are typically offered by a policy. In each case, this results in additional premium for the extra coverage. Some renters policies allow for extended limits on restricted categories without scheduling individual items. Anyone with valuable items should consider scheduling those items for proper coverage.

A given renters policy might offer a number of other optional coverages. Fire department charge coverage, additional living expenses, and other coverages are sometimes available. Of course, not all policyholders will need or want to pay for optional coverages. Insurance carriers make a number of excellent coverages available at an affordable premium nonetheless. Policyholders should always check what’s available to themselves to ensure they’re fully covered.

The Final Verdict on Renters Insurance 

In the end, renters insurance is more than a discount opportunity, and it’s recommended whether mandatory or not. Individuals shouldn’t count out the importance of covering themselves and their belongings with a renters policy. Affordable coverage is available from dozens of companies, and the protections offered cannot be overstated. For that reason, tenants should look at the additional expense as added protection more than anything else.