Home renters insurance - important information and suggestions

Jordy Sep 29, 2010

Moving to a brand new home is very nerve-racking and most people today think about setting up the telephone, cable television and internet, but just ignore content insurance. Typically, your landlord will have an insurance policy, but what a lot of people don't realise is that it covers only the building, not your personal possessions. If you need a peace of mind knowing the content of your home is covered by insurance, you need renters insurance. Trying to replace your valuable belongings or defend yourself against a liability lawsuit, may be quite expensive.

HO-4 and HO-6 are the two basic types of home content insurance. The former is for people who rent and the later for those who own condos. Normally, these policies offer protection against theft, fire, hail, criminal damage etc. Earthquakes and floods, however, are not by default included in renters insurance. If you have to be protected against floods and earthquakes, the insurance company will consider the risks and may provide you cover at extra cost of course.

A couple of important factors about renters insurance are "actual cash value" (ACV) and "replacement cost coverage". Undoubtedly, you can very easily guest what these terms mean, but lets explain them in brief. If your two year old laptop is stolen, ACV coverage will pay only as much as the laptop costs at that moment in time - far less than say the $500 you bought it for. On the other hand, replacement cost coverage will pay out as much as it costs to buy a new laptop from the shop.

Of course, replacement cost coverage is costlier. The most important thing is to understand which insurance coverage you want and which one you are quoted for before buying your policy.

If you own high value items, you will be required to state them separately on your policy. Such items include antiques, diamonds and electronic devices. Obtaining receipts for all the high-priced items could be helpful, and why not even take a few photographs or make a video.

If your residence is damaged - what happens?

That's when the "additional living expenses" (ALE) part of your home content insurance policy comes into play. If you place needs to be repaired and you have no place to live - you are covered. ALE will cover living cost for you to remain in a hotel or rent a similar residence for a period of time. Typically, the limits for ALE are 30-40% of the overall insurance policy value. Its unusual for repairs to take more than a month or so but most policies have additional living expenses cover limits of as much as 12 months.

Another standard benefit of renters insurance is liability protection. You probably wander what do you need liability protection for? It covers you in case somebody gets injured in your apartment and chooses to take legal action against you. Certainly, certain limits of cover are in place as well.

Just how much does home content insurance cost?

The truth is that it actually depends. Besides the important factors mentioned previously, your credit rating and age group can play a role also. Compare insurance quotes from different providers and see for yourself. Don't rush to go with the least expensive quote you are given. Its necessary to examine what the insurance limits are and read the fine print of your plan.