Do I Need Renter’s Insurance?
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If you’re renting an apartment or home, have you considered renter’s insurance? Assuming your landlord’s insurance will cover any losses you incur could be a costly mistake.

"While your landlord may be sympathetic to a burglary you experience, or a fire caused by your iron, the destruction or loss of your possessions typically is not covered by your landlord’s insurance," says Loretta Worters, vice president of communications for the Insurance Information Institute.

Even if another renter or unit causes the damage — for example, water flows into your apartment from the unit above — your landlord may not be responsible for damage to your personal property.

Renter’s insurance can cover your personal belongings against a variety of losses, including theft and damage from fire or smoke, lightning, vandalism, an explosion, a windstorm, and water (not including flooding from natural disasters).

Not all policies provide the same protection, so ask these questions about specific coverage and exclusions to make sure your policy meets your individual needs:

Will the Renter’s Insurance Policy Have Liability Protection?

Like homeowners insurance, renter’s insurance can cover your responsibility to other people who may be injured on your property or elsewhere by you, a family member, or your pet. In some cases, insurance might pay for legal defense costs if you are taken to court, Worters says.

Will the Policy Cover Additional Living Expenses?

Renter’s insurance policies also cover additional living expenses if you’re unable to live in your apartment or home because of loss or damage.

“Most policies will reimburse you the difference between your additional living expenses and your normal living expenses, but limits may be set on the amount insurance will pay,” Worters explains. In other words, if your apartment is damaged by a fire or burst water pipes, you can’t check into a five-star hotel and expect your policy to cover it in full.

How Will the Policy Pay to Replace Your Possessions?

Renter’s insurance policies come in two forms. The first, an actual cash value policy, pays to replace your possessions minus a deduction for depreciation up to the limit of your policy. These policies are typically less expensive to purchase, but in case of a loss, you risk not receiving enough of a payout to replace the damaged or stolen items. The value of an older TV, for instance, likely won’t cover the cost of a new model.

A replacement cost policy, on the other hand, pays the cost of replacing your possessions (no deduction for depreciation) up to policy limits. This type of policy costs more than an actual cash value policy, but if you have expensive and crucial items, like a four-year-old computer that you rely on for your job, the cost to purchase a new model can far outweigh the additional cost of the policy.

Is a Floater Worth the Extra Cost?

With either type of policy, you may want to consider purchasing a floater, Worters advises. “A standard renter’s policy offers limited coverage for items such as jewelry,” she says. “A floater is a separate policy that provides broader protection for your valuables and covers them for perils not included in your policy, such as accidental loss.”

The price of a floater varies depending on the type of coverage. Compare the cost against what you would have to pay out of pocket to replace an expensive item, like a diamond ring, without insurance coverage.

What Renter’s Insurance Discounts Are Available?

Some insurance companies offer discounts if you have another policy with them, like car insurance. Others offer discounts if you have a security system, smoke detectors, deadbolt locks, and good credit.

When you choose a policy that meets your individual needs, renter’s insurance can help provide peace of mind and protect your possessions in case of a theft, accident, or disaster.

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