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Renter's Insurance: A Vital Necessity or a Waste of Money?

Updated on September 20, 2010

When we think about bad things that may happen to us, few come to our mind right away: death in the family, serious illness, job loss. That is why most people carry health and life insurance policies to be prepared for the inevitable. Very few of us, however, think about other unpleasant events that may cause serious damage: crime, accidents, natural disasters, and so forth, until those happen. Most commonly, they carry threat to our personal belongings. While homeowners are usually more protected against those, as mortgage holders mandate property insurance, those of us who rent an apartment or a house rarely consider insuring personal belongings.

But why?

Some think that it is a liability of their landlord to carry insurance, but most people have never even thought about a possibility of having their personal assets damaged, destroyed, or stolen. Very few smart folks, however, already have renter’s insurance.

Are You Covered under Your Landlord’s Insurance?

Most people think that property owners and property management companies carry insurance. In fact, they are right – they do. However, such insurance policies are not aimed to protect the renter, but rather to protect the landlord. Property owners commonly carry two types of insurance policies: liability and property insurance. Liability insurance protects property owners or managers from any legal claims resulting from events that may have happened on the premises, excluding quarters, occupied by tenants. Property insurance covers the structural elements, such as walls, roof, plumbing and electrical fixtures; however, it does not cover your personal items, furniture, and electronics. Simply put, if something happens, you are not covered at all!

Is Renter’s Insurance Right for You?

Renter’s insurance policy could be a useful financial planning tool or a complete waste of money. Well, do you really need renter’s insurance?

You do not need it, if you only have very few personal items, like a couple of pieces of old furniture and a beat-up TV. A good example here is college students, renting apartment for an academic term and planning to give away their furniture and appliances at the end of the school year.

You do need renter’s insurance if you have accumulated a number of items of value or have personal possessions with strong sentimental value. If you would not be able to replace essential belongings without staining yourself financially, then you should seriously consider getting a renter’s insurance policy.

How Much Renter’s Insurance Should You Get?

Estimating your renter’s insurance needs is not difficult at all. The two most common approaches to estimate how much your personal assets are worth are assessing either present (or future) cash value or replacement value. The difference between the two is that the first method estimates how much your assets are worth today (or at some point in the future,) taking into consideration tear and wear when the second represents the price of same or similar items when purchased brand new. I addition, there is no need to insure all of your belongings – just focus on the most valuable ones. There is definitely a need to insure a 40” plasma TV but no need to add an iron to your renter’s insurance policy that may be purchased at your local Wal-Mart for ten bucks. The best way to make a list of valuables to insure would be making a walk around in your apartment, noting every item that is valuable on a piece of paper and, once done, adding a price sticker to every one of them.

Where Should You Get Renter’s Insurance?

Getting a renter’s insurance policy s nothing difficult these days, provided the level of competition between insurance companies and the way information technology is developed. You may easily obtain multiple quotes by going online and performing a simple Google search. All you need is a computer with internet access, some basic information about your neighborhood, yourself, and your assets and few minutes of your time – as simple as that.

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