Apartment burglar

Take a look around your room and roughly calculate how much it would cost to replace your possessions. Think about your TV, computer, gaming system and furniture.  If everything disappeared today, that would not be cheap to replace.  It's for this reason that renters insurance is extremely valuable.

Your possessions can be stolen or damaged in any number of ways (water, fire, earthquake) and a renters insurance policy will help you replace those items. Consider this a small expense with the potential for a huge benefit.

Just like auto and life insurance, renters insurance has a few sub-categories. Thankfully, these are rather straightforward. The first type is Actual Cash Value (ACV) insurance.  With an ACV policy you will be paid a specific amount to replace your items less a cost for depreciation.  This means that the TV you bought for $1,500 isn't really worth $1,500 two years later due to depreciation.  If that TV is stolen or damaged you won't receive the entire $1,500.  Think about the effect of depreciation on your possessions before purchasing an ACV policy.

The second policy type is Replacement Cost.  This type of policy is more expensive than ACV, but can be worth the extra cost.  Replacement cost policies will pay the actual amount it will cost to replace your items without a reduction from depreciation.  Needless to day, this is very beneficial! Remember, both policies will have limits so be sure you buy enough coverage.

So, how do you determine how much coverage to purchase?  This is the somewhat tedious part.  You will need to create an inventory of your home including everything from furniture, to clothes, electronics and even utensils. Document what you have, the quantity of each and the amount you paid (or a rough estimate).  If possible, take pictures of all the items. By the time you are done you will have a catalog of everything in your home.  It is very important to keep this list somewhere safe. Keep a copy saved in your email or cloud account. You might even consider printing off your catalog and asking family or friends to hold a copy for you. If you have to file a claim in the future, having this list of all of your possessions will make the filing process much easier.  Once you know the value of your possessions it will be easier to determine how much coverage you need in your policy.

Up until now we have addressed only one aspect of protection found in a renters insurance policy, the personal possessions protection.  This is usually the most common reason why you might consider buying a policy, but renters insurance provides other levels of protection.

Liability coverage is a crucial part of most renters insurance policies.  The liability portion will provide protection for bodily injury or property damage caused by your family and even includes your pet.  So if your dog manages to damage your neighbors property, you will be covered. Medical expenses can be extremely expensive and liability coverage will cover up to a certain amount of medical bills should someone become injured in your home or apartment.  The policy will not cover your own personal medical expenses or those of your family.

The third benefit of a renters insurance policy is the Additional Live Expense (ALE) section. The ALE coverage will protect you in the event your home is destroyed in a qualified accident and you must live elsewhere for a period of time.  ALE will cover your hotel bills, rental expenses and even food expenses.  The amount paid by ALE is typically calculated as your additional living expenses less your normal living expenses.

By this point you should be extremely excited and convinced to get a renters insurance policy when you move out on your own.  Some people, however, decide to take the risk and ignore getting a policy.  One common misconception is that the insurance carried by the landlord will cover your property.  This is not true.  If your building is destroyed the landlord is insured on the building.  They will not be replacing your personal possessions, thus you will be responsible for the cost.