If you have decided to get renters insurance, the next step is to determine exactly how much coverage you need. Everyone has different needs: property value is important, but you also need to find a premium amount that you are comfortable paying. Here are some tips to help find the right amount of coverage for you.
Begin by taking a closer look at your coverage needs. You should ask yourself three important questions:
1. How much is my personal property worth?
2. How much of it could I afford to repurchase if it was destroyed in a fire or stolen?
3. What is my exposure if a liability lawsuit was filed against me?
Take an inventory of your possessions and note their value. Coverage is typically limited for certain items – money, watercraft, jewelry, firearms, etc. – depending on the policy. Total the value of your possessions to get a rough idea of the coverage you require.
Renters insurance policies come in a range of coverage limits, usually in $10,000 increments. If you want full coverage, choose coverage that equals or slightly exceeds the value of your personal property. If you don’t want to cover all of your belongings, or simply want a lower premium and are willing to accept the risk involved, select a lesser coverage amount. Talk with an insurance professional to learn your full range of options.
One other consideration is a policy that reimburses actual cash value (ACV) for losses, or provides full replacement costs. The former pays you only the current value of the lost item: for example, you may only receive a fraction of the cost for a television you purchased several years ago. Policies that specify replacement cost reimburse you the full amount needed to purchase a comparable item. Replacement cost policies are slightly more expensive, but may very well be worth the extra cost if most of your possessions are prone to depreciation.
Renters insurance typically covers liability as well, a fact that is often forgotten because most buyers are focused on personal property values. If you have a significant net worth that might be attractive to an aggrieved party in a potential liability lawsuit, this coverage may come in handy. You should discuss your need for liability coverage with your insurance specialist.
Get started with a review of your need for renters insurance – it’s not very expensive and we have already examined 10 ways to lower the cost of renters insurance even further. Once you have a handle on your situation, you can talk with an insurance professional and explore your coverage options.
