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Money Girl

294 MG Your Guide to Renters Insurance

Who really needs renters insurance and how to choose the best policy.

Broadcast on:
05 Dec 2012
Audio Format:
other

Who really needs renters insurance and how to choose the best policy.

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It's the perfect time to experience the quality and reliability that has made Dickies a trusted name for over a century. Hi, friends. Thanks for downloading the Money Girl podcast. I'm Laura Adams, author of the award-winning guide to personal finance called Money Girl's Smart Moose to Grow Rich. Visit your favorite bookseller and download the e-book or order a copy of the paperback for yourself or to give us a gift. Since the housing crisis, many Americans have decided that it makes more financial sense to rent a home than to buy one. However, being a tenant doesn't mean that you're off the hook for insurance. In today's episode, we'll cover what you should know about renter's insurance and how to shop for the best policy to keep you and your belongings safe. Renting can be the right financial decision for many people, depending on where you live, your work situation, and the lifestyle you want. However, less than one-third of all renters have renter's insurance. Many renters mistakenly believe that their possessions are automatically covered by their landlord's insurance. This is dead wrong. Your landlord's insurance generally covers the building and grounds only, not your personal belongings or your liability. Renter's insurance gives you three main types of financial protection. Number one, coverage for your personal belongings. Number two, liability protection against a lawsuit, and three, reimbursement for additional living expenses. It's terrible to think about, but what would happen if the apartment or home you rent was completely destroyed, as was the case for a lot of people in the Northeast who were devastated by Hurricane Sandy. Renter's insurance protects you if your possessions are lost or destroyed in a natural disaster, such as a fire, lightning strike, windstorm, certain kinds of water damage, or in the event of theft or vandalism. 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It's no wonder Ixcel is used in 95 of the top 100 school districts. I think the positive feedback that Ixcel gives is really crucial when it comes to learning. So make an impact on your child's learning. Get Ixcel now, and money girl listeners can get an exclusive 20% off Ixcel membership when they sign up today at ixl.com/moneygirl. Visit ixl.com/moneygirl to get the most effective learning program out there at the best price. Calling all future shapers and dream chasers, MSU Denver works with you online and on campus. Learn with faculty and peers to forge your career. Your next starts now. We are the change makers. MSU Denver. However, most policies don't automatically include insurance for earth movement, such as an earthquake or landslide, nor do they cover damage from floods or underground water. Flood insurance is available from the federal government, and a few private insurers only. You can learn more about the National Flood Insurance Program at floodsmart.gov. To make sure you have enough renters coverage for all your belongings, create a detailed inventory of what's in your home that includes the estimated value for each item or category. Check out the free software that makes creating and updating your home inventory easy at knowyourstuff.org. Also, my quick and dirty tips colleague, the domestic CEO, has some great tips on how to document your belongings. There are two types of renters coverage to choose from, actual cash value or replacement cost. Actual cash value means the policy pays to replace your belongings up to a limit less a deduction for depreciation. And replacement cost means the policy pays the real cost of replacing your belongings up to a limit regardless of depreciation. A replacement policy cost about 10% more than a cash value policy, but it may be worth it if your most valuable possessions have depreciated significantly. And speaking of valuables, many policies limit the amount of coverage for certain expensive items. That means you may need a separate policy known as a floater or rider for additional coverage on items like jewelry, collectibles, antiques and computers. Some renters insurance may offer inflation coverage, which automatically increases the amount of your coverage according to a financial index as the cost of living goes up. Most renters policies include off-premises coverage that protects your belongings when you're outside of your home. For instance, if you're on vacation and your laptop is stolen from your car or hotel room, it would be covered. However, most policies have low caps on off-premises theft, so shop for additional off-premises coverage if you travel a lot. In addition to covering your possessions, renters insurance protects you from the cost of a lawsuit. If you, a family member or a pet hurt someone or damage their property, you're covered for both the cost of your defense in court and any award given to the other party up to the limit of your policy. Standard renters insurance provides $100,000 of liability coverage, but you can purchase additional amounts if you have a higher net worth that could be at risk. Liability also includes several thousand dollars of no-fault medical coverage if someone injures him or herself while they're in your home. The final type of financial protection that renters insurance gives you is called additional living expenses. This saves you if your home is uninhabitable due to an insured loss and you have to move out until repairs are completed or you have to relocate to a new home. Additional living expenses may include the actual costs of a temporary rental, hotel, restaurant meals, and related items that you incur during the time you can't live in your home. Some policies reimburse you for a set period of time while others may impose a financial cap, so be sure you understand how much coverage you really have. The cost of renters insurance varies by company, the deductible you choose, and how much coverage you purchase. However, the average annual premium is only $184, or about $15 a month, according to the Insurance Information Institute. That's incredibly cheap insurance for the coverage you receive. So, if you're a renter, don't miss out on the affordable protection and peace of mind that renters insurance gives you in the event of a disaster or lawsuit. And if you already have a renter's policy, review it periodically to make sure that you have enough coverage to protect your finances. We post transcripts of each show on the Money Girl page at quickanddirtytips.com to read this transcript. Look for episode number 294 called Your Guide to Renner's Insurance. While you're there, be sure to connect with me on social sites, like Facebook and Twitter, and sign up for the free Money Girl newsletter. I'm Glenn, you're listening to Ching. That's all for now, courtesy of Money Girl, your guide to our richer life. Calling all future shapers and dream chasers, MSU Denver works with you online and on campus. Learn with faculty and peers to forge your career. Your next starts now. We are the change makers. MSU Denver. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capelli University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals, like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capelli University. Learn more at Capella.edu. [BLANK_AUDIO]