Even if you don't own a home, your possessions are assets that may be difficult to replace in the event of fire, flood, or theft.

Most people have insurance to cover the loss or damage of significant assets such as a car or home. But suppose you don't own your home. In that case, a substantial asset of yours is left unprotected - your possessions.

Most people own a laptop or desktop computer, clothes, furniture, electronics, plus more. These assets may have been accumulated over years and may not seem worth much. But have you ever considered how much it would cost to replace your possessions if they were lost or stolen? The total may be more than you would expect.

Renter's insurance is designed to cover the replacement cost of your possessions in the event of a fire, theft, vandalism, flood, or any other damaging event. Renter's policies may also cover additional living expenses if your apartment becomes unlivable and even your personal liability if someone is hurt while in your home. Compared with insuring a car or home, renter's insurance is relatively cheap - between $150 and $300 per year for approximately $20,000 in coverage for personal possessions and $100,000 or more in liability protection.

Choosing a Policy

Before purchasing a policy, make sure you understand the following options, each of which will affect your cost and coverage:

  • Policy Value - There's no need to buy coverage worth more than the total value of your possessions. But since most people buy and renew each year, it may make sense to purchase coverage slightly above the value of your current possessions. This increased coverage allows for new purchases over time.
  • Deductible Amount - A deductible is the amount you must pay before the insurance company begins to pay in the event of a loss. Most insurance companies offer flexible deductible amounts, and higher deductibles will lower the overall policy cost. Just ensure you can afford a higher deductible before choosing a policy based on cost only.
  • Actual Cash Value vs. Replacement Cost - In the event of a loss, an insurance company will either pay you the cash value of your possession or the entire replacement cost, depending on your policy type. For example, if your whole wardrobe, from jeans to formal attire, were destroyed, the actual cash value would be the hypothetical value of a closet full of used clothes - far less than the replacement cost (and you would still have to pay the deductible). Since a replacement cost policy is not much more expensive than an actual cash value policy, we suggest considering one that covers total replacement costs.
  • Exclusions and Limits - If you live in a flood-prone area, you will likely need separate coverage for that type of water damage. Some policies also limit the amount they will reimburse you for specific categories of possessions, such as electronics or computers. Make sure any limitations do not affect your coverage, and be sure to purchase additional insurance if they do.

RTH FEDERAL CREDIT UNION MEMBERSHIP MATTERS BLOGCataloging Your Possessions

In addition to purchasing renter's insurance, you must take a comprehensive inventory of your possessions. Your inventory list will be needed to substantiate your claim during a loss.

An inventory typically consists of a written list and photos or videos of the actual items in your home. For big-ticket items such as furniture, computers, and electronics, you'll want to write down the make and model of each item. Otherwise, a general description will suffice. The easiest way to make an inventory is to walk from room to room, filming items with your phone. Be sure to open all closets and drawers, and narrate as you film.

It's a good idea to create a written list of your items in addition to photos or videos. There are several ways to organize your list - you can do it room by room, by category of item (electronics, clothes, etc.), or you can use a home inventory tracking app on your phone.

Finding a Policy

Renter's insurance policies may be purchased through most independent insurance agents, from direct-to-consumer insurers such as Geico, or you may get multiple quotes from companies such as InsWeb.com or NetQuote.com. Many insurance companies also offer discounts for customers who bundle multiple policies together - for example, a discount may be available if you buy a renter's policy from the same company that insures your car.

No matter how you find your policy, be sure to comparison shop and understand each policy's specific exclusions and limits. Otherwise, it is impossible to make meaningful price comparisons. Premiums will also vary depending on location, so your policy cost may change for the same coverage when you move.