Renter's Insurance
Most renters have the mistaken belief that they don't need renter's insurance and that the property owner is responsible for any damages to the property. The owner's coverage doesn't protect you against damage that you or your guests cause to the property. If you overrun your bathtub and water leaks into the apartment below, you're liable for the costs, unless you have renter's insurance.
The building owner's coverage also doesn't protect you against personal injury lawsuits if someone is injured in your apartment. And it doesn't provide for replacement of your belongings if they're stolen or damaged by fire or water. Renter's insurance does all of this, and is well worth the cost — which is surprisingly low.
How Much Coverage Do You Need?
Even if you don't have much furniture or large household appliances, you'd be amazed at how much your belongings would cost to replace. For starters, you probably have several thousand dollars' worth of clothing. Take a detailed room-by-room inventory of your belongings, write down a brief description of each item, and estimate what it would cost to replace it. Include clothes in your inventory.
Replacement Cost or Actual Cash Value?
When buying insurance, it's a good idea to buy coverage for replacement cost rather than actual cash value. Replacement cost coverage is just what it sounds like: if something you own is stolen or damaged by fire or water, the insurance company will pay you what it will cost to replace it with an item of similar quality. Actual cost value coverage assumes that your belongings lose value with time and usage, and pays you only the depreciated value of the items.
Note that you take big risks with actual cash value insurance. If you have stereo equipment that you paid $1,500 for and would now cost $2,000 to replace, you would be reimbursed $2,000
To obtain an estimate of what you would pay for renters' insurance, go to
Deductibles
The deductible is the amount you agree to pay out of your pocket before the insurance company covers the rest of your loss. The higher the deductible, the less expensive the insurance. When choosing a deductible, you're deciding how much risk you're willing to take and balancing risk and cost. Most property deductibles are between $250 and $500 per year.
