Renters face the same risk as homeowners in cases of disasters striking their home. Your landlord or condo association may have insurance, but this protects only the building, not your things in it. Renters insurance can protect your belongings in case of disaster.
There are several types of residential insurance policies. The HO-4 policy is designed for renters, while the HO-6 policy is for condo owners. Both HO-4 and HO-6 cover losses to your personal property from 14 types of perils:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Vandalism or malicious mischief
- Volcanic eruption
- Falling objects
- Weight of ice, snow or sleet
- Malfunctioning plumbing, heating, air-conditioning, fire-protective sprinkler system or household appliance: accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or bulging; or freezing.
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component).
Floods and earthquakes aren't on the list. If you live in an area prone to either, you'll need to buy a separate policy or a rider. In some coastal regions, where hurricanes might pose a threat, you might also need to buy a separate rider to cover wind damage. (See "Do you need disaster insurance?")
Actual cash value vs. replacement costOne thing to look at is whether the insurance company will offer "actual cash value" (ACV) or "replacement cost coverage" for your belongings. As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $500, it would be worth significantly less today. While you'd still need to spend about $500 for a new TV, your insurance company will pay only for what the old one is now worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost, again minus the deductible.
In some regions, most insurers write ACV coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim.Let your agent know about any particularly valuable items you have. Jewelry, antiques, and electronics might be covered up to a certain amount. If you have some items that are unusually expensive, such as a diamond ring, you'll probably want to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the full loss.
To ensure you are compensated for any belongings you lose from a fire, storm or other catastrophe, you should inventory all of your personal belongings. Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place.