Renters insurance is for anyone who rents a roof over your head, be it a house or an apartment. Your landlord or condo association may have insurance, but this only protects the building, not your things in it. Renters insurance protects your personal property against fire, theft and vandalism.
What It Covers
Renters insurance doesn't just provide coverage for household items like furniture and clothes; it also helps protect theft-prone valuables like your laptop and bike, wherever you take them.
Renters insurance also protects you if someone gets hurt on your property. This is called liability protection (and really bad luck).
If your place burns down, renters insurance pays for your temporary housing so you don't have to live in a van down by the river.
How It's Priced
The price you pay for renters insurance is usually based on four things:
1. Dollar Amount of Coverage:
The amount you think all of your stuff is worth.
What you pay out of your own pocket before your insurance kicks in.
3. Actual Cash Value or Replacement Cost:
If you paid $400 for a new couch, $400 is your replacement cost. Once it's covered in ketchup stains and smells like cat pee, the actual cash value might be $.35.
4. Location and Previous Claims:
If you live in an area where you (or even your neighbors) get your bike stolen every week, you'll probably end up paying more for your policy.
When Bert's apartment burned down, he was relieved to remember that he had renters insurance. However, he never got around to taking inventory of his stuff and recording serial numbers and value.
When investigators showed up and asked what was lost, Bert hesitated. "Um," he said, trying to get as much as possible for his lost items, "I had a 60-inch plasma TV, a Gucci salad spinner, three Faberge eggs, 24-karat gold dental floss, a bearskin rug made out of Chewbacca ..." Bert went on and on until he'd piled up $36 million worth of claims.
The investigators eyed him suspiciously and handed him a pamphlet titled "Insurance Fraud."
Bert called the investigators and explained that he'd made a mistake and that all of those items were in his OTHER one-bedroom apartment. His actual compensation ended up being $18.42 and a life NOT behind bars.