If you're renting a place to stay, it is essential to know what is renters insurance so that you can protect yourself from the financial risks that a tenant faces. Find out what does renters insurance cover and whether you should be buying it.
In a sentence, renters insurance protects tenants and their possessions from financial losses. In exchange for paying a premium every month, the insurance company will cover any unexpected financial losses that you face as a tenant.
To better answer the question of what is renters insurance, you need to know that there are two types of renters insurance: Actual Cash Value Insurance and Replacement Cost Insurance
Actual Cash Value ACV Insurance pays for you the current (depreciated) value of your damaged and stolen items.
For example, you bought a laptop two years ago for $1,500 and it was recently stolen from your rental property. If the laptop is worth only $500 today, the insurance company will reimburse you $500 for the loss.
Replacement Cost Insurance pays you to fully replace the items that were destroyed or stolen.
Returning to our example - If the same laptop was stolen and you're covered by replacement cost insurance instead, then you are likely to receive at least $1,000 so that you have enough money to buy a brand new laptop.
Now we know what is renters insurance, let's move on and learn more about renters insurance coverage in detail.
First and foremost, renters insurance covers you for the destruction and loss of your possessions.
The destruction and loss can be caused by natural disasters (e.g. lightning, windstorm, volcanic eruptions heavy snowfall or by man made accidents (e.g. burglary, vandalism, fire, water damage, electrical damage, vehicle collision, rioting).
By possessions, we are referring to your cash, furniture, appliances, electronics, clothing and jewelry. If you have expensive belongings
such as a branded watch or jewellery, you may have to pay extra to cover the
full worth of these items.
If the rental housing that you're staying in sustains major damage and becomes inhabitable, renters insurance will also pay for your temporary living expenses elsewhere while repairs are being made.
In case if you ever find yourself entangled in a renter liability lawsuit (e.g. being sued by a guest who fell down and broke his arm), renters insurance also covers your legal fees and any damages awarded to other party (including his medical bill and legal fees).
Now that we know what does renters insurance cover, let's see if it is worth your money: