Renter’s insurance, sometimes referred to as “tenant’s insurance” is important for anyone who is renting a property. When getting a policy, it’s important to understand what’s covered under renters' insurance and how much coverage you need based on the value of your home’s contents.
Many people assume that their landlord’s insurance is enough to protect them with whatever concern they may have about their rental unit, but your landlord’s insurance will generally only safeguard the property. For example, their policy will likely cover damages on the physical building and not any issues with your specific unit or personal belongings. Therefore, it’s important for each tenant to have their own renters' content insurance in place.
How much renters' content insurance do I need?
Determining how much renters' content insurance a tenant will need to cover their property in case of damages can be difficult. Generally, valuing contents can be done by answering the question, “How much would my things cost to replace today”?
Most belongings’ value should be assessed based on how much it would cost to buy them again. This is easy to calculate, especially when you have a detailed list or inventory of your items. That said, when it comes to unique or high-value items–such as collectibles, antiques, artwork, jewelry, and heirlooms–this can get a bit trickier. You’ll typically need to have these items appraised to get the numbers right.
Cash value versus replacement value
Renters' content insurance can either consider a cash value or replacement value policy. Here’s a brief explanation for each type:
Cash value
A cash value policy considers the value of items at the time that damages are claimed minus depreciation. That means that your things will be valued for what they would cost to replace minus a percentage per year for the age of the item(s) versus what you originally bought them for, which is often lower.
Replacement value
A replacement value policy considers the value of the item to replace, even if this is higher than the original price. For example, if you have a computer system that you can claim damages for and its value is higher than when you originally paid for it, your policy will replace it for the higher amount.
Know the value of your belongings
You can ask your insurance provider for help in understanding the value of your renters' content insurance, but you can also employ certain measures yourself. A great way to track how much your things are worth is to start with an inventory of your belongings, which is often easier after you move as you’ll likely have a list handy.
No matter what type of renters' content insurance you get, it’s crucial to be fully aware of the value of your belongings. This helps you determine how much coverage you need to ensure that you can more easily get back what you lost when damages occur within and to your property.