Determining How Much Renters Insurance You Need

October 20, 2009

Ensuring that you have enough renters insurance protection is critical to both your peace of mind and your ability to recover from a loss. The major factor to consider is, of course, the value of your belongings. Most people don’t realize how much money is tied up in their possessions until it's necessary to replace them. Start by taking an inventory of everything you own. Include the big items like sofa, stereo, and computer, as well as the little things, like pots and pans, and clothes – and even cosmetics.

Next, try to determine how much each item is worth now, as well as what it would cost to replace it with a comparable item. Create a list, either electronic or paper, of every item, and include these values next to each item. Finally, add it all up to estimate your personal property coverage needs.

As added protection, take photos of everything and store them along with a copy of your inventory in a safe place, like a safe deposit box. This will be invaluable if you ever need to file a claim.

When purchasing renters insurance, you will need to choose either replacement cost value (RCV) or actual cash value (ACV) coverage. Replacement cost coverage will pay the true cost to replace your belongings. Actual cash value will pay only what the items were worth at the time of the loss, typically what you paid for the item minus depreciation.

Replacement cost coverage costs more but is the better value if you ever suffer a loss. As time passes, your possessions are worth less, but the cost of replacement increases. This gap could easily exceed the extra premium you would have paid over the years.

Items especially prone to loss, such as jewelry, cash, guns and coin collections, receive only limited coverage in a basic policy, and the maximum payout is almost always much less than the items are worth. You can increase coverage for these items at an additional cost.

If you own items that typically do not lose value, such as art or antiques, have them professionally appraised, and exclude their value in your personal property calculations. Purchase a separate policy for them.

Determine if the coverage limits for liability and medical expenses are sufficient for your lifestyle. If you entertain a lot, you may want additional coverage. Large parties increase the likelihood of an injured guest. Finally, remember that certain risks, like earthquake and flood, are excluded from the basic renters insurance policy. If you need this coverage, you must purchase it separately.

Take a few minutes to get a free no obligation renters insurance quote from Homesite and see just how affordable it can be.