photo credit: cocoate.com
This is a guest post by Andre, who is part of the team that manages Australian Credit Cards, a low interest credit card comparison service based in Sydney, Australia.
Most homeowners want to protect their house and personal belongings against loss or damage, so they buy an insurance policy that caters to their needs best. A house is not just a dwelling place to eat and sleep in—it’s a considerable financial investment that needs protection.
However, if you are simply renting a room or a house, you might ask yourself: do I still need to get insurance?
The answer is yes. Most people who don’t own their current places of abode mistakenly believe that the general insurance policy over the physical structure they rent includes them in the coverage, or that their personal property aren’t worth much and therefore don’t need to be insured against loss or damage. This couldn’t be farther from the truth. Renters do need to purchase additional insurance for their belongings for their own peace of mind and financial security.
Some landlords make obtaining a renter’s insurance a prerequisite to signing the deal on the property. But even if obtaining a separate insurance is not part of your leasing requirements, you should still make sure that you get adequate insurance protection. Remember that any loss or damage to your personal belongings will not be shouldered by your landlord in any way, so you should look out for your own interests.
Consider the following points before you go ahead and buy a renter’s insurance policy:
How much coverage do you really need?
Not all the items in your rented home or apartment needs to be insured. The rule of thumb is that you must decide which items have the highest current and/or cost of replacement values, as these will cause you the greatest financial setback in case of loss or damage.
Perhaps you own an expensive state-of-the-art home entertainment system, a few pieces of antique furniture that’s been in your family for generations or a really pricey set of diamond jewelry. These things matter to you not just because of their pecuniary value, but also because of the memories and stories associated with them.
Therefore, insuring them against loss or damage is a wise move because you will at least receive monetary compensation should they get lost or damaged in your rented premises. The more items you include in the coverage, the higher the premium you have to pay each month.
Finally, take note of the prices of the items you have in your rented unit and the purchase dates so you can keep track of any fluctuation in value and adjust your insurance coverage accordingly. You can take videos or pictures of the premises regularly so you can protect yourself in case you have a dispute with the insurer when you need to collect on your premium.
What type of coverage do you need?
Different policies insure against different types of loss and/or damage, so be sure to shop around for options so you get the best value for your money. Most standard renter’s insurance policies insure your belongings against fire, lightning, hail, windstorm, theft and burglary. Others provide extended coverage for your belongings even when they are not inside the rented unit or while you are travelling.
Moreover, some insurance policies don’t just cover the contents of your rented home or apartment. It may also include a third-party liability clause that covers medical expenses incurred by anyone who might get injured while inside your premises.
The insurance may also protect you against claims from your landlord should he ask you to pay for alleged damages to the property at the end of your lease term, making it unlivable and therefore no longer profitable for the landlord.
Most insurance companies don’t include flood and earthquakes in their standard policies, but if you live in an area where these natural disasters are common, it is advisable for you to purchase an additional rider extending your coverage.
What kind of payout scheme do you prefer?
There are also various indemnity payouts you can avail of, replacement cost or actual cash value (ACV). The former allows you to recover the actual cost of replacing the items lost or stolen, with no deduction for depreciation.
On the other hand, the ACV scheme takes into account the replacement cost minus depreciation, and you are able to recover the item value at the time of the loss itself. A replacement-cost coverage is relatively more expensive, but at least you get you everything back at their purchase price.
At the end of the day, an insurance policy can only do so much for you. It will not prevent natural calamities or crimes from happening. You should also do your share towards keeping your rented unit safe from certain occurrences such as fire or burglary. Make sure that you lock up your premises securely every time you leave, especially if you are going to be away for a long time. Install fire and burglar alarms as well as sprinkler systems to further protect your rented unit.
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