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Upscale Apartment Complex

More landlords than ever are requiring their tenants to carry renters insurance. Once you find and settle on a renters insurance policy, you will pay monthly premiums for coverage. This insurance covers liability you may face — as well as your personal items — in the event of an accident. But there are more aspects to renters insurance than most people realize.

Actual Cost Value vs Replacement Cost Value

When searching for renters insurance, there are two ways you can choose to receive compensation for a claim: Actual Cost Value and Replacement Cost Value.

  • Actual Cost Value provides compensation for the actual cost of the item. It also accounts for depreciation. This means that, as the value of your item decreases, so will the amount of compensation you receive.
  • Replacement Cost Value covers the cost of replacing the item with an item of similar or identical value. This type of compensation is more likely to replace your items completely, but it also costs more.

How Renters Insurance Is Calculated

There are a few different factors that go into the cost of your renters insurance. This includes your:

  • Location
  • Credit score
  • Coverage amount
  • Deductible
  • Value of insured items

Your location is a huge factor when it comes to your renters insurance rates. Renters who reside in a property that sits close to a fire station or within a gated community may pay less for renters insurance. Thankfully, when it comes to your credit score, you will likely be approved for renters insurance if you're approved for an apartment.

What Does Renters Insurance Not Cover?

Renters insurance offers similar coverage to home insurance, such as:

  • Liability: Personal liability insurance covers incidents in which you cause bodily injury or property damage.
  • Personal Possessions: Personal possessions coverage provides compensation if your insured items are lost or damaged due to fire, smoke, lightning, wind, theft or vandalism.
  • Additional Living Expenses: Additional living expenses helps with the cost of temporarily moving while repairs are being made to the rented space after a disaster.

Renters insurance doesn't cover everything, however. It won't cover damage due to floods or earthquakes, though these can be covered by separate policies. Expensive items — such as jewelry, furs and art — also have limited coverage under renters insurance. You can purchase floaters for these items to expand your coverage.

Despite popular belief, renters insurance is relatively cheap. The average cost of renters insurance is about $16 a month for required coverage.

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