Do You Have the Correct Type of Renters Coverage?
Posted on January 10, 2008
Filed Under Uncategorized |
If you are looking for renters insurance, the first thing that you need to do is calculate the value of all of your possessions. Once you complete that, you’ll have two values: the current cash value and the original purchase price.
The reason you calculated the two values, current cash value and original purchase price, is because some rental insurance policies pay only the current cash value, while others will pay the actual replacement cost. As you notice the large difference in the numbers, it is important to know what type of coverage you are getting. The original purchase price total will give you a good idea of an actual replacement cost, which is probably much higher than the current cash value.
Most rental insurance companies write basic policies that cover current cash value. This means if you have a claim, you will be paid only for what your property was worth at the time of the claim (your yard sale price). To you, that 4 year old $1200 computer is great, worth every penny of what you originally paid for it, and you can’t live without it. To an insurance company, its current cash value is only a couple hundred dollars. Not nearly enough to buy a new one.
You can get renters insurance policies that cover actual replacement cost, which will pay you what it actually costs to replace the items you lost, at today’s prices. It is important to realize, this type of coverage is more expensive. But it might be the better option for you.
If it turns out you have something that is very valuable besides usual home items, such as jewelry or coins, you will need to get a separate policy to cover that. This is because many types of possessions have a dollar limit that a typical renter’s insurance policy will cover. So anything valued above that limit should be handled separately. Check with the individual insurance company for a list of such items.
Make sure that you are clear on the type of coverage, current cash value or actual replacement cost, that is written into your renters insurance policy.
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