Do you have enough renter's insurance?

Amy Higgins

Renter's insurance is an important investment if you're living under someone else's roof. Your landlord will more than likely have landlord insurance, but this coverage will cover damage only to the property itself. Renter's insurance will foot the bill if your personal possessions are damaged or stolen, or if someone is injured on the property.

According to the National Association of Insurance Commissioners NAIC), the average renter's insurance policy costs $15 to $30 a month. Once you've decided to buy renter's insurance, it's important to make sure you buy enough. Will it cover all disasters? What about all of your valuables?

Priceless coverage

Before buying renter's insurance, take an inventory of your belongings. The more valuables you own, the more coverage you'll need. Standard policies include coverage for valuables like expensive musical instruments, art and jewelry, according to the Insurance Information Institute -- but only up to certain limits. If what you own is worth more than those limits, you'll need to add floaters to your policy. Floaters provide extra coverage for specific items, often without deductibles.

The Massachusetts Office of Consumer Affairs and Business Regulation suggests making a comprehensive list of your possessions that includes purchase prices, model numbers and serial numbers. Take photos or video footage of these items, and store your home insurance inventory in a secure off-site location.

Another factor to consider is the difference between cash-value and replacement-value coverage. A cash-value policy covers your possessions but takes into account the items' depreciation, whereas replacement-cost coverage takes into account the cost of replacing them. For example, if your computer is destroyed, a cash-value policy will pay the item's worth, minus depreciation -- which might not be enough to buy a new, similar computer.

Risky business

Your renter's insurance covers perils like vandalism, theft, windstorm and fire, but it won't protect you from damage caused by earthquakes or floods, according to NAIC. If you live in an area that is prone to floods or earthquakes, you might want to look into purchasing separate coverage.

  • Floods: Water damage is covered under renter's insurance, but not if it's caused by a flood, according to the Insurance Information Institute. In other words, if a window breaks and rain pours in, you're covered. If floodwater from a nearby river damages your property, you're not. You can buy flood insurance through some private insurers or through the National Flood Insurance Program NFIP).

Floods and flash floods occur in all 50 states, so, technically, everyone lives in a flood zone, NFIP says. Flood insurance covers flood damage cause by hurricanes, rivers and tidal waters. If the flood is confined to your property, it must cover at least 2 acres, according to NFIP.

NFIP covers up to $100,000 for your personal possessions, the Insurance Information Institute says. If you're renting in a designated flood zone, you'll want flood insurance for your belongings. Your landlord should have coverage for the property itself.

  • Earthquakes: Earthquakes are another hazard not included in standard renter's insurance policies, but you can add earthquake coverage to your existing policy or buy it separately. About 5,000 earthquakes happen each year in the United States, and about 90 percent of the population lives in seismically active areas, according to the Insurance Information Institute. Earthquakes can cause substantial damage to property and possessions.

Renters in California can buy coverage through the publicly managed California Earthquake Authority CEA). The basic renter's policy insures personal property up to $5,000, according to CEA. In other parts of the country, you can buy private earthquake insurance coverage in the form of an endorsement to your renter's insurance policy. Again, your landlord is responsible for covering the building.

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