You’ve decided it’s time to get renter’s insurance to cover your property, but how do you determine how much insurance you need? The first step is to do an inventory of what you own, and how much it’s worth. (This sounds worse than it is, and it’s something that needs to be done anyway.)
The process is simple, choose a room and:
*List each item, including when you bought it, how much you paid, and serial numbers for items that have them
*Add up the amounts to give you a rough idea of what it’s all worth
*It’s also a good idea to take pictures or make a video so you have a visual record
Repeat this process for each room in your home, and be sure to include the closets and storage spaces as well. Once you have your inventory, total the amounts from each room, and store it in a safe place, away from home, like a bank safe deposit box. (Your inventory won’t do you much good if it burns up with the building, or is stolen in a burglary.) If you have receipts for your property, they should be stored with the inventory, since they will help you and your insurance company agree on a fair settlement in case of a claim.
If you haven’t decided whether to get an “actual cash value” (ACV) policy or a “replacement cost” (RC) policy, now is the time. Look at your inventory and compare what your things are actually worth (their depreciated value) to how much it would cost to replace them. If your computer is two years old, and cost you $1500 when you bought it, the actual value is probably $500 or less; but the replacement cost is going to be close to what you paid. If you can afford to cover the difference, an ACV policy is about 25% less than an RC policy. (Remember, though, that you’re likely to need to replace more than one item if you have a claim.) Replacement cost policies will make it much easier for you replace your losses, and are more than worth the difference in price if you can afford the minor increase in premiums.
Next you should check the policy for dollar limits on particular types of property. If you own $4000 worth of computer equipment, but there’s a $1500 limit on that type of property, you’ll probably want to add a “rider” to your policy to cover the difference. Compare any limits in the policy to the value of your property, and decide if you need additional coverage for particular items. This is also the time to talk to your agent about any “special circumstances” that may not be covered, such as working from home using equipment owned by your employer.
Taking the time to follow these steps will protect you from discovering too late that you don’t have enough insurance to cover your losses, and make filing a claim much easier.