What affects the price of renter’s insurance?
Obtaining renter’s insurance will provide you with peace of mind that your belongings are protected. A basic HO-4 policy will cover loss of common household items in the case of theft or damage caused by a number of factors including, but not limited to, smoke, fire, and faulty plumbing. The basic policy usually also pays for certain living expenses if your residence is not fit to live in due to damage or disaster. Liability coverage is also included and will pay medical costs up to your limit of liability, for any person who was injured while on your property.
How do you know what which factors to consider when choosing the right policy for you? The following should be of concern when choosing a renter’s insurance policy.
HOW MUCH COVERAGE IS NEEDED?
The price you pay for a basic policy will depend, in part, on the value of your personal belongings, which determines how much coverage you will need. Simply put, if you need to insure $50,000 worth of belongings, you will pay more for your policy than if you need to insure $30,000 worth of belongings.
A rider might be needed to cover more valuable items or in specific situations. For example, if you own a collection of valuable jewelry, antiques, or specialized electronics you may need to obtain a rider. A rider is simply a written amendment to an insurance policy that alters the terms or coverage of your policy.
SHOULD YOU INCREASE YOUR DEDUCTIBLE?
A deductible is the amount that the policy holder needs to pay before the renter’s insurance policy will reimburse for damages. A person with a $500 deductible pays the first $500 in damage and the insurance company pays the remainder within certain limits. In most cases, increasing your deductible will lower your premium. Take care not to increase your deductible beyond what you can afford.
REPLACEMENT COST VS. ACTUAL CASH VALUE
Estimate how much it would cost to replace everything you own based on current prices. This is important because often you can choose a policy that provides reimbursement of your personal belongings on a replacement cost basis, rather than reimbursing the depreciated value of the items.
Choosing to have items reimbursed at the replacement cost will be slightly more expensive than getting reimbursed based on the actual cash value (ACV). Both pay to replace with new property of the same type and quality, but the ACV includes a deduction for depreciation of the property.
HAZARDS IN YOUR AREA
Living in an area with a high crime rate or where natural disasters are likely to occur will probably result in an increased premium.
The basic policy can have some limitations which often include damage due to floods, earthquake, and some other natural hazards. Those living in a high risk area should consider additional coverage through a rider or a separate policy that specifically addresses these risks.
Considering all of these factors carefully you will be able to control costs and get the right coverage for your individual needs.