Choosing the right renters insurance policy doesn't end with understanding the coverages offered by standard policies. You should also be aware of the different types of compensation you can receive for items lost or damaged that are covered under your renters insurance policy.
One of the main components of a renters insurance policy is liability coverage. Liability helps in the event someone suffers bodily injury or property damage on the rented property. Compensation for liability claims typically occur as the expenses appear. For example, say someone visits your apartment, falls and breaks their ankle. Once they receive the immediate medical attention they need, you should then file a claim with your renters insurance provider. Once an underwriter from the insurance provider investigates and approves the claim, compensation will be given for the related medical expenses that follow. The same applies for the side of liability insurance that covers your legal fees should the victim decide to sue.
Personal Belongings Compensation
Personal belongings coverage provides compensation if your personal items are lost or damaged due to fire, lightning, smoke, wind, hail, theft or vandalism.
There are two types of policies when it comes to personal belongings coverage: actual cash value and replacement cost value.
Actual cash value (ACV) policies provide compensation for items lost or damaged while accounting for depreciation. This means that as the value of your items go down over time, so does the amount of value you can receive. For example, say your television is worth $2,000 when you purchase it. By the time it's destroyed by a fire in your apartment, the television is only worth $500. You'll likely receive compensation closer to $500. This type of policy is generally cheaper, but it also makes it harder to replace your items in full after a disaster.
Replacement cost value (RCV) policies provide compensation for items lost or damaged and does not consider depreciation. Even if the value of your items goes down, the amount of compensation you are supposed to receive does not. Instead, you will receive compensation for an item of equal or similar value as the original item you lost. This type of policy is usually more expensive, but it's more likely to help you replace your belongings.
Additional Living Expenses
Additional living expenses provide monetary assistance for temporarily moving while the apartment is being repaired or rebuilt after a disaster. This helps with costs such as food and hotel stays. In general, renters insurance policies have a capped amount that they will provide for additional living expenses. Be sure to check your policy to know where your additional living expenses max out. It's usually a percentage, such as 10 to 20 percent of the coverage on the policy.
Which Policy Do You Need?
Every renter is different, as are their renters insurance needs. Carefully consider the replacement cost value of your belongings. Many renters believe they don't have anything to insure, but this isn't true. In fact, renters, on average, own about $35,000 in belongings. With the wrong renters insurance policy, you could be left with no way to replace your items after an accident or disaster. Be sure to calculate the replacement cost value of your personal belongings. This way, you can know how much you should purchase in insurance and what type of policy you should purchase. Some policies will save you money while simultaneously leaving you vulnerable to further loss. If you're unsure about what type of renters insurance policy you need, be sure to speak with a BluCanopy agent.
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