insurance

5 knocks on renters insurance -- all bogus

1. Always buy replacement value 

As with any legal contract, you need to read the fine print, Portman explains, but one of the critical clauses you should be looking for when it comes to renters insurance is the issue of replacement cost. Typically, buyers will have a choice between purchasing a policy which offers "replacement cost" or one that uses "actual cash value." While terms and phrases like those are frequently used in everyday speech, when it comes to insurance law they have very specific -- and very different -- meanings. Buyers who hold actual cash value policies won't get very much money in the event of a loss because the adjuster will look at what it costs to replace the item and then subtract depreciation. That method can quickly leave the policy holder with pennies on the dollar, and that's why Moree says he almost universally recommends replacement cost policies, which will give the renter money to go out and replace the item at today's prices. While there is a price difference in policies that offer replacement cost and actual cash value, the difference is negligible according to Moree, who says the point of renters insurance is to make you whole, which isn't something that can be accomplished with actual cash value.

2. Beware of exclusions 

As with any insurance policy, there are going to be exclusions -- events that keep coverage from being triggered even though there was clearly a loss. Typically, those exclusions are the same as those that affect homeowners, which means that policies won't cover things like floods or earthquakes. Those events require separate coverage.

3. Watch your deductible 

One of the factors that will affect your monthly premium will be the deductible you opt for, with a higher deductible resulting in lower payments. But a renter shouldn't pick a deductible based on saving a few dollars in monthly premiums, says Lyttle. Instead, the focus needs to be on what the renter can afford to pay out of pocket should they lose everything. Typically, a deductible can be as low as $250, but it can be as much as 5 percent of the total policy. Lyttle advises that the buyer select their deductible based on the monthly balances they typically carry in their checking account.
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