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Understanding the Terms of Your Renters Insurance Policy

By Compuquotes Team on March 27th, 2008
Renters Insurance

A large number of people who rent a house, apartment, or condominium fail to give renters insurance a second thought. It is a greatly believed misconception that since the building is owned by the landlord, he is responsible for paying the insurance. That is true to an extent. The insurance the landlord will be required to carry, however, insures the building itself. This type of policy will not cover your belongings. The following paragraphs will discuss understanding the basic terms of most renters insurance policies.

Renters insurance, also referred to as HO-4, is a special type of insurance policy. Instead of covering damage caused to the building itself, this renters insurance will cover your personal possessions in the event they are ruined because of one of many reasons. Most basic renters insurance policies cover losses resulting from one or more of 17 different named perils. These perils most generally include, but are not limited to:

Explosion damage
Wind or hail damage
Damage caused by vehicles
Damage caused by aircraft
Fire or lighting damage
Smoke damage
Damage from a riot or civil disturbance
Theft
Vandalism
Damage from falling objects
Damage from the weight of ice, snow, or sleet
Damage from a power surge

Individual renters insurance policies can vary greatly, so it is extremely important to know which perils are named in the policy you choose.

As important as it is to know which perils are named in your renters insurance, it is important to totally understand what is not covered. In most cases, any damage caused by the enforcement of building code laws are not covered under basic renters insurance policies. Other perils not covered can include:

Flood damage
Earthquake damage
Damaged caused by power failure
War damage

Understanding these factors before you chose your renters insurance policy will help you to make better informed decisions regarding your insurance. For instance, if you live in an area extremely prone to flooding, you may need to purchase a separate policy to protect your belongings.

Another aspect of your renters insurance policy you should understand fully is replacement cost versus actual cash value cost. It is very important, when considering any renters insurance policy, to understand which type of coverage being offered. A renters insurance policy offering actual cash value will typically reimburse the insured only the monetary value of the damaged property at the time they were damaged. However, a policy offering replacement costs will reimburse the insured the monetary amount it will cost to actually replace their property.

Finally, you should understand that limitations will be put on the total amount of money the insurance company will be willing to pay out. These limitations usually begin around $15,000 and go much higher. The higher the total amount of coverage, the higher your renters insurance premiums will be.

It is so important to understand the terms of a renters insurance policy before you purchase it. So many different factors should be taken into consideration. Without having some basic knowledge of what to expect, you may end up purchasing a renters insurance policy which doesn't match your insurance needs.

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