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Renters insurance: the basics

What you need to know about renters insurance

As first time renters, college students have many variables to keep in mind: where to live, how much money to spend and who to live with. All of these questions are important to ask, but there is one question students rarely ask: should I get renters insurance?

Chances are that you’ve never even heard of renters insurance. Unlike home insurance, renters insurance does not cover your actual apartment but rather your personal possessions inside your apartment. Upon signing a lease, you will notice that your landlord has insurance on the actual structural building. The property owner may have even had you pay a security deposit to ensure that he/she do not have to pay for damages on the building. What isn’t insured is your personal property in the event of a fire, break-in or apartment accident. That is why you need renters insurance.

“If the tenant suffers an injury or loss because of the landlord, then it’s on the landlord to pay. But if it wasn’t the landlord’s fault, they are not liable,” said Esther Patt, the Coordinator of the Tenant Union at University of Illinois at Urbana-Champaign. “We definitely encourage our students to get renters insurance. Promoting the idea is something we push a lot with the students here.”

You pay a small fee every month and in the event that your items are destroyed in an accident or stolen from your apartment, you have to pay a deductible fee and receive money to replace the items that were lost or damaged. For example, with State Farm, if your property value is from $10,000 to $20,000, the monthly price estimate is $8 to $21. Depending on what plan you choose to go with, your deductible may be a low or high fee. If your stuff is worth much less, the fee will be much lower.

Not having renters insurance forces you to pick up the cost of your damaged or stolen goods. As Money Alert reports, renters insurance provides you with peace of mind that your items are safe and protected. “There was a case here where plumbers had accidentally set the insulation on fire. The entire building was lost and what students suffered most was water damage to their possessions. Not one student had renters insurance,” said Patt. That means that each of the students had to replace their possessions on their own dime.

Before signing up with an insurance company for renters insurance, there are important questions that you need to answer. First you should think about how much coverage you actually need. If you have only a few items that would be expensive to replace, you may want to go with a smaller, cheaper plan. If your apartment is full of valuable items, then a larger plan may be for you.

You also need to decide if you want to go with an Actual Cash Value (ACV) plan or a Replacement Cost plan. With an ACV plan, you will receive the amount of money your item was worth when it was stolen or destroyed. For example, if you had a three-year-old guitar, you would receive payment for what you would receive if you sold it after three years of use. You would not receive payment equal to what your guitar was worth when you first purchased it. On the contrary, a Replacement Cost plan gives you a payment that covers the amount of money you would actually need to spend on re-purchasing the item. According to Patt, the Replacement Cost plans are the best ones,  “I hear some students say they only have to pay $69 a year. But they probably have the cash-value plan and that plan is crummy.”

In addition to covering the cost of your personal belongings, renters insurance covers costs that would otherwise be covered by you if for some reason your apartment becomes unlivable. Say, for instance, your ceiling falls in due to water build-up on the roof. If you do not have renters insurance, you may have to pay for other living arrangements until your apartment ceiling is fixed. With some renters insurance plans, the cost of living in a hotel while your apartment gets fixed may be covered.

“A lot of students hear the word insurance and automatically think of car insurance. They think it’s expensive, but when they find out it could be only $130 a year they start to think, I could afford that!” Patt added.

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