The Case for Renter's Insurance

Unsure whether you need renter's insurance? Some renters mistakenly believe their landlord's or a condo association's insurance covers their property as well. But such policies insure only against damages to the building and its structure, not to items in individual units.

Don't take the chance of losing your belongings in a theft, flood or fire. Renter's insurance protects you from losing your personal property -- and from liability lawsuits.

Here are three things to consider when shopping for renter's insurance:

• A basic home insurance policy for renters, known as an HO-4, covers losses to your household inventory from 17 types of perils. Among those are fire, civil riot, aircraft and vehicles, vandalism, theft, falling objects, flooding from home utilities, and electrical surge damage. Natural disasters are not included, so if you live in an area prone to earthquakes or mudslides, consider adding a separate rider.

• Know whether the insurance company will reimburse you in "actual cash value" (ACV) or "replacement cost coverage" should something happen to your home. As the name suggests, ACV coverage will pay you only what your property's value was at the time it was damaged. If you bought a laptop two years ago for $500, it's worth significantly less today, and you would get a fraction of what you paid for it. Replacement cost coverage will pay you what the same laptop actually costs now. The only drawback is that you have to pay out of pocket to replace the missing or damaged item, then send the receipt to your company for reimbursement. Note: Replacement cost coverage has higher premiums, but you get more in return if you ever need to file a claim.

• Make sure you declare any items of particular value before you buy the policy, or you won't be able to recover the loss. Expensive jewelry, antiques and electronics may be covered up to a limit, but very expensive items, such as a diamond ring or an irreplaceable original painting, often require a separate policy.

Renter's insurance has the additional benefit of liability protection. If someone slips and falls in your apartment and decides to sue you, you would be covered for what the victim wins in court up to your policy's limit, along with legal expenses.

What will all this cost you? Expect to pay between $150 and $300 a year if you don't need extra coverage for jewelry or computers, says Insure.com, an insurance comparison and shopping Web site. That would get you up to $35,000 worth of coverage for your personal possessions, and $100,000 to $300,000 worth of liability protection.