Renter’s Insurance is arguably the most misunderstood of all types of insurance policies. That would explain why only 43 percent of the renting population has renter’s insurance, versus the 96 percent of homeowners who have homeowner’s insurance. Below are some of the myths and misconceptions about renter’s insurance.

1. My landlord has insurance, so I don’t need my own.

While it is likely that a landlord has insured his or her building, that policy only covers losses that the landlord incurs during a situation like a fire or other property damage. Furthermore, if the landlord’s losses were due to negligence of a tenant, that tenant would likely be responsible for payment of the damages. Renter’s insurance offers coverage for property loss due to fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage from plumbing. It also provides for the temporary lodging you would need after such an event.

2. I don’t have that much stuff anyway.

Is $20,000 a lot of stuff? A recent survey found that approximately 45 percent of renters have at least $20,000 or more in clothing, furniture, electronics and other assets. Even if you do not believe you have that much, are you really prepared to re-purchase every item in your home? How long could you go without a bed, computer and clothes?

3. Renter’s insurance rates are too expensive for me.

At an average of $260 per year, or approximately $22 per month, renter’s insurance is possibly the most affordable insurance you will ever encounter. Renter’s insurance rates do vary based on the amount of coverage you desire and the deductible you choose. An insurance agent will be glad to help you find the most affordable rate for your needs.

4. That sounds good, but renter’s insurance only covers what is in my apartment.

Nope! A renter’s insurance policy covers your items, whether they are in your home or car, or even while you are away on vacation. And that’s not all that may surprise you. Renter’s insurance also provides personal liability coverage, both medical and legal.

Personal liability coverage means you are covered for damage or legal bills, should you accidentally cause damage or should someone have an accident in your home. If your clumsy cousin trips over a chair and loses a tooth, you are covered. If you get a little aggressive with the lighter fluid and burn a hole in the patio, you are covered as well.

Don’t be one of the many renters who claims to know about renter’s insurance but hasn’t found the time to do anything about it. Life happens—sometimes it happens to you and sometimes you bring it about. Either way, wouldn’t it be nice to know that when unpleasant events strike, you have the coverage you need to get through it all?

Homeowners liability insurance is the portion of your homeowner’s policy covering damages or injury, to another party, that has been deemed your fault. Such coverage is a safeguard against financial disaster should someone file a claim against you or sue you in a court of law. For many, the standard $100,000 liability limit is sufficient but anyone with a more substantial net worth can easily purchase coverage for a larger premium.

Specifically, homeowners liability insurance provides coverage for three basic scenarios: personal liability, damage to the property of someone else, and medical expenses should a third party be injured on your account. A good example would be if a visitor fell trying to walk up your slippery porch steps. Perhaps they broke an expensive watch during the fall and also sprained a knee. Should this person choose to sue you for property damage and medical bills, then you will have the coverage you need thanks to homeowners liability insurance.

Another positive to having homeowners liability insurance is that it also covers accidents that occur outside the home, even past the boundaries of your property. If a piece of lawn furniture blows away in a wind storm and accidentally breaks a neighbor’s window, your policy will cover that. And if anyone is harmed during that incident, you have medical coverage as well.

One final bonus to owning homeowners liability insurance is the coverage it provides for living expenses. Should any damage come to your home and you are forced to take up temporary residence elsewhere, your liability coverage will help pay for the costs involved. While most people purchase homeowners liability insurance to be certain the cost of rebuilding a home is covered, you can also be secure knowing the expenses incurred during this difficult time will be reimbursed as well.

The benefits of homeowners liability insurance is not to be underestimated. It could save you financially should an accident or emergency occur. Be certain to take the time to determine the right policy limits for you and your family; don’t assume that the minimum coverage is enough. An agent will be happy to help you calculate your needs and find the coverage you need.

Homeowner’s insurance can seem like a confusing web of information and numbers. Words like deductible, liability, and insurance claims, and acronyms like ACV (actual claims value) make understanding a basic insurance policy feel like a lesson in foreign languages. And knowing how much coverage to purchase can feel like a risky guessing game. In truth, there are tools available and knowledgeable insurance agents willing to streamline the insurance coverage process and give you the certainty to choose the policy that works for you.

The first step is understanding the four basic types of homeowner’s insurance policies and deciding which one you prefer.

• Cash value policies provide payment to replace your home and possessions minus any depreciation up to the policy limit amount.

• Replacement cost policies pay the actual cost of rebuilding/repairing your home, along with the cost to replace your possessions up to the policy limit.

• Guaranteed replacement cost policies pay whatever it costs to rebuild your home as it was before the disaster, even if it exceeds the policy limit.

• Extended replacement cost policies pay a specified percentage over the policy limit to rebuild your home. Usual percentages range from 20 percent to 25 percent.

Maybe you are looking to purchase your first homeowner’s policy or perhaps you already have a policy, but are wondering if you need to make some adjustments. Well, before something happens and you have insurance claims to file, you should see if policy adjustments are in fact necessary. It is recommended that homeowners re-evaluate their coverage yearly to take inflation, depreciation, and asset accumulation into consideration. If inflation is a big concern for you, ask your insurance agent if he or she has inflation guard, an add-on to your policy that automatically adjusts the policy’s claim limits.

The biggest concern for homeowners looking into insurance is making certain they have adequate coverage. Unfortunately, many novice buyers simply accept the minimum premium only to have insurance claims rejected or partially paid because of a lack of coverage. People file insurance claims during times of duress, so that is not the time to discover your coverage is less than adequate. Here is an easy equation to help you determine the premium you need to cover the rebuilding of your home:

Local building costs per square foot x Total square footage of home = Cost to rebuild home

Next on the list of concerns for homeowners is the cost of their insurance policy. Policy prices vary from state to state and company to company, but local averages can still give you an idea of what to expect. Traditionally, Texas is the most expensive state, with $1,409 being the cost of an average premium. Idaho ranks the best place to purchase home insurance, with an average premium of only $500. Naturally, you can expect your costs to fall within that range, depending on the size of your home, assets, and any additional coverage you require.

No one wants to have to file insurance claims, but don’t you want continuous confidence that your claim will be paid in full? Taking the time to understand your insurance policy and re-visiting it regularly will not only make the insurance claims process go smoothly, but it will also leave you knowing that your home and family are well protected.

Your home is most likely the largest investment you will ever make, and homeowner’s insurance coverage enables you to protect that life-changing investment. When looking into a homeowner’s insurance policy, there are several policy types to research, along with many different factors to consider.

Types of Homeowner’s Insurance Policies

• Cash value policies provide payment to replace your home and possessions minus any depreciation up to the policy limit amount.

• Replacement cost policies pay the actual cost of rebuilding/repairing your home along with the cost to replace your possessions up to the policy limit.

• Guaranteed replacement cost policies pay whatever it costs to rebuild your home as it was before the disaster even if it exceeds the policy limit.

• Extended replacement cost policies pay a specified percentage over the policy limit to rebuild your home. Usual percentages range from 20 percent to 25 percent.

Once you’ve decided on the homeowner’s insurance coverage that suits you best, it is important to also research the specifics. Many first-time insurance buyers overestimate what is covered by their homeowner’s insurance policy or underestimate how much coverage they actually need. Here are some guidelines to keep in mind as you compare homeowner’s insurance coverage options.

• Most standard home insurance policies cover property damage caused by the following scenarios:
  • Theft
  • Fire and lightning
  • Smoke
  • Frozen pipes
  • Ice and snow
  • Human error or pets

• A typical homeowner’s insurance policy will also include coverage for the living expenses you may incur if damage to your home causes you take up temporary residence elsewhere.

• Home damage from an act of war, nuclear accident, flood, earthquake, or terrorism is not included in most home insurance policies.

• Most homeowner’s insurance coverage limits certain high-priced or hard-to-replace items like jewelry. An appraisal and an addendum or additional policy will likely be required if you wish to include these in your policy.

• Know what it will cost to re-build your home. Most homeowner’s insurance coverage begins at $100,000; if that is not enough, look into the next level of coverage.

As with any important purchase, know your options and shop around. The lowest price of homeowner’s insurance coverage isn’t always the best deal—be certain you compare the line items of different policies to truly understand their value. One final safety net is contacting your state’s Department of Insurance to ascertain that the company you choose is a reputable one.