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Understanding Renters Insurance

Compared to homeownership, renting your home can be relatively carefree—until your precious laptop is stolen or a broken pipe floods your apartment. Purchasing renters insurance can provide peace of mind by safeguarding your belongings and finances.

How Does Renters Insurance Work?

Renters insurance typically covers your personal property in case of theft or damage, protects against legal liability, and helps pay the cost of living elsewhere due to a covered claim. Here’s what you need to know about renters insurance.

1. Personal Property Coverage

Renters insurance pays to repair or replace your belongings if they’re stolen, damaged, or destroyed due to a covered risk. Generally, personal property coverage protects against damage or loss due to:

• Fire or smoke
• Lightning
• Explosions
• Certain types of water damage
• Windstorms
• Theft
• Vandalism

To decide how much personal property insurance you need, conduct a home inventory of your belongings and estimate how much replacing everything would cost. Then choose between replacement cost coverage and actual cash value coverage.

Replacement Cost Coverage

Pays to replace possessions with comparable new items. Premiums tend to be more expensive, but payout amounts are higher and offer more protection in the event of theft or damage.

Actual Cash Value (ACV) Coverage

Pays you the current value of your possessions. Premiums tend to be more affordable, but payouts may be lower and may not cover your financial losses in the event of theft or damage.

2. Personal Liability

The personal liability component of renters insurance safeguards against legal liability if a visitor to your rental is injured accidentally. For example, if a party guest falls down the stairs and sues you for injuries, renters insurance helps pay your legal costs. Personal liability insurance also covers damage your family members cause to another person’s property.

3. Medical Payments

As part of personal liability coverage, renters insurance covers medical payments for visitors accidentally injured in your rental home. Medical payments insurance doesn’t cover injuries to you or your family; your health insurance covers those.

4. Additional Living Expenses

When your rental unit is damaged by a covered risk and the insurer decides it’s temporarily unlivable, additional living expenses (ALE) insurance covers additional costs of living elsewhere during repairs. In addition to temporary housing, ALE may cover extra costs of eating out, boarding pets, or commuting to work.

What Is Typically Not Covered by Renters Insurance?

Unlike homeowners insurance, renters insurance doesn’t cover your home’s physical structure; that’s your landlord’s responsibility. Other losses that renters insurance typically doesn’t cover include:

• Bedbugs and other infestations
• Moving costs
• Car theft
• Floods
• Earthquakes
• Business equipment

How to File a Renters Insurance Claim

To file a renters insurance claim, follow these steps:

1. Review your policy details.
2. Report the damage or loss to your landlord.
3. Contact the police if theft or vandalism was involved.
4. Take photos or videos of the damage.
5. Contact your insurance company.
6. Keep receipts for living expenses and temporary repairs.

The Bottom Line

Protecting yourself and your belongings with renters insurance is a small investment that can make a big difference if you ever have a claim. In many states, insurers check your credit-based insurance score when setting rates for renters insurance. Positive financial habits like paying bills on time and minimizing credit usage could improve your scores, which may help reduce your renters insurance costs.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage needs!

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