Luckily, renters insurance is relatively easy to understand compared to other policies. That’s because a renters policy (also called an HO-6) is limited in its coverage. Unlike a homeowners policy which insures the structure of a building, or an auto policy that protects against many different types of damage to your car, a renters policy covers a more limited range of events and property. Below you’ll find the top terms you need to understand your policy, whether you’re reviewing your current plan or shopping for new options.
Personal Property: This coverage insures items inside your home, such as furniture, electronics, and clothing, and provides you with the cost of replacing your belongings if they’re stolen or damaged.
Loss of Use/Additional living expenses: If you cannot live in your home due to a covered loss, such as a fire, this coverage will help pay for additional living expenses like temporary housing, hotel stays, pet boarding, and additional food expenses. If you live in a high-cost-of-living area, this coverage can be beneficial for ensuring a temporary loss of housing doesn’t seriously affect your income or savings.
Personal Liability: If someone is injured on your property or by you or a pet (even outside your home) and the other party decides to sue you to pay for medical costs or loss of income, personal liability coverage pays for legal fees and any settlements against you. Often overlooked, it’s essential to make sure you’re adjusting this coverage to help protect your assets in case of a lawsuit.
Deductibles: The amount you’ll need to pay before your coverage begins. For example, a $1,000 deductible means that a claim of $5,000 would give you an insurance payment of $4,000. Raising your deductible can usually save you on premium costs if you can afford to pay for smaller events out-of-pocket.
Endorsements or riders: These are additional options you can add to your policy that will provide extra coverage in certain situations. Sinkhole or earthquake endorsements, for example, increase the events you’re protected from, as your insurance does not usually cover these specific natural disasters. Other endorsements extend how much your insurance covers particular items, such as electronic equipment or jewelry. Most policies have a specific limit for how much they’ll pay for these categories (usually between $1,000-$2,000); therefore, they allow you to individually raise those limits if you want your insurance to pay out for a higher amount of that item.
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