Renters Insurance Terms to Know

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    Part of the allure of renting is not being married to your space. You may not be able to put your footprint on it with paint and upgrades, but you can pick up and move when the next best thing shows up. But the parts that make a place home — your belongings — can follow you wherever you go. That’s why it’s important to answer the question, “What is renters insurance?” It can be a powerful tool to financially protect your personal items in a variety of situations. Reviewing renters insurance definitions can also help you understand what your policy covers.

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      Renters insurance definition

      Proof of renters insurance is typically required when you sign a lease on a new apartment or rental home. Your landlord has insurance to cover the property and structure, but your renters insurance covers your personal property if certain types of loss or damage occur. You can file a claim with your insurance provider. While you typically have a deductible that’s your responsibility, the insurance policy will pay out the value — up to your policy limit — above that for eligible claims. Take an inventory of your items to determine how much coverage you actually need.

      [Read: How Much is Renter’s Insurance?]

      Terms to know

      Renters insurance coverage definitions

      Personal possessions: This term refers to anything in your rental property that isn’t part of the structure, but actually belongs to you. Think furniture, linens, electronics, clothing, jewelry, appliances and kitchenware. Creating an inventory list with photos or videos is a smart way to track your possessions.

      Liability protection: You’re covered in case someone sues you for an injury or property damage caused on your property. It can cover both legal fees and settlement costs. Coverage amounts should usually be equal to your personal assets, since that is what plaintiffs typically target during a lawsuit.

      Additional living expenses: This includes coverage for your living expenses when you’re unable to stay at your home or rental property because of qualifying damage. It may also reimburse you for meals, since you may not be able to cook in a hotel. Coverage amounts typically equal 20% of your insurance coverage for the property.

      Scheduled items: These are expensive personal possessions that may not be covered by a standard renters insurance policy. You can get supplemental insurance for scheduled items, which could include jewelry or electronics. Insurers may require a receipt or appraisal to insure the full value of scheduled items. You may also qualify for additional coverage when you purchase a supplemental policy This means you could be reimbursed for loss or damage beyond what a standard renters insurance policy would cover.

      Renters insurance reimbursements definitions

      Actual cash value: This refers to one method an insurer may use to calculate reimbursement for damaged personal possessions. Rather than reimbursing you for the amount it would cost to replace the item in today’s market, the insurer could instead give you the amount of its fair market value. Age is taken into account, so you may not be able to replace your electronics, for example, with brand new ones based on their current value.

      Appraisal: An appraisal is an evaluation of personal possessions by a professional appraiser. This process helps the insurance company calculate the replacement value of your belongings. An appraisal can also be used to determine the amount of damage incurred to a building.

      Home inventory: This is a list of all of your personal belongings within your home that you would want to be covered in the event you need to make an insurance claim. You can take a home inventory with a manual list using a pen and paper or take photos or videos of your home.

      Depreciation: Depreciation occurs when your personal property loses value over time. Things may become worth less because of age and condition.

      Replacement cost coverage: Replacement cost coverage allows you to get today’s market value for damaged property; in other words, how much it will cost you to replace it, not how much you would receive if you sold your old belongings today. This is typically considered a more competitive component of an insurance policy compared to actual cash value.

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      Renters insurance policy terms to know

      Premium: An insurance premium is the amount you agreed to pay to be covered by a policy. The better coverage you have, the higher your premium will be. Premiums may be charged monthly, quarterly, or annually.

      Deductible: Every insurance policy comes with a deductible, which is the amount you must cover before your insurer pays out on a claim. In other words, you only get reimbursed for damages incurred above your deductible. If your apartment gets vandalized and there’s $1,000 worth of damage, but you have a $500 deductible, your insurer would only pay out $500.

      Declarations page: Although it can be longer than a page, an insurance declarations page lists all of your policy details. It includes your coverage limits, premium amount, deductibles, effective date, and information on how to file a claim.

      Policy: Your insurance policy is another term for your contract with an insurer. Your policy outlines the agreement you reach for the amount of coverage you receive for the premium you agree to pay. The policy lets you know what your insurance covers, just as importantly, what it doesn’t cover.

      What does renters insurance cover?

      Renters insurance covers you for damage done to your own property caused by certain events. For instance, most policies cover smoke, fire, theft and vandalism, lightning, windstorms, and some water damage. So if the stove in the apartment below you catches on fire and your apartment is damaged by smoke or flames, your policy will likely cover you to help you replace your belongings that were destroyed or ruined.

      Most policies also include renters liability insurance. If someone is injured while at your property and attempts to sue you, your insurance policy should have some type of coverage that either pays for your court costs. Sometimes you may also have no-fault medical coverage, which would allow you to file a claim for your insurer to pay for medical costs as a result of injury on your property.

      Finally, your policy will also likely cover additional living expenses (ALE). If your rental unit is damaged so badly that you can’t live in it during the repairs, ALE coverage pays for your lodging expenses until you can move back in.

      What does renters insurance not cover?

      Read your renters insurance policy carefully to also find out what is not covered. Most standard policies do not cover damage caused by floods or earthquakes. If you live in an area prone to either of these disasters, you may want to get an additional policy to protect your belongings.

      Also explore your options for coverage limits. Regardless of what type of items you have in your home, your reimbursement will only go as high as your policy allows. Consider extra coverage for high-value items, like an expensive stereo system or a designer shoe collection. Ask your insurer if you need an appraiser to confirm the value and put it in on record.

      [Read: Is Renters Insurance Worth It?]

      Find the Best Renters Insurance

      Save money on renters insurance with our simple comparison tool.

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        Lauren Ward

        Contributing Writer

        Lauren Ward is a personal finance writer living in Virginia’s Blue Ridge Mountains with her husband and three children. In her spare time she enjoys board games and gardening.

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        • Nashalie Addarich
          Nashalie Addarich
          Insurance Editor

          Nasha Addarich is an editor at The Simple Dollar and a former attorney who specializes in home insurance, auto insurance, life insurance, and savings. She is a former contributing editor to