If you live in a condominium or rent an apartment, your landlord's or condo association's insurance should cover damages to the building -- meaning the structure itself. But such a policy only covers their building and not your belongings. That's why you should have renter's insurance. Regardless of whether you live in a house, condo or apartment, replacing your stuff or defending yourself against a liability lawsuit can take a big toll on your bank account.
Basic home insurance policies are generally known by their number. Both the HO-4 (for renters) and HO-6 (for condo owners) policies cover losses to your personal property from 17 types of peril:
Fire or lightning
Windstorm or hail
Riot or civil commotion
Vandalism or malicious mischief
Damage by glass or safety-glazing material that is part of a building
Weight of ice, snow, or sleet
Water-related damage from home utilities
Electrical surge damage
That just about covers it, doesn't it? You may notice, however, that floods and earthquakes aren't on the list. If you live in an area prone to those, you'll need to buy a separate policy or a rider on your renter's policy. In some coastal regions, where hurricanes can cause mass destruction, you may also need to buy a separate rider to cover you from windstorm damage.
It is necessary to understand that renter's insurance policy may be written as "actual cash value" (ACV) or "replacement cost coverage." As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $300, it would be worth significantly less today. While you'd still need to shell out about $300 for a new one, your insurance company will pay only for what the old one was worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay for what it actually costs to replace the items you lost. Usually, you'll have to pay out of your own pocket to replace your damaged items and submit the receipts to the claims adjuster for reimbursement. Even so, you'll still get a bigger chunk of change back than if you bought ACV coverage.
When it comes to ACV and replacement cost coverage be sure to discuss these options with your insurance agent.
Make sure you also let your agent know about any particularly valuable items you have. Things like jewelry, antiques and electronics may be covered up to a certain amount, but if you have some items that are unusually expensive, like a diamond ring, you'll probably need to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the loss.