If you don't own a home, do you need home insurance? There are many different types of home insurance -- that protect renters from liability and loss. Renters need coverage options even if they don't own the apartment or building that they live in. For those who live in multi-unit buildings, there are special considerations and exceptions for needed insurance. Even with the best coverage, a catastrophic accident can sometimes go over coverage limits; this is where personal liability comes into play.
Renter's Insurance
Renters need a special type of policy aptly named renter's insurance. This type of coverage protects the contents of a rented property. The landlord's policy only covers the actual building and structure and will not reimburse any loss to a tenant's personal belongings regardless of who is actually liable.
Renter's policies are known in technical lingo as HO-4 and they cover losses due to such accidents as fire, theft, smoke, vandalism, and electrical surge damage. Notable exceptions include water and flood damage as well as earthquakes or wind damage from a hurricane. For renter's living in an area where those disasters are possible, additional coverage or a rider to the renter's policy is required.
There are two types of coverage for personal belongings; one policy will cover the actual value of goods, whereas the second will cover the replacement cost for lost items. For example, a five year old TV is no longer worth the sticker price when it was new, but a replacement policy would cover the purchase of a comparable new TV.
Renter's home insurance will also include personal liability, but only to a certain percentage of the face value of the policy, so it is often best to purchase supplemental personal liability coverage.
Personal Liability Coverage
This policy is known as umbrella coverage since it offers protection in areas that are typically excluded or limited in other policies. Personal liability comes into play for many situations. For example, if someone suffers an accident on your property, is seriously injured as a result of a car accident, or suffers loss as a result of a fire that started in your apartment, you can be held liable.
Renter's and auto coverage both have provisions for personal liability, but they come with a hard cap. Any legal fees, court decisions, lawsuits, and legal awards will count against that liability term and can often times exceed the limit. Personal liability coverage extends protection to yourself and your assets.
Liability can come into play if a teenaged dependant causes a car accident. Any guests in a home or on owned property can be the source of a lawsuit if the unthinkable happens. Pools, pets, and sports can all turn an innocent situation into a costly accident.
Overall, renters need to protect themselves just as much as a homeowner. By purchasing the renter's version of home insurance along with personal liability coverage, renters will enjoy the same peace of mind.
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