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Why buy renters insurance?

Renters insurance is one of the most important and affordable kinds of insurance. It's also one of the least used.

A poll by the Princeton Survey Research Associates found that even though most millennials rent their homes, less than one in three have renters insurance. That’s a shame, given how much protection renters insurance provides for about $10 to 12 a month, typically. Landlords cover the building, but protecting the stuff inside is up to the renter. And when you consider that the average renter’s possessions are worth over $20,000, renters insurance starts to make a whole lot of sense.

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Renters insurance has four main components that provide different types of coverage: C, D, E, and F. (A and B are in homeowners insurance and cover the building itself, which isn’t needed with renters insurance.) Here’s the breakdown:

Coverage C: Personal property

This is probably what comes to mind when you think of renters insurance. Coverage C protects your personal property, like furniture, clothes, electronics, jewelry, and more from covered perils, like fire, theft, hurricanes, and tornados. Quilt’s policies include replacement cost value, rather than actual cash value, which means if something happens, you’ll get the full amount it takes to replace your stuff. That’s a big deal when it comes to items that depreciate quickly, like electronics and furniture.

There’s another benefit of renters policies most people don’t know:  your stuff doesn’t have to be at home to be insured. If your laptop is stolen from the coffee shop, or someone breaks into your car and takes your purse, renters insurance will cover it.

Coverage D: Living expenses

If your apartment is damaged by a covered peril, Coverage D provides living expenses for the time you can’t stay in your home, including hotel and food costs. Just make sure you save your receipts.

Coverage E: Personal liability

Coverage E is an extremely important, but little known, part of renters insurance. If someone gets injured at your home or their property is damaged because of your negligence, Coverage E protects you from lawsuits. For example, if someone breaks an ankle tripping over a toy in your apartment, this will help pay for the cost of legal defense and the judgments against you if you lose the case.

Coverage F: Medical payments

Related to Coverage E, this pays for medical care if someone gets hurt at your place. (It won’t cover medical costs for you or anyone who lives with you, since that’s what health insurance is for.) If you’re sued, Coverages E and F could mean the difference between bankruptcy and paying nothing out of pocket. That makes these two components almost as important as insurance for your stuff.

What you're protected against

In the insurance world, a peril is anything that causes a loss. Hurricanes, fire, and theft would be three common examples. Depending on your insurance company and the policy you choose, some perils will be covered, while others won’t. That’s why it’s extremely important to look at more than just the cost when buying a policy. The lowest price doesn’t always mean you’re getting the best value.
Quilt’s standard renters insurance policy includes coverage for the following perils:

  • Fire, smoke, and lightning
  • Windstorm and hail (including hurricanes and tornados)
  • Theft, vandalism, and riots
  • Explosions
  • Freezing
  • Aircraft and vehicles
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge of water (like burst pipes & overflowing bathtubs)
  • Sudden and accidental electrical current discharge

Damage caused by the perils listed above is covered by Quilt’s standard renters insurance policy, up to the policy limit you choose. That covers the vast majority of situations you’re likely to face, but there are some exclusions you should know about. The most common are earth movement, including landslides, earthquakes, and sinkholes, and damage caused floods, tidal waves, and water or sewage backup. Neglect, war, intentional loss, and governmental action are also excluded. (You can check out our policy documents for more detailed info.)

Riders

For perils that aren’t covered by the standard policy, coverage can be added or increased through add-ons called “riders.” As we mentioned above, earthquakes aren’t usually covered by renters insurance, which isn’t a big deal if you live in Florida. But for Californians, it’s one of the chief concerns when purchasing insurance. If that’s the case, you can add the earthquake rider to your policy.

Riders can also be used to extend coverage. Jewelry is covered by a standard policy, but if you have a ring or necklace that’s particularly expensive, for example, its entire value might not be covered under a standard policy. You could increase your policy limit across the board, but that would be expensive and unnecessary. It makes more sense to add a rider that fully insures the particular piece of jewelry.

Floods are another special case. When a flood happens, the damage is typically both catastrophic and widespread. Combine that with the tendency of only people who live in flood-prone areas to seek out flood insurance, and it makes insuring against floods a losing proposition for insurers. To counteract the problem, the government created the National Flood Insurance Program in 1968. It’s a federally-backed program that offers flood insurance to participating communities. Check out floodsmart.gov to learn more.

Deductibles and replacement costs

One important thing to note when shopping for a renters insurance policy is the deductible, which is the amount you’ll need to pay out of pocket before insurance kicks in. For example, if you have $3,000 in damage and your deductible is $1,000, you’d get a check for $2,000. The higher the deductible is, the less your policy will cost, but the more you’ll need to pay if something happens. At Quilt, our renters insurance policies come with a $500 deductible standard.

Another thing to know before purchasing a renters insurance policy is whether it provides replacement cost value (RCV) or actual cash value (ACV). RCV is a little more expensive, but worth it in almost every case. If your policy includes replacement cost value, you'll get the full amount it takes to replace the items you lost. But with actual cash value policies, you're only entitled to the replacement cost minus depreciation.

Let's say the couch you bought two years ago was lost in a fire, and replacing it with one of the same kind and quality would cost $1600. With an RCV policy, you'd get $1,600 (minus the deductible). But if you have an ACV policy, your insurer would deduct the two years of use you got out of the couch along with the deductible. You'll get something for it, but it won't be nearly enough to replace what you've lost.

At Quilt, we only offer renters insurance policies with replacement cost value, so if something happens, you'll be made whole.

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