Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, or insurance carrier. A person or entity who buys insurance is known as an insured or policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and must involve something in which the insured has an insurable interest established by ownership, possession, or preexisting relationship.
The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.
You should have enough renters insurance coverage to replace lost or damaged items with new ones. On average, renters have approximately $20,000 worth of belongings, but it is important to take inventory of everything you own to calculate exactly how much coverage you need. Extra insurance coverage is recommended for valuables such as art and jewelry.
Landlords are responsible for insuring rented properties against damages caused by fire and other disasters. Your personal property as an individual renter is not generally covered by the property owner's insurance. While you aren't legally obligated to buy renters insurance, it is strongly encouraged you do to protect yourself from the unexpected.
Take Inventory and Document Your Possessions
It is not enough to simply buy a renters insurance policy. If you need to file an insurance claim, you must be able to prove what you owned to make sure you will get enough money to replace your possessions. Document everything of value you own with a camera, walking through every room taking detailed photos of individual items. Go through closets and any storage space where you keep your valuables.
Once you have visual evidence of your belongings, make an itemized list and update your inventory periodically, especially when you make big purchases. Many insurance companies offer online tools to help with the inventory process.
Research Prices of Replacement Items
It is not enough to simply take pictures and make a list of your possessions. Do research to determine exactly how much it would cost to replace them. Shop around, keep a running grand total, and make sure to add a cushion for inflation.
For expensive items, it may not matter if you know the replacement value. Most renters insurance policies have limits that require special riders to replace items such as jewelry or fine art.
