How Much Renter’s Insurance Should I Buy?

The amount of renter’s insurance that you should purchase depends on your personal situation, net worth, and tolerance for risk.

A basic policy gives you coverage in the areas that are noted in the previous article:

  • contents on and off premises
  • additional living expenses
  • personal liability
  • medical payments
  • property of others

The amount of maximum coverage you personally purchase could be anywhere from $10,000 to however much you determine is the value of your personal property. It could also be more if your net worth is high and you prefer to carry additional liability insurance, although higher liability may be covered under a separate policy. Discuss this with your agent.

To help you determine how much rental insurance you should purchase, you should add up the value of your personal property based on what it would cost you to replace it all if there is a total loss. Take an hour or so and make a comprehensive list of everything you own in the property. You can even search for a home inventory list on the Internet, as there are plenty of them available for free. The Texas Department of Insurance has a good one here: http://www.tdi.texas.gov/pubs/consumer/cb086.pdf

Your list would include items such as:

  • Clothing and Soft Goods – suits, shirts, slacks, ties, shoes, jeans, athletic clothing, towels, linens, comforters, carpets, rugs, and everything else you have and can document
  • Electronics – computers, video games, stereos, clocks, DVD players, iPods, Kindle, iPad, cell phone, TVs, and all the add-on devices like backup storage, software, game controllers, coffee makers, toaster ovens, microwave ovens, washer/dryer, refrigerator, air filters, etc.
  • Furniture and Kitchen Items – couches, chairs, beds, dressers, artwork, plants, patio items, desks, lamps, and any other furniture, silverware, pots and pans, baking and cooking equipment, BBQ grills
  • Other – bicycles, athletic equipment, jewelry, coins, collectibles, books, wall shelves, lamps, ironing board, luggage
  • Another other items you own

By taking the time to list and categorize your belongings, you will be able to better ascertain the values and properly insure your belongings.

The next task is to take the list you have prepared and assign values to each item on the list. You should assign a value that would cover the cost to replace that item with a new one. You can use the Internet, or go to stores to help you determine the monetary value of your items if you are unsure about what they are worth.

You will likely be surprised at the total value of your belongings when you start adding up everything to determine the maximum amount that you need to have insured. It's a good idea to over-insure a little too, because you will likely have forgotten some things on your list, and that extra coverage will help you purchase those items you need to continue should you suffer a total loss. After all, a little extra insurance typically only raises your premiums a little, while making certain that you will be able to maintain your current standard of living even if disaster strikes.

With the list of your items and total value, you can discuss with your agent how much the maximum policy coverage should be for your personal situation. Your agent will take your requested amount and prepare a policy and premium fee for you. Once your pay the premium, you are covered for losses up to the maximum policy amount for the length of your insurance term. Typically, this is one year.

Make sure you save the list of your personal property in a separate location because you do not want to lose the list if there is a loss at your house. It's a good idea to email the list to yourself too so that it can be stored and accessed on any computer with Internet access. As an extra precaution, you could also take digital photos and/or videotape your belongings. This is especially important with more valuable items so that you can prove to an insurance adjuster that you owned the items and validate the quality of them.

Remember too that the policy will cover you for liability. If you have significant financial net worth, or special valuables like artwork, you need to discuss those with your insurance professional to see what the appropriate amount of insurance coverage would be for you.

By taking the time to properly document and assign values to your personal assets, you can be sure to obtain the proper insurance coverage.