How To Buy Renters Insurance

Renters, in reading the following, you will learn how to decide if Renters Insurance is for you, calculate the amount of liability coverage needed, asses the probability of property loss (while valuing your possessions), estimate a deductible, and put it all together to discover exactly what you should look for in purchasing renters insurance.

Repeat readers will observe a review in some material explained in a previous article: “Renters Insurance: Rip Off or Rewarding?” That reading is supplemented now with attention to deductibles and deeper liability assessment explained in this article. For more on how to value your possessions, reference the article mentioned above. Otherwise, let’s get started.

How Much Should I Pay: RentPost has developed a systematic way to learn how much an insurance policy is worth to you; from there, you may compare your own calculations to the quotes you receive to asses the quality of insurance offers.

Step 1.) Analyze your risk of liability damages

  • Those living on the second floor or higher have a higher propensity to be liable for property damage to neighbors, considering people are directly underneath. Waterbeds can ruin your life; if it pops, be ready to cover the damage of those living beneath you.
  • Do you have a dog? If so, renters insurance will provide protection in the event the animal releases its testosterone on your neighbors or visitors. Be especially cautious if there are small children living near by.
  • Those with frequent visitors are more likely to have a non-inhabitant incur some type of injury in the residence in question. Careful.. never know when a buddy will get litigious on your butt.

If you consider your home to be high risk, it’s an automatic trigger to start insurance shopping. If not, dig deeper and let’s analyze the value of your property and potential loss.

Step 2.) Asses the value of your total possessions, segregate the “steal-able,” high value possessions

  • Steal-able,” high value possessions are items likely and available to be stolen in the event of burglary: TV’s, DVD players, computers, jewelry, or even cash typically kept on hand amongst other things. This is to asses the potential damage incase you are the victim of burglary, as it is unusual that all possessions are lost.
  • Total possessions: include everything here from your shoes all the way to your hair dryer. Estimates are exactly as said, estimates. Simply imagine losing everything and consider the costs of getting it all back. This is necessary to asses your loss in the event of catastrophe such as fire in which everything is lost.
  • Observe the ratio of “steal-able” possessions to total possessions. High ratios mean you have a high probability risk of suffering a few thousand dollars in economic loss, as robbery is the most probable risk factor.

Step 3.) Estimate your probability risk of loss

  • There are 105 million homes in the U.S., and there are around 350,000 fires for which a Fire Dept. is required to cease the flames, so based on history, there is nearly a.3% chance of a catastrophic fire in your home. Although not all these fires will destroy everything, it’s worthwhile to keep the odds of complete destruction at.3%, as it helps to accommodate for obscure risks such as falling objects or vehicle damage.
  • For Burglary, check out Neighborhoodscout to look up crime rates in your state and even your specific area. We’re gonna use the state of Georgia as an example in which there are 46 burglaries per 1000 people per year (4.6%).
  • Note: Probability and risk are not the same! Risk measurements incorporate the probability of the loss along with the estimated value of that loss, if realized. Use this measurement tool: Risk Factor = Probability x Value of Loss.


Step 4.) Calculate the value of your “Risk”

I now know that my probability of total loss is around.3%, and my probability of burglary is 4.6%. If my total possessions are worth $15,000 and I gauged my “steal-able” stuff to be worth $5,000, than here is how to calculate what the risk of annual loss is worth to me.

(.003 * $15,000) + (.046 + $5,000) = $275

– Essentially this takes 3% of your $15,000 in total items and adds it to the 4.6% of your $5,000 “steal-able” items… add them together, and you’ve got what the risk to cover potential property losses should be worth to you on an annual basis. Also, if your domicile is, by your estimate, considered “risky” in terms of liability, than a quote from an insurance company of $275 annually isn’t half bad.



CHOOSING AN APPROPRIATE DEDUCTIBLE – Step 5 – includes choosing your amount of liability coverage, and comparing that to the probability and cost of potential property loss

Step 5.) What is the right deductible for me? Deductibles come in $100, $250, $500,  $1000, (also $2,000, $2,500, and $5,000) varieties

-You must asses what your greatest risks are – property loss or liability damages? Liability damages carry a much higher bill – liability coverage amounts come in $100,000, $300,000, or $500,000 – decide on how much liability coverage you need, then compare that with the value of your possessions. Here’s how:

Step 5-A: Decide how much liability coverage you need

Choice A: $100,000: (low legal liability) few visitors, no family residing with you, few dangers on your property, no dog (or other potentially dangerous animals)

Choice B: $300,000: (medium legal liability) small family, consistent visitors, some potential dangers on the property, dog in the home

Choice C: $500,000: (high legal liability) larger family, frequent visitors, potential dangers exist on property, aggressive dog (or other aggressive animal). If you have most or all of these factors with heightened associated degrees of potential damages, consider an even higher amount of liability coverage.

Liability Coverage may also go as high as $500,000 and $1,000,000+. If you fit into one of these categories, than you should consider the higher deductibles such as $2,000-$5,000

—-Choose one of the 3 above that matches you—-

Now, asses your potential for loss based on the value and quantity of your possessions.

This is Step 5-b: Uncover the value and probability of loss of your “stuff.” Consider the following and chose an option to do so:

Choice 1: Medium to High Value of possessions spread across a large number of possessions

Choice 2: Medium to High Value of possessions, spread across a low number of valuable possessions.

-This means you have a small number of items that take up a large portion of your total possession value

Choice 3: Low Value of Possessions

—Choose one of the 3 above—

Now, combine your choices from A-C and 1-3 above, and analyze the combination to determine your deductible:

A-1: suggested deductible: $100

A-2: suggested deductible: $250-$500

A-3: you likely have little need for renters insurance; if you choose to buy anyhow, choose the lowest deductible available

B-1: suggested deductible: $500-750

B-2: suggested deductible: $500

B-3: suggested deductible: $1000

C-1: suggested deductible: $1000

C-2: suggested deductible: $750-$1,000

C-3: suggested deductible: $1,000-$2,000

Explanation of why we suggest your deductible

A-1: Low liability risks factors along with medium to high possession value spread evenly across many possessions

-If you fit in here, you are likely buying the insurance primarily to protect against the loss of your property; if you have few possessions you fear the loss of, renters insurance is not for you. However, for those with valuable possessions: you must not only pay attention to the total value of possessions, but the value of individual possessions. Those with a high dollar value of total possess that do not have many individual possessions that, alone, are very valuable are not endanger of a significant dollar-value loss based on the loss of only one possession. To explain, this means robbers will be unlikely to do significant economic harm to you with a quick raid (they would have to steal a lot). Also, fires must be very destructive in order to cause you serious economic harm. If this matches you, than you should pay a low deductible because your losses might only be a few hundred dollars (explained by example: if a robbery results in losses of $700, renters insurance does you little service if the deductible you must pay is $500).

A-2: Low liability risk factors along with Medium-High possession value, spread across a few valuable items

-Those in this category do not risk significant economic loss from liability damages, but do fear the loss of a few valuable items. The loss of one these items could carry an economic burden in the thousands. The low liability allows insurance buyers to choose a higher deductible, but you likely fear the loss of a valuable possession which could come from a simple robbery – odds of incurring cost from robbery are more likely than incurring liability costs, so this factor puts downward pressure on the deductible you should choose. The two factors should balance out to form around a $250-$500 suggested deductible. (Example: Your main fear is losing one, or all, of your five $3,000 gold bracelets, and you are not worried about your potential liability to others. If one bracelet is stolen, than paying a $500 deductible is fair, mitigating your losses by $2500).

B-1: Liability to others is your primary concern, if you find yourself in this category, but you would still like to protect against the risk of losing all your possessions in a catastrophe. Both these factors have a low risk of occurrence that result in high value loss. Insurance Buyers in this category are free to offset the monthly premium costs by selecting a higher deductible. However, don’t go overboard on pushing up that deductible – if you still have some individually valuable possessions you would like to protect against, choose the lower deductible option to make sure your coverage will service you in the event of the loss on that property.

B-2: Medium risk of liability loss, along with risk of losing valuable items. Remember those valuable items are the most likely to cause you economic harm, so the higher probability drives down your estimated deductible, but concern for liability loss pushes the deductible upward. It is up to you to decide what your greatest concern is, but the risk of lost items puts comparably more downward pressure on the deductible, than the accommodations for liability damages does upward.

B-3: In this category, your only concern is the potential of liability loss from your “Medium” liability risk factors. There is a low likelihood of a large dollar loss, so a high deductible is inconsequential for damages ranging up to $300,000 – a loss that is unlikely to occur. Also, the lower deductible will help to reduce your monthly payments.

C-1: Risk for large liability damages should make renters insurance a must buy, but buyers should be willing to offset the higher associated insurance costs with a high deductible. Also, your primary property loss concern deals only with the risk of catastrophic property loss (like from a fire or hurricane). Both these risk factors have a low probability of occurrence, so buyers should offset monthly costs with a high deductible

C-2: Risk of property loss from one item is great, with a high probability, driving down the deductible you should be willing to pay. However, this will prove costly because you also have a risk for a high dollar value loss, as a result of your liability risks. Buyers here are torn between driving down added costs of higher liability coverage with a high deductible, and protecting against those valuable items in the house (that insurance buyers are more likely to see loss from). A fair balance, suggests a $750 deductible that may increase up to $1,000 if the individual possessions of concern are valued significantly more than $1,000.

C-3: Buyers here are concerned only with a high-cost, low probability risk of loss. Certain factors such as multiple children or multiple dog ownership increase the probability you will realize some loss, but the probability is still unlikely. If you find yourself in this category, insurance purchase is a must, but the large amount of protection will be costly on a monthly basis. Feel free to drive this cost down by choosing a high deductible. Those who may choose the highest deductible are the ones concerned with a danger on the property that, if it causes damage, will cost a lot. If buyers are purchasing more liability coverage simply because there are a number of potential liabilities, none of which have a great associated loss, than those buyers should choose the lower deductible option. (Example: If you need more coverage because you have 15 dogs on the property, you should choose the lower deductible, because an average dog bite costs about $24,000, and the number of dogs increases the probability that you will realize the risk of a dog bite. In contrast, if you buy a greater amount of liability coverage because you have one dangerous piece of equipment that, if misused, could cause significant bodily injury to a human, than you can feel free to choose the higher deductible, as the probability of realizing the risk is low, BUT if the risk is realized it will undoubtedly have very high costs, ranging up to $500,000).

Summary: Calculate your Risk of property loss, including the probability you will lose those items, and the value of your “stuff” at risk. Next, choose the amount of liability coverage you require. Then, compare the two in order to decide on your deductible. Finally, put all the factors together to calculate how much renters insurance is worth to you. Depending on your insurance company and state regulations, you might not be able to find exactly the plan that fits you, but this model should assist in getting you as close as possible, if you do decide to purchase renters insurance.

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Tony Salloum


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