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Protect Your Stuff!

By Martin Lieberman

If you're a recent college graduate, you may not have a ton of possessions. But what happens if you're burglarized or there's a fire in your apartment? Renter's insurance can protect you against those and other household calamities.

When you consider what you get, it's actually a great value. - Kip Diggs, State Farm Insurance

Leah Ross never thought it would happen to her: she lost all of her possessions in a building fire two years ago. "I always assumed I would just get broken into, and because I didn't have the greatest of things to steal, I wasn't that worried. But when the building burned down, I lost everything," she recalls. Because Ross, 27, hadn't purchased renter's insurance, she was unable to recoup any of her losses, which totaled at least $7,500 worth of stuff. Unfortunately, many twenty somethings could find themselves in a similar situation. According to an Insurance Information Institute study, less than 30 percent of all renters purchase insurance. Three myths contribute to this:

Myth One: Renters think they are covered under their landlord's policy.
The Truth: Landlords do typically have insurance on their buildings, but that's where it ends. None of the building's contents or the people who live there are covered.

Myth Two: Renters think they don't own anything worth insuring.
The Truth: Ross thought this, too. Take a look around your apartment (or even your dorm room). Think about how much it would cost to replace all your clothes, your CD collection, furniture, videotapes, kitchen appliances, and other electronics. Even if you don't own expensive jewelry or nice furniture, the price tag for buying a new bed, television, computer, clothes, and CDs will add up.

Myth Three: Renter's insurance is expensive.
The Truth: It's really not. "When you consider what you get, it's actually a great value," says Kip Diggs, spokesman for State Farm Insurance, one of the largest insurance providers in the country. The average cost for $20,000 worth of insurance is only around $100 a year, depending on where you live, according to Diggs. For only a small price-about the same as a couple of take-out pizzas each month-the financial burden of buying new things after a catastrophe could be significantly lessened.

What are you paying for?
There are two kinds of renter's insurance you can buy: "actual value" or "replacement cost." Actual value is also referred to as "depreciated coverage" because any piece of property, whether it be a car or a CD, loses its value over time. As such, if you buy actual value coverage, you probably will not get back the full cost of what you originally paid for your possessions. Conversely, if you have replacement cost coverage, you will be reimbursed for the full amount it would cost you to replace your belongings. Diggs says the cost difference is "negligible," but actual value coverage is sometimes more attractive because it is less expensive to purchase. Renter's insurance also covers other catastrophes. For example, if someone comes to your apartment and falls and hurts himself, you are prone to a lawsuit. Insurance will cover your legal defense costs, if necessary. Your policy should also include "additional living expenses" in case your apartment becomes unavailable because of a fire or similar event. This coverage will pay for you to live somewhere else of comparable value for a period of up to 12 months. Unfortunately, renter's insurance does not cover you in every situation. Flooding and earthquakes are typically excluded from most policies (though you can buy additional insurance to cover these hazards). Otherwise, insured renters are protected against theft, vandalism, fire, smoke damage, lightning, explosions, and even riots or civil disturbances that may occur right outside your apartment. Even though renter's insurance is generally not expensive, you can keep your costs even lower. One way to keep your rates down is to insure your apartment through the same company that handles your car or other insurance. Many insurers will give you a discount for keeping the business under the same roof, so to speak.

Filing a claim
If the worst happens and you do need to make a claim, the process is reasonably easy. First, get in touch with your agent as soon as possible to tell him or her what has happened. (Of course, if you've been robbed, the agent will be your second call-after the police.) The agent will ask for a list of what you need replaced. The time it takes to reimburse you depends on how complex the claim is. But to speed up the process, it's a good idea to keep a documented list of all your possessions in a safe place. After all, if your apartment burns down, the list will, too. Every insurance payment includes a deductible, which is taken out of whatever money you are paid. A deductible, typically around $250, is the amount that an insurance policy holder has to pay before being reimbursed. Many insurance companies will adjust the deductible, though, and make it cheaper for the policyholder; ask your agent for further details. Mark Rossi, 35, also learned the need for renter's insurance the hard way. When he moved out on his own after college, Rossi thought he would never need insurance. Then his apartment burned down and he learned his lesson. He quickly purchased insurance after that. Three years later, Rossi was a larceny victim and had a chance to cash in. Thanks to his policy, Rossi was able to recoup what was taken from him. "It became not nearly as big of a problem as it could have been," he says. Today, both Rossi and Ross tell all of their friends to get insured so they don't make the same mistakes. "It's such a bargain," Rossi adds. "Once you've been somewhere and you have some valuables, if you have insurance, you don't have to worry about it as much because you have the backup."

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