Home insurance for renters

Buying your first house is an exciting accomplishment. It is also probably the largest financial decision you’ve made to date — and that means you’ll want to protect your new asset carefully. You should already know that even if your mortgage lender doesn’t require you to carry home insurance (most do), it’s absolutely vital that you get sufficient coverage.

However, that doesn’t mean you shouldn’t try to keep the cost of homeowners insurance reasonable. Home insurance providers will likely give you offers that vary, so it’s worth it to shop around a little. It’s important that you compare value, and not just overall premium costs, when comparing homeowner insurance rates. By understanding some of the terms home insurance providers are likely to use in their policies, you can better evaluate which policy is best for you. Here’s a simple rundown:

  1. Premium:

    This is the bottom line — what you’ll pay for your coverage. It’s usually broken down either annually or monthly.

  2. Deductible:

    The deductible is the amount up to which you’d need to cover costs yourself before your coverage kicks in. Usually, it’s inversely correlated with your premium (the higher your deductible, the lower your premium).

  3. Contents:

    Also called personal property, this includes your belongings, such as your furniture, clothing, electronics and some jewelry.

  4. Replacement Cost:

    This is a kind of insurance that pays the cost of replacing your home and belongings. There will be a maximum dollar amount on the policy, so ensure that it’s high enough for your home.

  5. Actual Cash Value:

    This is the other kind of insurance you can choose. It repays the cash value of your home and belongings on the current market, meaning it takes depreciation into account. You can split up your policy, getting replacement cost insurance for your personal property and actual cash value coverage for the dwelling itself.

  6. Liability:

    If someone is hurt on your property due to your negligence, this covers medical and legal bills.

  7. Riders:

    These are like mini-policies you can roll into your overall coverage. They often cover antiques, expensive jewelry and artwork that are too valuable to be included in the more general “contents” part of the policy.

What other terms should new homeowners look out for when comparing offers from home insurance providers? Add your thoughts or ask questions in the comments.