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One of the hardest parts of shopping for renter’s insurance is deciphering all the fancy lingo and obscure terminology that goes into each policy. 
Here are three of the most important terms to know when shopping for renter’s insurance: 
  • Actual cash value (ACV) vs. replacement cost: If your policy covers the actual cash value of your belongings, it will only pay out the value of the items at the time of loss—but replacement cost allows you to purchase new comparable items. 
  • Deductible: Your deductible is the amount you’ll have to pay before insurance kicks in. In most cases, renter’s insurance deductibles start at $500 and go up to $2,000
  • Floater or endorsement: This term refers to additional coverage on top of your standard policy, such as a scheduled personal property endorsement for valuable possessions. 

All the renter’s insurance terms you need to know


A renters insurance policy can cover your belongings at two different levels. Actual cash value, or ACV, covers only the current value of your property. 
Let’s say a fire damages the couch you bought when you moved into your first apartment eight years ago. With ACV coverage, insurance will only cover the amount the couch was worth when it was damaged—maybe a few hundred dollars. 


When you buy renters insurance, it’s important to conduct an appraisal of your personal property. Take an inventory, create a spreadsheet of values, and collect receipts, photographs, and video evidence. 
If you own any high-value items, such as fine art, you may want to call in a professional appraiser. 


If your personal property is damaged by a covered peril, if you lose the use of all or part of your property, or if you’re sued for an accident that took place on your property, you’ll need to submit a claim to your insurance company in order to get compensation. 
To submit a claim, document the incident with photographs and a police report, if applicable. Then reach out to your insurance company and explain what happened. 


Renters insurance consists of three essential coverages: personal property, liability, and additional living expenses (or loss of use). 
For example, if your neighbor sues you because your sink overflowed and the water dripped through the floor and ruined their antique china cabinet, your liability coverage will protect your assets and help you deal with legal fees. 


Your renters insurance deductible is the amount you’ll need to pay out of pocket before your insurance company will pay out for a claim. Common deductibles start at $500 and go up to $2,000. 
Let’s take a real-world example: if a truck crashes into the living room in your rented house, you could be looking at thousands of dollars of damage. If your deductible is $1,000, though, you’ll only need to pay $1,000 and insurance will cover the rest (up to your coverage limit). 


Depreciation refers to the value that your possessions lose over time. If you’ve got replacement cost insurance, depreciation doesn’t matter, but with ACV depreciation can reduce the amount you’ll get out of a claim. 
Remember your eight-year-old couch? Let’s say it cost $1,200 when you first bought it. A sofa typically sees about 7% depreciation every year, meaning that an insurance claim eight years after purchase would only pay out $671—well below the average cost to buy a new couch! 


If the value of your property exceeds your policy’s coverage limit, an endorsement allows you to raise the limit for a specific category of items, such as jewelry or sports equipment. Keep in mind that an endorsement is different from a floater, which extends your coverage for a specific item, such as a wedding ring. 


Renters insurance doesn’t cover everything—every policy comes with exclusions. Typical exclusions from renters insurance coverage are flood damage, earthquakes, and sinkholes, but it’s important to read the details of your policy to understand all possible exclusions. 

Liability coverage

Personal liability is a crucial part of renters insurance. If you or a family member cause an injury or damage to someone else’s property, your liability coverage can pay for medical bills and legal expenses. 
If your son throws a baseball through a neighbor’s window, liability can pay for the repairs. Or, if your guest slips in the bathroom and knocks their head on the sink, your liability coverage could handle both the ER bill and a possible lawsuit. 

Limit of liability

The liability coverage that’s built into your renters insurance comes with limits. Typically, the limit of liability insurance is $100,000, $300,000, or $500,000
To figure out how much liability insurance you need, it’s a good idea to add up your assets and subtract any debts. For instance, if your bank balance plus the value of your car, property, and investments minus your college loan debt is over $100,000, it’s probably best to opt for a higher coverage limit. 

Replacement cost

In the event of a valid claim, replacement cost coverage will pay out the full amount necessary to replace your personal belongings—not just the amount they’re worth at the time of loss. 
Let’s go back to our old friend the eight-year-old couch. If you’ve got replacement cost coverage, you’ll be able to claim the amount necessary to buy a comparable replacement. Because replacement cost is typically only 10% more expensive than ACV coverage, it’s usually worth the added expense. 


Simply put, a renters insurance rider extends your coverage, either against perils not covered by a standard policy or to a higher coverage limit for certain categories. 
Examples of common renters insurance riders include scheduled property riders for expensive personal items like jewelry and electronics, replacement cost riders for specific items in an ACV policy, earthquake coverage riders for quake-prone areas, and pet damage riders for renters with roommates that like to scratch and chew on stuff.

Save smart with Jerry

Now that you’ve gotten an introduction to some of the most important renters insurance terms, you’re ready to start shopping for policies! Experts recommend comparing rates from at least three companies, but the calculations involved can get overwhelming fast. 
That’s why
exists: the #1 rated insurance app and the quickest, easiest way to see what you could save on renters insurance. Just download the app, enter your information, and Jerry will pull from a pool of dozens of top-rated companies to find quotes that fit your budget.

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