If you rent a house or apartment and think that your landlord is financially responsible when there is a fire, theft or other catastrophe – think again!

Surprises can be good but some are not. Do you know where your landlord’s coverage ends and your responsibility begins? If you rent a house or apartment and think that your landlord is financially responsible when there is a fire, theft or other catastrophe – think again. Your landlord may have insurance to protect the building you are living in. But your landlord’s policy won’t replace your personal possessions or pay for your living expenses while the building is being repaired. The only way to protect yourself financially against disasters is to buy a renters insurance policy.

Renters insurance, sometimes referred to as tenants insurance, includes three basic types of protection:

Personal Possessions

Standard renters insurance protects your personal belongings against damage from fire, smoke, lightning, vandalism, theft, explosion, windstorm, water and other disasters listed in the policy. Floods and earthquakes are not covered.

To decide how much insurance to buy, you need to know the value of all your personal possessions— including furniture, clothing, electronics, appliances, kitchen utensils and even towels and bedding. In other words, if your home were to burn, you should have enough insurance to replace all of your possessions.

The easiest way to figure out how much insurance coverage to buy is to create a home inventory (a detailed list of all of your personal possessions, with their estimated value). To help make this task easier, the Insurance Information Institute offers free Web-based software, which you can find at www.knowyourstuff.org. An up-to-date home inventory will also make filing an insurance claim faster and easier.

Liability

Standard renters insurance policies provide liability protection against lawsuits for bodily injury or property damage that you or your family members cause to other people. It also pays for damage your pets cause. So, for example, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you’ll be covered. However, if your children or pets destroy your own rug, you will not be covered.

The liability portion of a renters policy pays for both the cost of defending you in court and for court awards, up to the limit of the policy. Liability limits generally start at about $100,000. Some experts recommend that you buy at least $300,000 worth of protection.

Your policy also provides No-fault Medical coverage. So, if a friend or neighbor is injured in your home, you can submit their medical bills directly to your insurance company. You can generally get $1,000 to $5,000 worth of this coverage. It doesn’t, however, pay the medical bills for your own family or your pet.

Additional Living Expenses

Many people don’t know that Additional Living Expenses coverage, also known as ALE, is included in a renters insurance policy. If your home is destroyed by a disaster that your policy covers and you need to live elsewhere, renters insurance covers your additional living expenses. Policies will generally reimburse you the difference between your additional living expenses and your normal living expenses. ALE covers hotel bills, temporary rentals, restaurant meals and other expenses you have incurred while your home is being rebuilt.

There are two types of renters insurance policies:

Actual Cash Value pays to replace your possessions minus an amount for depreciation (the reduction in the value of items due to age and use) up to the limit of your policy.

Replacement Cost pays the actual cost of replacing your possessions (with no deduction for depreciation), up to the limit of your policy. The price of Replacement Cost coverage is about 10 percent more than Actual Cash Value coverage but can be well worth the extra cost.