by Rachelle de Bretagne

Created on: July 23, 2009   Last Updated: February 18, 2011

As a renter, perhaps the complexities of insurance are baffling. Many renters have never had to consider the price or type of insurance needed to adequately cover their personal items, and this can be a mine field, especially when comparing prices from company to company. Different policies have different clauses and while it may be tempting to look for the cheapest insurance, this isn't always the wisest move to make. What renters often don't realize is that their possessions are not covered under a Landlord's insurances, as their responsibility stops with covering the bricks and mortar rather than possessions kept therein.

*Replacement cost coverage versus Actual cost value.

One of the areas which confuses those seeking insurance is that they interpret the actual cost value of the items they are about to insure with the replacement cost, and set their policy value too low. The expensive sofa you bought in the sales may only have cost you a fraction of its worth, though what would it cost to replace it? There is also another important element to consider if you insure your items under a policy which only reimburses actual cost value. The Insurer will have written into that policy that what you get is the original amount of money the item cost, less depreciation of the value over a period of time. In other words, you will only get the second-hand value of the items which were destroyed, with a deduction for each year of ownership.

Conversely, if you are wise enough to do so and find it possible under the policy prices being offered to you, Replacement Cost Coverage or New for Old is a much wiser investment. An example of what this will give you is that if you lost that expensive sofa in the unfortunate event of fire, the Insurance company would give you the equivalent of what a similar sofa costs on today's market. It makes sense, and you should always check that your policy covers you for 100 per cent, as many hide within the wording a lesser percentage. Whichever policy you choose, ensure that you know exactly what you will get in the event of loss.

Making a comparison of the two kinds of contents insurance, in the event of you losing everything, the chances of your being able to buy it all again on an actual cost basis are negligible. However, if you paid the extra premium to have Replacement Cost Coverage, then, just as the policy name indicates, you can replace your items with similar items on the market at the date of the loss.

It's always worthwhile knowing what something costs to replace, and never to rely upon the price bought as being the value an insurance company will pay to you in the event of loss. By taking out adequate insurance on a "new for old" basis, you cover the items you possess and can be assured that the Insurance company will reimburse the value, at today's prices, rather than second hand value of the items you possess.

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