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WalletPrep worksheet · Protect yourself

Do you need renters insurance?

Name ____________________ Date __________

Key ideas

  1. Your landlord's policy does not cover your things. It insures the building. Your furniture, laptop, clothes and bike need a renters policy of your own.
  2. Replacement cost pays far more than cash value. In the example, the same theft pays Ana $2,500 with replacement cost and $900 with actual cash value.
  3. Liability coverage protects your savings. If a guest is hurt or you damage someone else's property, the policy can pay their costs and your legal defense.

Vocabulary

Insurance deductible
The amount you pay yourself on a covered loss or medical bill before your insurance starts to pay.
Liability coverage
Insurance that pays for injuries or damage you cause to other people, up to your policy's limits.
Emergency fund
Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.

Work it out

Ana's apartment is broken into. Her laptop, TV and bike would cost $3,000 to replace new. After age and wear, the insurer values them at $1,400. Her deductible is $500.

  1. Cost to replace new
  2. Deductible
  3. Replacement cost payout
  4. Actual cash value
  5. Deductible
  6. Actual cash value payout

Check yourself

  1. A fire destroys a couch that costs $1,200 to replace new. Its actual cash value is $400 and your deductible is $250. What does a replacement cost policy pay?

    • A. $150
    • B. $400
    • C. $950
    • D. $1,200

  2. Which part of renters insurance pays for a hotel while your apartment is repaired after a covered fire?

    • A. Liability
    • B. Loss of use
    • C. Personal property

  3. Which event is usually not covered by a standard renters policy?

    • A. A kitchen fire
    • B. A burglary
    • C. A flood from a nearby river
    • D. A guest slipping in your home

Your turn

Spend 15 minutes filming every room, closet and drawer in your home and save the video online. If you don't have a policy, request two quotes with replacement cost coverage and the same deductible.

www.walletprep.com/learn/renters-insurance/ · Free to print, copy and share for non-commercial classroom use.

Answer key

Do you need renters insurance?

Work it out

  1. Cost to replace new$3,000
  2. Deductible− $500
  3. Replacement cost payout= $2,500
  4. Actual cash value$1,400
  5. Deductible− $500
  6. Actual cash value payout= $900
  1. With replacement cost coverage, Ana gets $3,000 − $500 = $2,500. Many insurers pay the cash value first and the rest once she buys the replacements.
  2. With actual cash value coverage, she gets $1,400 − $500 = $900.
  3. The gap is $2,500 − $900 = $1,600. Her video inventory and receipts help prove what she owned.

Check yourself

  1. C. $950 Replacement cost pays the price to buy it new minus the deductible: $1,200 − $250 = $950. A cash value policy would pay $400 − $250 = $150.
  2. B. Loss of use Loss of use, also called additional living expenses, covers extra costs of living elsewhere after a covered loss.
  3. C. A flood from a nearby river Most renters policies exclude flood damage. Renters can buy contents flood coverage through the National Flood Insurance Program.