Renters insurance isn't too costly

This week's column is the latest in my occasional series on personal finance for twentysomethings. Several columns ago, I wrote about strategies for renting your first apartment. Today I'll tell you how to protect your belongings with renters insurance after you move in.

Although your parents' homeowners policy normally covers your belongings when you live in a dorm, once you move off campus, whether as a student or as a grad, you need your own policy. Some landlords even require it before you move in.

Still, two out of three renters are uninsured, taking their chances in case of fire or theft. Without insurance, however, you bear the full cost of replacing your possessions. The cost of replacing your stuff could be substantial, even for new college grads.

But you're in luck: Renters insurance isn't expensive. A renters policy with a $250 deductible typically costs about $250 a year for $30,000 worth of contents coverage and $300,000 in personal- liability coverage -- which protects you in case you're sued for an injury that occurs in your home.

To determine how much contents coverage you need, estimate what your belongings are worth now and round up to the nearest $5,000 or $10,000 -- the increments in which coverage is generally sold.

Buy replacement-cost coverage, so the policy pays enough to cover the cost of replacing your possessions -- up to the policy's dollar limit -- rather than paying you what they're worth when they're stolen or destroyed.

Choose an insurer that pays up front instead of making you buy everything before reimbursing you. And watch out for limits on certain kinds of coverage. For example, if a policy sets a $5,000 cap on computers and yours is worth more than that, ask for a higher limit or purchase a rider that covers the system's full value. Belongings carried outside your apartment are insured up to a limited amount, usually 10 percent of the policy's coverage.

Compare costs for different policies at Web sites such as NetQuote.com and InsWeb.com. If you own a car, check first with your car insurer. A multi-policy discount can be a real money-saver.

Another money-saver: In some states, insurers let roommates purchase a single policy -- rather than two separate ones -- so you can split the cost, assuming you intend to stay together.

Have a question about kids and finances for Dr. Tightwad? Write to Dr. T at 1729 H St., N.W., Washington, D.C. 20006. Or send the good doctor an e-mail message (and any other questions for this column) to [email protected].

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