• Renter's insurance covers your possessions in the event of a fire.fire. image by Yuri Bizgaimer from Fotolia.com
  
  Homeowners insurance policies protect a property owner against personal liability and theft, in addition to property damage claims. Renters, however, are not protected against property loss due to theft or catastrophe by their landlords’ homeowners policies. Although renter's insurance laws vary widely from state to state, there are several basics that apply nationwide, and insurance contract law dictates how insurance companies must settle each claim, based upon coverage options.
  
  

Type of Policy

• Renters typically enroll in an HO-4 policy to protect their property when it is in a dwelling owned by someone else. Although condo owners are not renters, they do not own the buildings in which they live, so they do not qualify for traditional homeowners coverage. An HO-6 policy provides the same property coverage to condo owners.
  
  

Scope of Coverage

• Renter's insurance policies may cover losses caused by specific causes or may open coverage up to all types of loss. “All Peril” policies cover damages incurred by nearly every conceivable source, including fire, storms, electrical surges, theft and damage caused by vehicles. Only catastrophes specifically waived in the policy are not covered. Nearly every All Peril policy waives coverage of damage caused by flood or earthquake. “Limited Peril” policies draft a list of catastrophes that are covered by the policy; loss due to any cause not delineated in the policy is not covered. All Peril policies have higher premiums because of their expanded coverage.
  
  

Replacement Value Coverage

• Policies written with Replacement Value Coverage (RVC) will pay enough to replace all the renter’s lost property, regardless of its age and condition, if the renter makes a claim against the policy. RVC policies have higher premiums because of their higher settlement amounts.
  
  

Actual Value Coverage

• Personal property begins to depreciate the minute it is purchased, and Actual Value Coverage (AVC) policies take this loss of value into account when determining a settlement. Rather than settling for the amount needed to replace a 12-year-old 48-inch television with a new one, it covers the price to purchase a similarly used television. Because settlement amounts may be drastically smaller than with RCV policies, ACV policies have cheaper premiums.
  
  

Floater Policies

• Most policies only cover a fixed amount for high-dollar items such as jewelry or art. Renters may increase that coverage amount by purchasing floaters to increase coverage limits on one type of property. If they do not, insurance companies are not legally required to reimburse policyholders for losses that exceed the standard cap.
  
  

Documentation

• Most insurance policies require renters to provide documentation of their property before they receive a settlement. Records, including photographs and videos of possessions that document purchase date, purchase price and serial numbers (where applicable), may be necessary to make claims on lost property. Records should be maintained in a safe place away from the residence to ensure they are not destroyed in a catastrophe.