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If you are renting an apartment or house, you need to ensure that the belongings you have here are adequately protected. Your landlord's insurance will often only protect the building itself, leaving your belongings without coverage.

The HO-4 home insurance policy is designed with renters in mind. It covers losses to your property from 17 types of peril:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft
  • Damage by glass or safety glazing material that is part of a building
  • Volcanic eruption
  • Falling objects
  • Weight of ice, snow, or sleet
  • Water-related damage from home utilities or appliances
  • Electrical surges

Since floods and earthquakes aren't on this list, you may need to buy a separate policy or rider to cover those risks. Also, if a covered peril occurs and your condo or co-op becomes uninhabitable, your policy should include coverage for the additional living expenses you incur while living elsewhere. This is usually 30 to 40 percent of the value of your policy. So, if your policy has a $100,000 value, your additional living expense limit would be $30,000 to $40,000, depending on the policy.

Replacement Cost vs. Actual Cash Value

Before buying home insurance, you should understand the difference between the replacement cost and actual cash value. Most homeowner policies have replacement cost coverage on the structure itself and actual cash value coverage on personal property.

The replacement cost of an item is the amount you would expect to pay to replace it with an identical or similar item. The actual cash value of an item is the replacement cost minus depreciation.

A policy that uses replacement cost gives you more protection than one using actual cash value coverage. Insurance companies will generally require proof that you're replaced an item before reimbursing you, or they will offer to replace the items themselves.

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