Let's say you are a jazz fan renting an apartment in a gentrified neighborhood in Washington, D.C. You have a $2,000 stereo system and 300 rare CDs in your living room. Your music room is decorated with local art picked up on a trips to Cape Town and Nairobi. To you they are priceless keepsakes that would be near impossible to replace. 

The smart decision would be to get renters insurance to protect you in case your prized belongings are stolen or seriously damaged. Your landlord won't be covering the replacement costs. What determines how much you will have to pay?

Location

Yours used to be a high-crime area, but as new apartment buildings went up and a Starbucks and a Whole Foods moved onto your block, crime went down. Though they may be declining, crime rates are one thing that an insurance company will factor in when deciding what to charge for a renters insurance policy. A neighborhood known for theft and vandalism is likely to be one where a renter has to pay more for an insurance policy.

It is always good to shop around for insurance policies, no matter where you live. iSelect allows residents of Australia to compare the coverage and prices of five insurance companies. Their site explains that items such as jewelry, furniture, books, clothing and electronic devices can be covered. Insuring your personal property is simply common sense.

As for protecting that stereo playing Wynton Marsalis from your Washington abode, you will have to decide whether paying more for coverage than you would if you lived in a low-crime outer suburb is worth what you would give up by living elsewhere. The location of the property you rent is not just an issue when it comes to crime, but also regarding severe weather. If you live in an area prone to hurricanes or tornadoes, flashfloods or brush fires, you should expect to pay more for renters insurance.

It would be a prudent move to investigate whether the house you are renting lies in a flood plain and inquire what the landlord's insurance might cover. The same holds true if you are among those who reside in an earthquake zone. While there may not be a high chance of these disasters occurring, it's worth considering what would happen if they do.

Levels of Coverage

You'll have full control over what you want covered and how much you want it covered for. You can opt for high or low coverage and you can choose whether to add more coverage for the stereo and the local art. All will be covered in the case of a fire but there are options to add more coverage for select items. Doing so will add to your premium costs. In thinking about additional coverage for select items, you would want to consider the actual cash value of your belongings as opposed to the cost for replacement.

The three-year-old stereo system has naturally depreciated in value due to time and use. Replacing it with a similar system today would likely cost quite a bit more than you paid for the original. You can opt to adjust your insurance coverage accordingly, thus making it important to carefully figure out the replacement costs. 

Liability Coverage

You also have to consider whether you want the insurance to cover legal fees and medical bills that might result from someone getting injured while in your apartment or the house you are renting. For instance, if you are having a party in your back yard and a guest falls and breaks his leg while coming down the stairs, who is going to pay for his injuries? What if he sues, claiming the steps were not properly maintained? Many an expensive lawsuit has been filed over a lot less.

The Insurance Institute says renters insurance liability coverage typically starts at a $100,000 limit for claims or lawsuits. If you think you need more coverage than that, it will cost more. There can be a lot of other concerns regarding renting a place and insurance, You'll certainly want to know who will pay the hotel bills, restaurant meals and other living expenses if you were required to temporarily leave your rented flat. The location of the property, the level of the insurance coverage and whether to include liability coverage must be considered when determining the price of rental insurance.