Are you a renter? Are your kids renters? In most cases, people leasing apartments or homes ask themselves, 'Why should I bother paying for renters insurance?'

The short answer is that even though you don't own the building itself, you can easily find yourself financially wiped out if you are uninsured when a catastrophe like a fire or tornado destroys your rental and everything in it. Without insurance, you're vulnerable to crimes like burglary and vandalism, too. Here's what you need to know about renter's insurance.

As a renter, it is extremely important to understand that your belongings are not covered by your landlord's insurance policy.

The landlord's policy protects only the landlord's property -- specifically, the building housing your unit. For your belongings to be protected, you'll need your own coverage separate from your landlord's coverage. If you don't have renters insurance and an electrical short causes a fire in the building, your landlord will be covered for damage to the structure, but you won't get a cent to replace your lost possessions.

Not all renters insurance policies are the same.

Knowing what kind of renters insurance to buy can help you avoid unpleasant surprises if you ever have to make a claim. It will pay off to do some homework before shopping for coverage.

You have two basic choices when covering personal belongings -- 'actual cash value' coverage and 'replacement cost' coverage. The former is cheaper, but unless you're on a very tight budget, it's probably not worth buying. Why? Because if you have a claim, this coverage requires that your insurer pay only what it estimates as the current value of your possessions at the time of the loss. You may have paid $1,000 for your television five years ago, but if today's market value for the same television is only $400, that's what you'll collect.

'Replacement cost' coverage is generally a better bet. As the term implies, if you report a loss, replacement cost coverage requires the insurer to send you enough money to replace your old belongings with new and comparable items. Replacement cost coverage costs more, but in most parts of the country the total bill for this type of insurance is still only about $25 per month.

Make sure 'loss of use' coverage is included in your policy, too. Loss of use coverage pays for room and board if a fire or other disaster leaves you homeless. It should reimburse you for the cost of a hotel and for the cost of meals.

Coverage though rental insurance can do more than protect your valuables.

It can also protect you in case of a liability lawsuit. In this litigious age, if a house guest slips and falls in your apartment, you could find yourself in court. If so, you'll be glad you have liability coverage. Look for coverage with liability limits of at least $250,000.

Know when supplemental rental insurance is a good idea.

Note that renters insurance policies typically don't cover losses caused by earthquakes or flooding, so if you're in an area that is vulnerable to such events, check whether your insurer offers additional coverage for them and at what cost.

Furthermore, if you own expensive jewelry, high-end video or audio equipment, furs, antiques, or silverware, double-check your coverage for high-value items. Even a good replacement cost policy may limit what your insurer will pay, and if yours does, consider buying extra coverage for your valuables.

Quotes for renters insurance are widely available online, making it easy to compare prices, terms and deductibles. Terms and conditions can vary widely, but now that you have an idea of what to look for in a policy, you can take the next step to protect yourself and your possessions from a renter's nightmare.