If you’re renting a home or apartment, your landlord may require you to have renters insurance. And even if your landlord doesn’t require it, having renters insurance is a good idea.
Renters insurance covers renters when it comes to the destruction or theft of their personal possessions, as well as certain liability issues. It can also cover additional living expenses if you can’t live in your home during repairs (like when a fire destroys your kitchen). A renters insurance policy is different from landlord insurance, which protects the owner of the building and not your personal belongings.
Here’s some more insight into what renters insurance is, how to buy it, and what you can expect to pay for this coverage.
How does renters insurance work?
When you purchase a renters insurance policy, you’ll choose between an actual cash value and a replacement cost policy.
Actual cash value: This policy gives you money to replace your possessions, minus the amount for depreciation. So you may not receive the full amount you’ll need to replace your belongings.
Replacement cost: A replacement cost policy is usually more expensive than an actual cash value policy because it doesn’t take depreciation into account and provides you with the full replacement cost for covered possessions.[1]
When you purchase a renters insurance policy, you’ll also choose your deductible amount – how much you’ll have to pay out of pocket when you file a claim before the insurance company steps in with its contributions. The higher your deductible is, the lower your monthly premium will be.
Choosing a higher deductible can save you a lot of money if you don’t end up filing a claim. But it’s important to make sure you have enough money set aside to pay the deductible if you do ever need to file a claim.
Learn More: Does Renters Insurance Cover Theft? Choose the Right Policy
What does renters insurance cover?
Renters insurance policies typically include three main types of coverage — liability, personal property coverage, and additional living expenses (ALE) coverage.[1]
| Coverage | What’s Included | What’s Excluded |
|---|
| Liability | - Liability protection against lawsuits for bodily injury or personal property damage caused by you or a family member
- Damages your pet does to someone else’s property
- Cost of defending yourself in court
- Court award up to the limit of the policy
- No-fault medical coverage
| - Your own pet damaging your personal property
- Medical bills for you, your family, or your pet
- Damage you cause to your personal belongings
|
|---|
| Personal Property | - Protects your personal belongings against damage
- Damage can stem from fire, smoke, explosions, lightning, vandalism, theft, water, and windstorm disasters (or whichever disasters are specifically listed in your policy)
| - Flood and earthquake damage
|
|---|
| Additional living expenses (ALE) | - Expenses incurred after a covered disaster
- Hotel stays, dining out, temporary rentals, etc.
| - Normal living expenses; only the difference between your normal living expenses and ALE are covered
|
|---|
See Also: What Does a Renters Insurance Policy Cover?
How much does renters insurance cost?
The average cost of renters insurance is $15 to $30 per month, according to the National Association of Insurance Commissioners.[2]
Important Information:
The cost of your renters insurance policy will depend on multiple factors, including where you live, the value of your personal possessions, and the age of the building.
Factors that affect the cost of renters insurance
Many factors can influence how much you’ll spend on renters insurance, such as:
Location: Where your home is located can affect how likely you are to file a claim.
Local fire protection: Fire can cause major damage to a home that will be expensive to repair.
Age and construction of building: The quality and age of your home can also affect how likely damaging events are to occur, such as leaky pipes.
Safety measures: Many insurance companies offer discounts for renters who have certain safety measures in place, such as alarm and sprinkler systems, dead bolts, and fire extinguishers.
Check Out: Home Protection Class & ISO Rating Lookup by Address
Pros and cons of renters insurance
Before taking out a renters insurance policy, it’s important to be aware of the advantages and disadvantages so you can plan your coverage accordingly.
Pros
You have help during hard times. Renters insurance generally covers liability, personal possessions, and additional living expenses — all of which can be really helpful after a covered event causes damage.
You get coverage away from the home. Usually, renters insurance also covers damaging events and covered losses that happen when you’re away from home. For example, if you’re traveling and your laptop is stolen out of your hotel room, you’d likely be covered.
Cons
Not all disasters are covered. Unfortunately, renters insurance doesn’t cover floods or earthquakes, which can cause major damage to your belongings.
Coverage limits exist. Renters insurance policies typically cover up to $1,500 in losses for expensive possessions, like jewelry. If you need more coverage than that, you’d have to buy it separately as a “floater” or “endorsement.”
How to buy renters insurance
Many different insurance companies offer renters insurance. Some exclusively sell renters insurance, and others offer multiple types of policies. Generally, you’ll take the following steps to get renters insurance:
Do your research. Get familiar with the types of renters insurance policies that may be available to you. You don’t want to apply with only one insurance company, so it’s best to learn more about what a few companies offer. This is also a good time to read customer reviews to see what the company is like to work with.
Request quotes. Find a few different insurance companies to request quotes from to see which one can offer you the most coverage for the best price.
Choose an insurer and purchase a policy. Once you’ve chosen an insurance company and a policy that’s right for you and your budget, you can sign up for a policy with an insurance agent.
How much renters insurance do you need?
To determine how much renters insurance coverage you need, the big thing to keep in mind is the value of your possessions. It can take quite a bit of work, but you need to create a home inventory and make a detailed list of all your belongings and their estimated values. That way, you know exactly how much coverage you’d need if the worst happens and you have to replace your belongings.
Read More: Is Renters Insurance Worth It? Why It’s a Must for Tenants
