- Renters insurance covers your property from theft and damage, loss of use of your home, personal liability caused by an accident in your home, and more.
- When it comes to deciding how much coverage you want, it’s important to keep in mind that the value of your belongings might be more than you think. Take an inventory to decide how much coverage you’ll need.
- Renters insurance is among the most affordable types of insurance. However, there are still many ways you can save on your monthly premium.
You just moved into a new apartment complex. Everything seems perfect. The space is exactly what you envisioned for your new home. Then, you get a call from your new management company asking whether you’ve acquired renters insurance yet. “Renters insurance?” You think. “I have no idea what that is. I’ve never needed it before.”
Although renters insurance isn’t something that’s legally mandated (like, say, auto insurance), a property management company or landlord can legally require their tenants to get it (much like a mortgage lender might require homeowners insurance). The good news? Renters insurance is affordable, with the average policy in the U.S. at just $17 per month. Plus, it can be a great way to protect yourself — you might want to consider it even if your landlord doesn’t require you to get it.
Read on for the lowdown on all things renters insurance, from what it covers to how you can get the lowest rate.
What Renters Insurance Covers
Most renters insurance policies have three different types of coverage: personal property, liability, and additional living expenses (also referred to as loss of use). Here’s a bit more information on these three types of coverage:
- Personal property. This covers things inside your unit that have been affected by accidents, certain weather-related events, or what’s referred to as malicious mischief (i.e. vandalism or theft). Personal property includes things like furniture, electronics, clothing, appliances, etc. (See exceptions below.)
- Liability. This type of coverage is for any accidents that happen in your home. For example, if someone injured themselves at your home, liability coverage under your renters insurance would likely cover their medical bills. Liability coverage also protects you in the event that you accidentally damage another person’s property.
- Additional living expenses (or loss of use). This type of coverage applies to any miscellaneous costs you incur in the event that your apartment is damaged or uninhabitable. For example, if your plumbing system freezes and you can’t live in your home for a few days, this would cover the cost of a hotel until you can return home.
In order for your renters insurance policy to cover the above occurrences, the incident or event in question must be considered a covered loss. A covered loss does not typically include natural disasters. If you live in an area prone to earthquakes or flooding, you’ll likely need additional coverage. A covered loss does, however, include the following events:
- Accidents (e.g., damage by a vehicle or falling object)
- Water damage (from plumbing or appliances as well as frozen plumbing systems)
- Weight of snow, ice, or sleet
- Hail damage
- Riots and civil commotion
Let’s say you live on the ground floor of an apartment building and a car drives through your front window and breaks your TV and dresser. The property damage caused by this event would be covered under your renters policy. If you experience the same damage to your property from a natural disaster like a tornado or earthquake, however, this likely wouldn’t be covered under your policy.
One thing many people don’t know is that renters insurance often covers your items even if they were damaged or stolen while not on your property or while you travel. For example, if your laptop broke while you were at work or someone stole it from your car, this could be covered under your renters insurance policy. This stipulation varies from policy to policy, so it’s wise to check your specific plan.
What Renters Insurance Doesn’t Cover
Renters insurance coverage varies across policies. But typically speaking, renters insurance does not cover:
- Water damage from flooding or another natural disaster
- Earthquakes or landslides
- Accidental loss (i.e. misplacing an item)
- Pet damage
Any damage to the building itself, such as the roof or siding, should be covered by your landlord’s policy, not yours.
Keep in mind that when it comes to personal property coverage, certain items are not protected from theft and require you to take out additional coverage. For example, you could need additional coverage for high-value items, such as coin collections, gift cards, jewelry, and fine art.
Determining How Much Coverage You Need
As with any insurance policy, you decide exactly how much coverage you need with a renters insurance policy. You will estimate how much your personal property is worth, and your insurance company will give you a rate based on that amount. The process is fairly simple: The more coverage you opt for, the higher your monthly insurance premiums will be. The less coverage you opt for, the lower your monthly premiums will be.
When it comes to personal property coverage, there are typically two options: actual cash value protection and replacement cost coverage. The former takes depreciation into account, while the latter does not. As such actual cash value insurance is cheaper to buy than replacement cost coverage, but replacement cost coverage will give you what you need to repurchase an item as if your lost item was brand new.
Because renters insurance is quite cost-effective, it could be worthwhile to get more coverage, depending on your circumstances. To figure out how much coverage you need, the first step is to take an inventory of your belongings and roughly estimate how much everything is worth. You should include clothing, furniture, jewelry, art, electronics, bedding, appliances, etc. The average renter has somewhere between $20,000 and $35,000 of personal property, a number that people often underestimate.
If you have the time, consider taking photos of your personal belongings, too. These photos could come in handy in the event that you need to file a claim in the future.
When you do file a renters insurance claim, you will likely need to pay a deductible (say, $500), which is your out-of-pocket cost before your insurance kicks in, depending on your policy. If you choose a plan with lower monthly premiums, your deductible will be higher. If you choose a plan with higher monthly premiums, your deductible will be lower.
Here’s an example of this in action: For a renters insurance policy that covers $20,000 of personal property and includes $100,000 of liability protection, a consumer might expect to pay a monthly premium of $12 ($148 annually) with a deductible of $500.
Managing Your Personal Risk
Renters insurance is a great way to safeguard your finances. However, it often only covers you up to a certain amount. That’s why it’s important to mitigate your own personal risk and liability. If you accidentally cause injury to others or find yourself in a lawsuit, for example, your liability coverage might not cover all of your expenses. Avoid engaging in risky behavior, such as having unmanageable dogs or parties that get out of control.
You should also keep your credit score in tip-top shape, as it’s often used in insurance assessments.
Saving on Renters Insurance Premiums
It’s important to shop around for renters insurance so you can find the best policy for you and your unique needs.
Certain factors, like specific dog breeds, can cause premiums to go up, while other factors can cause premiums to go down. For example, you could get a discount for having a security system and a smoke alarm or fire extinguisher in your home.
You might also be able to secure a lower rate if you bundle and open your plan with the same company you hold your auto insurance with. Some companies will also offer a discount for paying the entire annual premium at once, which could be worth considering since renters insurance coverage policies are relatively inexpensive.
The Smart Money Move
Renters insurance is one of the most affordable types of insurance out there. For a few dollars a month, you can protect your property from unexpected damage and theft, and yourself from liability for accidents that occur in your home. Be proactive about protecting your finances by considering the right amount of renters insurance coverage for you.