You’re likely aware that most homeowners have homeowners insurance to protect their house and possessions and cover their liability for anyone injured on their property. However, you may not know that similar coverage is available for people who rent or lease their home. A renters insurance policy provides coverage to help protect people renting a house or apartment. If an unexpected situation occurs, your policy can help protect you, your personal belongings, and your living arrangements.
Read on to learn everything you need to know about renters insurance and why it might be a smart idea for you to purchase a policy.
What is renters insurance?
Renters insurance, sometimes referred to as tenants insurance, is a policy that covers your personal possessions and can even cover your expenses if you have to vacate your space while it’s repaired. While your landlord’s homeowners policy protects the physical space you live in, it does not cover anything beyond that.
An important way to protect yourself against loss and personal liability is to carry a renters insurance policy. It can provide coverage if your apartment is broken into or vandalized or a pipe breaks and destroys some of your possessions. Depending on your plan, it may even cover items stolen from your car.
What is covered by renters insurance?
Except for covering the physical structure itself, a standard renters insurance policy is similar to homeowners insurance. Most basic renters insurance helps protect your personal property, liability, and additional living expenses, however, this can vary. When purchasing renters insurance, it’s essential to understand what is included in the coverage you select.
Personal property coverage
Can you afford to replace all your furniture or clothing if your apartment catches fire? A renters insurance policy can help ease the financial burden. If your possessions are damaged in a fire, a burst pipe, or even theft or vandalism, your policy has you covered. Your renter's insurance may cover personal belongings outside your home, such as your bike or items stolen from your car. Similar to car insurance, you’ll submit a claim for the damage or loss and be responsible for a deductible before reimbursement.
A standard renters insurance policy typically provides $30,000 of personal property coverage, which may be sufficient to cover your belongings. However, you can elect to purchase a higher coverage limit if needed. Below we’ll go into greater detail on calculating how much renters insurance you need.
Liability
Along with your personal property, your renter's policy can also help safeguard your financial assets. Liability coverage protects you if someone sues you for an injury they sustained while in your home. Your renter's insurance may cover the cost of the injured party’s medical expenses and additional related costs such as legal fees or damages up to your policy limit.
Most standard rental policies offer $100,000 in liability coverage. However, an umbrella policy is available to purchase if you want additional coverage above that amount.
Additional living expenses (ALE)
Of course, having your possessions replaced is important, but what if you need to leave your apartment while repairs are completed? Renters insurance can help with these additional living expenses (ALE) as well. A policy may cover costs related to alternate housing such as a hotel room or short-term rental, utilities if you’re responsible for them, and even meals.
While ALE coverage is often included in a quote for a renters insurance policy, it is not a standard item. Therefore, when shopping around for policies, review the estimates carefully to confirm that ALE is covered in the policy.
Medical payments
Similar to the liability coverage portion of your policy, medical payments coverage will also pay for medical payment claims from an injury sustained in your home. The main difference is that the liability coverage will address claims where you’re at fault. The medical payments coverage pays bills for an injury when you’re not responsible. For example, you have a friend over for dinner who trips on the corner of a rug in your living room and injures their head when they fall. Yes, the accident happened in your home, but it wasn’t really due to any negligence on your part. Your medical payments coverage could pay for some of the bills for treatment that they receive.
What is not covered by renters insurance?
Just as it’s important to understand what renters insurance covers, it’s equally critical to understand what it doesn’t cover. Most policies don’t cover catastrophes, like climate events such as earthquakes, hurricanes, or floods. Similarly, issues such as bed bugs or other insect or rodent infestations are also likely excluded. If you live in a part of the country where you might be at higher risk for specific natural disasters or simply want reassurance knowing that you’re covered for almost any situation, umbrella policies and supplemental riders can be added to address particular concerns.
The other area which needs extra consideration is any personal property that is higher in value. Most renters' insurance has a standard overall coverage limit, but often spells out specific sub-limits for pricier electronics, fine jewelry, art, musical instruments, and even expensive sports equipment such as bicycles. Carefully review the coverage details and pay special attention to any sub-limits that might apply to items you own. If you need protection for a higher value possession, you can purchase additional coverage for that item.
Lastly, while your renter's insurance protects your personal property against damage, that doesn’t include any accidental damage you might cause. What if you stumble and drop your tv while trying to move it? Unfortunately, you’ll be out of luck getting that claim approved.
How much renters insurance coverage do I need?
As you’re researching policy options and thinking about your possessions, you need to take the time to calculate exactly how much your property is worth. At first thought, $30,000 to cover your belongings may seem more than enough, but in reality, the total value of what you own might be greater than that.
How to calculate how much coverage you need
First, you need to start with a thorough inventory of your property and belongings. Go through your space room by room and make a complete list of every item. You can estimate quantities for things like your clothes or dishes - there’s no need to count every t-shirt in your wardrobe individually.
You may find it helpful to create categories to catalog everything and make researching costs easier. Categories to include might be:
- Furniture
- Appliances
- Cookware and dishes
- Electronics
- Clothing
- Media (books, DVDs, vinyl collection)
- Jewelry
- Sports equipment
Now start researching. The goal is to estimate the value of each item so that you can determine the total amount of coverage you’ll need for your policy. You may find it useful to research the estimated value of your items like furniture. Sites like Craigslist and eBay can also guide you while evaluating an item's worth based on its age and current condition, and how much it would cost you to replace that item if you had to.
As you’re compiling your estimate, consider an important distinction. Personal property coverage in renters insurance policies can provide either: reimbursement for the actual cash value or the replacement cost of your possessions.
- Actual cash value coverage pays you only what the item was worth at the time of the loss or damage. This valuation method takes into account the age and condition of the item and will only reimburse you for that amount regardless of what it might cost you to buy a new one.
- Replacement cost coverage will pay you the total amount to replace the item with one of similar size and quality.
Actual cash value coverage is a less expensive option. Still, replacement cost coverage is usually only about 10% more costly. You’ll avoid having to make up the difference between what your claim pays you and what you’ll need to spend on replacing the loss.
One final tip is to take photos or videos of your items while completing the inventory and gather any receipts you have. It will help you while you’re researching estimated values, and in the event of a claim, you’ll have backup to support your estimates.
What is the average cost of renters insurance?
Overall, renters insurance is relatively inexpensive. A basic policy will cost between $10 and $30 per month, although several factors contribute to your premium amount, such as:
Your zip code
Where you live will dictate how much you pay for your renter's insurance policy. Rates can vary depending on your area of the country, your state, and even which city you reside in. Check this chart to find the average premium cost for your state.
Your personal property
Remember that inventory you completed? Here’s where it factors into your cost. Most renters insurance policies are sold in $10,000 increments, and you’ll want to select a coverage tier slightly higher than your total estimate. The amount you select determines the rate you’ll pay. And don’t forget that replacement coverage is somewhat more expensive and will increase your premium.
Liability limits
Most basic policies include $100,000 in liability coverage, but if you elect to purchase more, increasing the limit will add to your costs.
Deductibles
Similar to auto policies, the amount of deductible you select will impact the total you pay. A higher deductible can reduce your annual premium amount, but means more out of pocket if you have a claim.
Tips to consider when policy shopping
Shop around
Different insurance companies will be able to offer different rates, and it’s worth the extra research to save as much as possible. Just make sure that when you’re comparing, each renters insurance quote has identical coverage.
Look for bundled discounts
Your auto insurance provider might also provide renters insurance coverage. Check with them to see if adding a renters policy might reduce your annual premium totals.
Don’t forget safety and prevention measures
Having a security system or upgrading locks might also provide additional savings. Ask the insurance agent to check all available discounts to see what you might qualify for.
Check your lease
Many landlords and leasing companies require tenants to have a basic renters policy before moving in. Additionally, some leases stipulate a minimum coverage limit, particularly for liability, so read carefully to ensure that your policy complies with their requirements.
A renters insurance policy is a smart and affordable way to protect yourself, your belongings, and your living arrangements after a covered loss. The annual premiums are a small investment and will provide you with greater peace of mind knowing that you're protected no matter what life throws your way.
Redfin does not provide legal, tax, or financial advice. This article is for informational purposes only and is not a substitute for professional advice from a licensed attorney, tax professional, or financial advisor.
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