Renters Insurance Explained, and Why You Need It
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As a renter, you know that you don’t need a homeowner’s insurance policy. However, even as a renter, it’s important to consider the benefits of having insurance to protect yourself and your personal belongings. A landlord’s insurance policy may protect the physical building you live in but won’t extend any coverage to you as the tenant. For many, purchasing a renter’s insurance policy is an affordable way to get peace of mind about your living situation.
In this article
Types of renter’s insurance
Overall, renter’s insurance policies are more straightforward than some other types of insurance. That being said, you should be familiar with certain types of coverage before you purchase a policy.
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Personal property coverage
Unfortunately, even if your landlord has an insurance policy that covers your building, this coverage doesn’t do anything for your personal belongings. So if your computer, furniture, clothing, or other items are damaged, you’ll be left to pay the bill alone. Renter’s insurance offers personal property coverage to take care of this for you.
When purchasing a renter’s insurance policy, you’ll have to choose the limit you want for your personal property coverage. The coverage limit is the maximum amount that your insurance agency will pay you to cover the cost of replacing your damaged items. To figure out what your coverage limit should be, you should consider the value of your belongings. How much money would you need to replace everything if you lose everything you own? You’ll want to make sure that your coverage limit is at least this amount or more.
What’s covered
Your renter’s insurance policy should cover damages from various situations, including fire, smoke, and certain water damage from your plumbing system. It should also cover theft and vandalism of your personal property.
What isn’t covered
Renter’s insurance policies only cover damages due to accidental and unforeseen circumstances. It does not cover any damage that you do to your own property, even if it’s accidental. Your policy may not cover expensive belongings such as jewelry or art collections. If you have expensive belongings you want to be sure are covered, you can talk to your insurance agent to see if you need to purchase any insurance policy add-ons to extend your coverage.
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Liability coverage
Liability coverage is an important component of renter’s insurance because it can help protect you if you’re found to be legally responsible for damage to someone else’s property. As with personal property coverage, the damage has to be accidental and unintentional. End up getting sued over damage to someone else’s property or someone else’s bodily injury. Your liability protection may also be able to help you cover your legal expenses. Your insurance agent can help you determine what coverage limit is appropriate for your liability coverage.
What’s covered
Your liability coverage may be able to cover the cost of repairing or replacing someone else’s property if you are found responsible for damage to it. This could even include if you accidentally damage your rental unit’s property, such as if you start a kitchen fire that results in the apartment needing repairs.
You may also be able to use your liability coverage if someone gets injured at your rental unit due to your own negligence. For example, if your dog bites a guest and the guest needs medical treatment, your liability coverage may be able to cover the costs of those medical bills. It’s important to remember here that if you own a dog, you’ll need to check with your insurance agent to make sure your policy covers your dog. Some renters' insurance policies may have breed restrictions, such as homeowners' insurance.
If you’re sued due to someone else’s property damage or injury, your renter’s insurance policy may help cover your legal expenses if you’re found legally responsible for the incident.
What’s not covered
Your liability coverage does not include protection against property damage to your own property. It also doesn’t include medical bill coverage for the policyholder, even if you get injured on your own rental property.
Loss of use coverage
Loss of use coverage is designed to help cover your additional living expenses, should you need it. To benefit from this coverage, your rental unit must become inhabitable due to a covered loss, such as a fire or other issue that could cause severe damage. If you are unable to use your rental unit as intended, you will likely have to spend money to keep up with your lifestyle. The amount of loss of use coverage varies by the insurance company, but it is usually in either a set dollar amount or a percentage of your personal property coverage.
What’s covered
If you’ve been displaced by an event covered by your renter’s insurance, you may be able to use your loss of use coverage on the cost of renting a different property or staying in a hotel room. It can also help with moving costs or storage costs if your belongings need to be relocated while you wait for a permanent place to live again. Other covered expenses include laundry and food costs, such as dining out at restaurants if you cannot use your kitchen to cook.
What’s not covered
Loss of use coverage does have its limits and won’t foot all of your bills for you while you’re displaced. In most cases, your insurance company will cover the difference between what you normally spend and what you must spend while you’re displaced. For example, if you have a $100 budget for eating out each week normally, but you’re eating out more because you can’t use your kitchen, your insurance company would cover the amount over $100 that you’ve spent.
Replacement cost coverage
Replacement cost coverage means that if a covered event damages your belongings, your insurance company will reimburse you for replacing them. For example, let’s say an old hand-me-down couch is destroyed by a fire. Your insurance company will replace it with a new one, even though the new one is sure to be worth significantly more than your old hand-me-down.
Actual cash value coverage
This type of coverage means that the insurance company considers the actual value of your items when deciding how much to pay you for your losses. So let’s say that old hand-me-down couch was only worth $75, but a similar couch today is worth $700. If you purchase a policy with this coverage, then you’ll be left on the hook for paying $625 out of your own pocket to replace your couch.
Companies that offer renter’s insurance
Allstate
Allstate’s renter’s insurance policies all come with personal property, personal liability, and loss of use coverage. If you live in an area where earthquakes or volcanic eruptions are a risk to your rental, you should know that Allstate’s renter’s insurance policy does not cover these events. However, you may be able to purchase additional insurance coverage for those situations. Coverage is available across the entire United States.
Lemonade
Lemonade is marketed as a modernized and affordable alternative to traditional insurance companies. In addition to offering renter’s insurance policies for as low as $5 per month, Lemonade donates its excess revenue to charities and nonprofit organizations. Lemonade is only available in some states, including New York, Michigan, Texas, and California.
State Farm
State Farm is a household name in the insurance world, known for its customer service and discounts. All its renters' insurance policies come with standard coverage but may not offer coverage for your roommates or their belongings. State Farm is available in all 50 states.
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Costs of renter’s insurance
The good news is that renter’s insurance is a relatively low-cost type of insurance. Like many other kinds of insurance, a few things can affect your policy's cost.
Coverage limits: You can choose your coverage limits within reason. The higher your coverage limit, the more expensive your policy will be.
Coverage types: Replacement cost coverage is usually more expensive than actual cash value coverage. It may be tempting to purchase the less expensive coverage option, but it’s important to consider the cost and value of your personal items to make sure that you’ll have enough monetary coverage if you suffer a loss.
Deductible: Your deductible is the amount you must pay out-of-pocket before your insurance company will pay for a covered claim. Raising your deductible may lower the cost of your policy (also known as the premium).
Some insurers also offer discounts if you bundle policies. To receive this discount, you must purchase both your renter’s insurance policy and another type of insurance policy from the same company. If you already have an auto insurance policy, you might ask your insurer if it can offer you a renter’s insurance quote. If the company offers a discount, it will likely be included in your quote.
Pros and cons of renter’s insurance
Pros
- Renter’s insurance covers the basics of your day-to-day life at a reasonable cost.
- Liability coverage can be beneficial if you are ever sued or held responsible for injuring someone else or their property.
- Renter’s insurance can help cover your living expenses if you are displaced from your rental due to unforeseen circumstances that make your rental uninhabitable.
Cons
- Renter’s insurance does have exclusions, so you might need to purchase additional coverage or even an entirely separate policy for some high-value personal items.
- Not all policies are the same, so you need to do your due diligence when picking an insurance company and policy.
- Renter’s insurance doesn’t offer coverage for your items or your own medical bills if you damage your own property or get injured within your rental.
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- Starting From $5/mo
- Most loved renters insurance in America
- Covered in as little as 90 seconds
- Claims paid at record speed
The bottom line
Do you need renter’s insurance? While some landlords do require tenants to have it, it’s not something that you are legally required to have. That being said, renter’s insurance offers essential coverages that can help you financially and legally if an unfortunate situation occurs.
When considering renter’s insurance, you should know that your landlord’s policy does not cover yourself or your belongings. If you want liability coverage that will help you replace your belongings if they’re lost or damaged in a fire, renter’s insurance is a good idea for you. Before you purchase a policy, be sure to get a quote and make sure you’re purchasing the types of coverage you want for your policy.
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Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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