How renters insurance and deposits work.
There are three questions people have about renters insurance and deposits, and we can answer them all quickly:
Can you get renters insurance if you haven’t made a deposit on an apartment? Yes. You don’t need proof of deposit or even a lease to get renters insurance, just your address.
Can you get a renters insurance policy that will mean you don’t have to pay a deposit on an apartment? No. Renters insurance has nothing to do with your security deposit — that’s between you and your landlord.
Do you have to pay a deposit to a renters insurance company before you are covered? Technically no — insurance companies don’t require any money down before you start paying premiums. But you do have to make your first month’s premium payment in order to be covered.
Maybe these answers delight you. Maybe they bum you out. But some good news is that renters insurance offers you protection in your new home for cheap, usually under $20 a month, and that it’s super easy to get. You can start by getting a free quote from Policygenius.
Renters insurance companies don’t require a security deposit or down payment, but you do have to pay the first month’s premium before your renters policy is made active.
That’s true for every renters insurance company and for all insurance policies: life insurance, car insurance, homeowners insurance, health insurance, disability insurance. You’re not covered until you pay your first premium.
Some people who sublet apartments or informally rent rooms from friends or family members don’t realize that they can get renters insurance without having a made a down payment on a room, paid a security deposit, or even signed a lease.
You don’t need any official paperwork or canceled checks to qualify for renters insurance: you just need the address of where you’re living.
It doesn’t make sense to start paying for renters insurance on a new apartment before you move in if you’re already paying for a policy on your old place, but if you want to apply for a policy for an apartment before you sign the lease or pay a security deposit, there’s nothing stopping you.
In fact, seeing the quotes may help you more fully understand your monthly expenses, and you can even sign up to have the policy be active on your move-in day.
There are two things you have to do to ensure that your renters insurance policy is in force: you have to sign your renters insurance policy, and you have to pay your first premium. That money isn’t technically a down payment or a deposit — you’re paying for the first month of your period of coverage.
The payment is an essential part of the contract, and it makes it binding. Without it, you’ve just expressed interest in getting renters insurance. The payment makes it official.
And unlike many other insurance types, which can cost hundreds of dollars a month, monthly renters insurance premiums are generally very cheap; a monthly payment is under $20 a month, usually.
So even though you have to make a payment up front to get your renters insurance policy in force, the amount is low and affordable to most people.
Some people mistakenly think that having renters insurance means they don’t have to pay a security deposit; after all, if the deposit is to protect the landlord, won’t proof of insurance do just as well?
Unfortunately, renters insurance doesn’t work like that. First of all, renters insurance doesn’t cover any damage that you do to the apartment. Renters insurance is to protect your personal belongings and personal liability, not the structure; your landlord’s insurance covers that.
What your renters insurance policy does offer your landlord is the possibility of reimbursement through legal action, and that’s one reason why many landlords require it.
For example: If you accidentally burn the building down, your landlord’s insurance will pay to rebuild the building. But your landlord will still have to pay a deductible, which could be tens of thousands of dollars. His recourse for that payment would be to sue you.
If you have renters insurance, your policy would cover your legal costs and any monetary judgement up to your liability limits. If you don’t have renters insurance, you’ll be paying out of pocket.
When you are choosing a renters insurance policy, you can choose how you pay your premiums: you can pay monthly, quarterly, or even yearly. There are some financial benefits to paying quarterly or yearly: most companies will give you a discount, since it means their administrative costs on your account are lower.
But if you’re concerned about immediate costs over long-term savings, it makes sense to choose to pay your premiums monthly. That way, you’ll only have to pay one month’s premium in order to have your policy in force.
Once you know that you can get renters insurance by just paying the first month’s payment, the next logical step is to find a renters insurance plan with the lowest possible monthly payment.
But before you open a tab and Google “cheapest renters insurance,” it’s important to know that getting the right amount of renters insurance is just as important as getting covered, and that the same coverage can cost different amounts based on your zip code, your credit history, and more.
It’s important to buy the right amount of renters insurance coverage. If you buy too little, it may not do what you’re buying it to do in the first place, which is to protect your personal belongings and personal liability in the event they’re destroyed by a covered peril.
If have time, making a home inventory is the best way to find out how much personal property coverage you need. Essentially, you make a list of everything you own and estimate the price of each item and then add it up, and that’s how much personal property coverage you need (most people underestimate the value of their stuff).
But if you’re in a hurry, you can use Policygenius’ Personal Property Calculator, available when you get renters insurance quotes, to help you estimate how much your stuff is worth and how much coverage you need.
For liability coverage you have have more flexibility based on your assets and comfort with risk. Many people recommend $100,000 liability as a minimum, and more if you have assets that exceed that amount. (Rule of thumb: your liability coverage should exceed the value of your assets.) It’s also important to consider your landlord’s insurance requirements for tenants.
There is no one company that has the cheapest renters insurance.
Because your renters insurance rates are based on so many different factors — including zip code, credit score, and more — an insurance company that gave a friend a great rate may give you a high rate, and vice versa. In fact, the cheapest renters insurance company for you at one address may not be the cheapest carrier at another house.
The best thing to do when shopping for renters insurance is to shop around. Get multiple quotes from several insurance companies when you are looking for renters insurance coverage to ensure that you’re getting the best deal.
Read about the best renters insurance companies.
Logan Sachon is the co-founder of The Billfold, a groundbreaking personal finance site for millennials that was named one of Time's 25 Best Blogs of 2012. Her work has been published in New York Magazine, Glamour, The Guardian, BuzzFeed and more.