How does renters insurance work?

Hold onto your leases, because we’ve got all the answers to your renters insurance questions, from costs to claims.

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Logan SachonSenior Managing Editor, Life Insurance & ResearchLogan Sachon is a former senior managing editor of life insurance and research at Policygenius. As a journalist, her work has appeared in The Guardian, Business Insider, CNN Money, BuzzFeed, Money Under 30, VICE, New York Magazine, and elsewhere.

Updated|7 min read

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Only 41% of renters have renters insurance, which kind of blows our minds, because renters insurance is super simple. In fact, renters insurance is one of the most straight-forward types of insurance available. Renters insurance is to get (as in understand) and get (as in buy).

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Who needs renters insurance

If you rent an apartment, house, or even a just a room, there’s a good chance you could benefit from renters insurance. Some building managers require renters to get renters insurance, but many don’t. But just because no one is requiring you to buy it doesn’t mean you should write it off.

Renters insurance is a good option for anyone who wants their belongings to be covered in the event of a fire or a break-in, anyone who is worried about personal liability and medical payment coverage in the event a guest is injured in your home, or anyone who wants to be covered for the cost of lodging, food, and more in the case your home becomes unlivable due to damage.

Basically, if you rent and want some protection from personal property damage or liability, renters insurance is for you!

How to get renters insurance

Renters insurance is one of the easiest and most affordable ways to start taking steps to secure your future and limit your liability in the event of bad luck. Even if you don’t need to start thinking about life insurance quite yet (or if you do and just don’t feel ready), a renters insurance policy is an affordable and easy way to dip your toes in the insurance pool and find out how great it feels to be covered.

Applying for renters insurance takes just a few simple steps:

  1. Create a home inventory of everything you own.

  2. Decide how much coverage you want.

  3. Start shopping online.

  4. See if you qualify for discounts.

To get started, visit our guide to buying cheap renters insurance online.

All about the home inventory

You can buy renters insurance without taking stock of everything you own, but you’ll get the best coverage if you know exactly what you’re covering and how much it’s worth. Compiling a home inventory can help ensure that your policy covers the value of your belongings so you avoid a gap in coverage.

Plus, in the event that you do you need to make a claim, the home inventory (including pictures and receipts or estimated values) can help your insurance company move ahead with the payout, ensuring your renters insurance policy works fast for you.

Luckily, technology makes taking stock of all your stuff easier than ever. Check out our tips for taking a home inventory.

How much renters insurance costs

The good news about renters insurance is that it’s more affordable than you might think — in fact, it’s one of the most affordable types of insurance you can buy.

Rates depend on where you live, the type of policy you buy, and the value of the property you are insuring, but a basic renters insurance policy can cost between $10 and $20 a month, or $120 to $240 a year. Additional endorsements for expensive tech equipment, high-carat bling, or priceless artwork can make that number creep up alongside the level of protection. The best part though: the amount of coverage is totally up to you.

Find out the average cost of renters insurance in your state, plus learn about what factors influence renters insurance premiums.

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Understanding renters insurance coverage

One of the key components of understanding how renters insurance works is figuring out what it does and doesn’t cover! The basic tenet is that your landlord’s insurance covers the building and your renters insurance covers the stuff inside, but there are some exceptions as to when coverage applies. Luckily, we’re here to help you sort it out.

What renters insurance covers

A basic renters insurance policy covers the stuff you typically keep inside your home: clothes, furniture, laptops, jewelry. If those things get stolen or destroyed during qualifying events, your insurance policy will pay for you to replace them.

Common qualifying events for renters insurance claims include:

  1. Fire and lightning

  2. Windstorm and hail

  3. Explosions

  4. Riots

  5. Damage by aircraft

  6. Damage by vehicle (not your own)

  7. Smoke damage

  8. Vandalism

  9. Theft

  10. Volcanic eruption

  11. Falling objects

  12. Weight of snow, ice, sleet

  13. Damage from steam-heating/water-heating appliances/systems

  14. Leakage or overflow of water or steam

  15. Freezing of plumbing, heating, air conditioning

  16. Short-circuit damage caused by electrical appliances

One perk of renters insurance: your stuff remains covered even when you take it with you outside your home. So if someone steals all of your luggage when you're traveling, to give a nightmarish but not uncommon example, your renters insurance policy may offer coverage for your stuff (whew).

In addition to replacing your stuff, your renters insurance policy also includes liability coverage that protects you in case someone gets hurt at your apartment. Your renters insurance company may pay for their medical bills, your legal expenses if they sue you, and more. Klutzy friends? Liability coverage, for the win.

Many insurance policies will also pay additional living expenses (ALE), which are the temporary expenses you’ll incur if you have to vacate your apartment for repairs relating to a covered event; check your policy to see what your insurance company will cover.

What renters insurance doesn’t cover

Renters insurance can be totally clutch in many emergencies including fires, but there are some damages that it won’t cover. Check with your insurance company about your specific policy, but in general, basic renters insurance won’t cover damage from the following:

  1. Flooding

  2. Hurricanes

  3. Earthquakes

  4. Tornadoes

  5. Sinkholes

  6. Pests and vermin (including bed bugs)

  7. Terrorism and acts of war, including nuclear war

So: check with your insurance company to figure out what you do and don’t have coverage for, and then check to see if you can buy additional insurance coverage to fill in the gaps. For instance, you can buy flood insurance or earthquake insurance if those are a concern.

As far as your specific property, it’s important to pay attention to what your policy covers, especially when it comes to higher ticket items, items you use for work, and items owned by roommates. Most renters insurance policies only cover the property of the renters listed on the policy (or property those renters have borrowed) — roommates who aren’t listed on the policy aren’t covered. And expensive items like art, jewelry, or antiques are generally subject to limits unless you purchase additional coverage in the form or endorsements or standalone policies, so read the fine print!

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All about renters insurance endorsements

Worried about some of things on the “not covered” list? You may have a savior in the renters insurance endorsement.

An endorsement is an optional addition to your coverage to protect property that would otherwise be excluded from a basic plan.

Here are a few common renters insurance endorsements:

  • Scheduled property endorsement

Scheduled property endorsements increase the coverage for specific items that wouldn’t be fully covered under a basic plan, like your diamond tiara or your nice little Renoir.

  • At-home business endorsement

Typical renters policies won’t cover business equipment in your home if you make more than $2,000 a year from the business (anything under that amount is at that rate, it’s considered a hobby and therefore still covered as personal property). If you make more than that, your renters insurance won’t cover the equipment you use for your business, so you may need an at-home business endorsement to cover that equipment or even a separate commercial or business insurance policy.

  • Replacement cost endorsement

There are two kinds of renters insurance — replacement cost policies (pay out more, cost more) and actual cash value policies (pay out less, cost less). If you have an actual cash value policy, you can get a replacement cost endorsement for a specific item, so you pay a little more up front, but get enough to replace it in the event of a claim.

Endorsements also exist to cover you during events that your basic policy doesn’t cover, like an earthquake endorsement.

Read more on the kinds of endorsements you can add to your renters insurance.

Renters insurance claims get paid out differently depending on the type of policy you buy: replacement cost or actual cash value.

A policy that pays actual cash value will pay you what the item is worth today. So if you purchased a laptop three years ago and it got stolen today, you would get a check for that laptop would be worth today, not what you originally paid for it.

A policy that pays replacement cost pays the cost of repairing or replacing the item with no depreciation factored in. So a replacement cost policy would give you money to replace the laptop outright, not just an older version of that laptop.

Replacement cost policies can be more expensive because they pay out more in the event of the claim. Whichever policy type you choose, filing a renters insurance claim is super straightforward.

Here’s how to file a renters insurance claim:

  1. Let your landlord and/or the police know (if your stuff has been stolen, your insurance company may want a police report).

  2. Compile your info, including your home inventory, your policy number, damage documentation (including photos!) and the police report or witness statements, if necessary.

  3. Contact your insurance company (and jump to it, you often have just 48 to 72 hours to file a claim).

  4. Complete a claims form.

  5. Collect your claim.

Read more about how to file a renters insurance claim.