Types of renters insurance

Your guide to the different aspects and categories of renters insurance

Kara McGinley

Kara McGinley

Published January 21, 2020

KEY TAKEAWAYS

  • Renters insurance is made up of three different parts: personal property coverage, liability coverage, and loss-of-use coverage

  • Replacement cost renters insurance policies will pay you for a loss as if your belongings were brand new. Actual cash value renters insurance policies will pay you for a loss at the depreciated value of your item

  • You can either have a named perils policy or an all-risk policy. All-risk policies cover most perils except for exclusions; named perils policies only cover the perils explicitly listed in your policy

Renters insurance is a smart investment for all renters, whether you rent a condo, apartment, house, or just a room. Some landlords will require their tenant purchase a certain amount of renters insurance coverage, but it’s a worthwhile product even if your landlord doesn’t require you to buy it. Renters insurance protects your personal property if it gets stolen, destroyed, or damaged by a covered peril.

If your stuff does get ruined, your renters policy will reimburse you for your items up to your policy’s limit. Renters insurance will also pay for medical or legal expenses if someone gets hurt on your rental property. If your home is damaged severely and you can no longer safely live there, renters insurance will pay for you to stay elsewhere, like at a hotel until your rental is liveable again.

Each of these instances are covered by separate categories of renters insurance contained within your policy. Your landlord might require you to purchase a certain amount of coverage for each category, but if they don’t then it’s totally up to you how much coverage you buy. You can adjust the amount of coverage depending on your budget, but renters insurance is typically very affordable — it costs an average of just $16 a month.

Knowing the different categories and aspects of a renters policy can help you save time when purchasing and understand your coverage.

In this article:

Personal property coverage

Renters insurance policies cover your personal property. Your personal property coverage will protect your belongings if they get damaged, stolen, or destroyed in a covered peril. Renters insurance will reimburse you for your items even if they get damaged or stolen off your property. For example, if your laptop gets stolen out of your car your renters insurance will still cover it.

Basic renters insurance covered perils are:

  • Fire and lightning
  • Windstorm and hail
  • Explosions
  • Riots
  • Damage by aircraft
  • Damage by vehicle (not your own)
  • Smoke damage
  • Vandalism
  • Theft
  • Volcanic eruption
  • Falling objects
  • Weight of snow, ice, sleet
  • Damage from steam-heating/water-heating appliances/systems
  • Leakage or overflow of water or steam
  • Freezing of plumbing, heating, air conditioning
  • Short-circuit damage caused by electrical appliances

What types of personal property are covered?

Renters insurance doesn’t necessarily cover all of your personal property equally. There maybe sublimits for certain categories of items. Generally, renters insurance will fully cover your everyday items, things like:

  • Furniture
  • Clothing
  • Cookware
  • Food and homegoods

If you have expensive belongings, like fancy electronics, jewelry, or fine art collections, they will be covered by renters insurance up to your policy’s limit. Your limit is the maximum amount your policy will pay you for a covered loss. For example, if your apartment has a fire and the total loss is$50,000 but your policy’s limit is $30,000 -- you will only be reimbursed $30,000.

Renters insurance does not cover your roommates stuff, unless you add them to your policy. If you add your roommate to your policy you will have to add the cost of their belongings, too. This will raise your premiums.

How much personal property coverage do you need?

You can decide how much personal property coverage you want when you purchase your policy. To determine how much personal property coverage you need, you should take an inventory of your belongings. A good inventory will contain the following:

  • Photos or videos of the item (this is helpful to have when filing a claim)
  • Receipts or credit card or bank statements proving purchase and price
  • Estimated item value
  • Estimated year the item was bought/made

Once you estimate the total value of your items, you will be able to determine how much personal property coverage you need so that you can get reimbursed if something does happen to your things.

Deductible for personal property coverage

Your deductible is the amount of money you have to pay your insurance provider before your coverage kicks in. For example, if your upstairs neighbor’s bathtub falls through your ceiling, destroying your $3,000 couch, and your deductible is $500, then you will need to pay your insurance company the $500 deductible before they will reimburse you for the rest of the cost of the couch.

When you sign up for your renters insurance policy you can choose your deductible price. The higher your deductible price the lower your premiums will be.

Additional coverage for personal property

Like we mentioned, renters insurance may not necessarily cover all of your personal property or all perils. If you have expensive items or live in an area of the country that experiences extreme weather, you might want to think about adding additional riders to your renters policy. There are a few common riders that people add to their renters insurance.

  • Scheduled property rider: Scheduled property riders add coverage for specific items that are not fully covered under basic renters insurance. It adds extra protection to items that exceed your policy’s limit or sublimits, like an expensive engagement ring.
  • Pet rider: If you have a pet and your renters policy doesn’t already cover related liability, you should think about adding a pet damage rider to your policy. It will provide coverage for your pet, so if your dog gets loose and bites your neighbor, your pet rider will help cover their medical expenses.
  • Earthquake coverage rider: Renters insurance doesn’t cover natural disasters like earthquakes or floods. You can add riders for these specific incidents. If you live in an area where those natural disasters are common, you should think about adding riders for those specific situations.

Liability coverage

When you sign up for your renters insurance policy you can choose how much liability coverage you want. There are two components to your renters insurance liability coverage:

  • Personal liability coverage: Personal liability coverage protects you if you’re found liable for harm or damage experienced by someone else. However, damage doesn’t always mean bodily harm, it could mean property damage, like if your AC unit falls out of your window and damages your neighbor’s car. When you’re liable for damage to someone’s property or harm to their person, your renters insurance policy will pay up to the maximum limit of coverage that you purchased. If you’re taken to court over the damage or injuries, your renters insurance will help you pay your legal fees.

  • Medical payments to others coverage: Medical payments to others coverage will reimburse you if someone suffers an injury while in your home. This coverage will reimburse the cost of their medical expenses up to your policy’s limit. This component of renters insurance also extends to cases when you are not on your property, too. Meaning if you hurt someone while you’re off your property then medical payments to others coverage can help you pay for their medical bills, even though it didn’t happen in your home. You will only be responsible for the victim’s medical expenses after their health insurance pays for their own obligations, so make sure they file a claim with their health insurance first.

Loss-of-use coverage

If your home becomes uninhabitable due to a covered peril, your renters insurance will help pay for you to stay elsewhere. Loss-of-use coverage is a provision of renters insurance that pays for expenses that add-up during the time that you are relocated from your home. Your loss-of-use coverage amounts will be outlined in your renters insurance policy’s declarations page, and just like the other categories of renters insurance, it’s up to you how much coverage you want to purchase.

Depending on your insurance provider, you will either get options of nearby hotels or be able to pick your own. However, you can’t use your loss-of-use coverage as an excuse to get a free vacation. Usually, your provider will reimburse you for a reasonable hotel, apartment, or house rental depending on your current rental property.

Your loss-of-use coverage will also pay for additional living expenses, like if you’re going to restaurants more because you don’t have a kitchen in your hotel room. You should keep receipts of any additional expenses that accrue while your home is being fixed.

Replacement cost renters insurance vs. actual cash value renters insurance

When you file a renters insurance claim, you will be paid out one of two ways: the replacement cost or actual cash value. When you first sign up for your renters insurance policy, you will decide which payment policy you want. After you decide this and purchase your policy you cannot change it.

  • Replacement cost coverage policy: Replacement cost renters insurance covers the cost of fully replacing your items if they are destroyed, damaged, or stolen. This type of policy will pay you the amount that your items were worth as if they were brand new (minus your deductible)
  • Actual cash value coverage policy: Actual cash value policies pay you the depreciated value of your item. This means if your couch is 10-years-old and was destroyed in a fire, your renters insurance would reimburse you for the cost of a similar 10-year-old couch (minus your deductible).

An actual cash value policy is cheaper than a replacement cost policy, but replacement cost policies will pay you out more, and will probably allow you to replace your stolen or damaged item with a brand new one. It’s up to you which you prefer and how high you want your premiums and deductible to be.

Named perils policy vs. all-risk policy

Another choice you will have to make when shopping for a renters insurance policy is whether you want an all-risk policy or a named perils policy. The type of policy you have will determine what qualifies as a loss when you’re filing a claim.

  • All-risk policy: All-risk policies cover virtually any incident that results in a loss or damage. This means you will be reimbursed by your renters insurance company, unless a certain peril is specifically excluded in your policy.
  • Named perils policy: A named perils policy only covers what is explicitly included in your policy. Any peril not named in your policy is excluded.

Since named perils policies are so specific about what can and cannot be covered, they end up costing less, since it’s slightly less likely that your peril will be covered in the event of a claim. This means your insurance company sees you as less of a risk to file a claim, so your premiums are cheaper.

How to file a renters insurance claim

If your personal property is stolen the first thing you should do is file a police report. If your rental property has been broken into, you should call the police and then alert your landlord. Your landlord can help you secure your property after the break in.

If your belongings are damaged or destroyed by another covered peril, like if there is fire or smoke damage,you should get in touch with your insurance company to file a claim as soon as the immediate danger is resolved. Most insurance companies require you file a claim within 72 hours of a covered incident. You can file a claim over the phone or through your insurance provider’s website or app. To make the process easier, you should provide your insurance company with:

  • Your policy number
  • Your renters insurance declarations page
  • Your home inventory
  • The police report (if you filed one)
  • Documentation of the damage (photos, videos)

Once you file a claim, your insurance company will assign you a claims adjuster. The claims adjuster will investigate the situation and assess the damage to determine how much the insurer will pay your for the loss.