Renters insurance protects your personal belongings if they are damaged, stolen or destroyed by a covered event, and it protects your personal liability if you accidentally hurt someone or they accidentally get hurt at your home and sue you. Renters insurance also includes loss-of-use coverage, so if your home becomes uninhabitable due to a covered peril, then your renters policy may pay for you to temporarily live in a nearby hotel.
It’s an essential way to protect yourself and your personal belongings. Renters insurance is one of the cheapest insurance products you can buy, costing an average of $16 a month. But very few landlords require it, and just 40% of renters have it. So do you need renters insurance? Probably — and the 60% of renters who don’t have it very likely need it, too.
In this article:
Why do I need renters insurance?
Renters insurance is important because it means you won’t have to pay to replace any property you lose in a covered peril, such as fire, theft, or some kinds of water damage. Your insurance company may also reimburse you for some of the medical and legal expenses you’re responsible for if a guest is injured in your house or apartment, as well as the costs if you damage someone else’s property, like if you’re visiting someone’s home and accidentally break an expensive item.
Renters insurance also covers your personal property when it is off your rental premises, so if your laptop gets stolen at the airport, your renters policy can reimburse you for the cost.
These costs can add up. If you don’t think you can afford to replace your expensive personal belongings out of pocket, then you need renters insurance. It’s very affordable, too. Many people pay between just $10 to $15 per month for full coverage of all their stuff.
When landlords require renters insurance
Landlords frequently require getting renters insurance to the signing terms of your lease agreement. They may even specify the amount of coverage you need to purchase.
Your landlord has a form of homeowners insurance that covers property damage to the building, but you may be liable for damage not covered by their policy. In that case, your renters insurance coverage could pick up some of the liability costs. Landlord insurance does not cover your personal property and your landlord will not cover any living expenses you accrue if your rental becomes uninhabitable.
Landlords might require you to get a renters policy for a variety of reasons, but mainly to minimize their own risk and liability.
Who needs renters insurance?
Basically, if you are renting your home and you cannot afford to pay out of pocket to reimburse your personal belongings if they get damaged or stolen, you should purchase a renters insurance policy. Renters insurance liability coverage will also help you pay medical expenses or legal fees if someone gets hurt on your personal property or if you cause them harm, as well as cover the costs if you damage someone else’s property. Essentially, renters insurance is financial protection for all renters — whether you rent a condo, apartment, house, or room.
There are a few common scenarios in which you should purchase renters insurance even if it is not required by a lease.
Your roommate has renters insurance, but you don’t
If you live in a shared house or apartment and your roommate has renters insurance, you are only covered by their policy if your roommate adds you as a named insured.
But it’s probably more worth it to just to purchase your own policy instead. If you are added to your roommate’s policy, you’d also have to navigate the claims process together and your own claims could affect your roommate’s insurance rates in the future. With your own policy, you can make sure you’re getting enough coverage for yourself.
You live in a disaster-prone or high-crime area
There are many covered perils in your renters insurance policy. These are the situations for which you’re eligible to receive reimbursement if one of them causes your loss. Covered perils, also called named perils, include everything from bad weather like (windstorms, to elemental hazards like (fire, to threats like theft and vandalism.
If your policy doesn’t include a certain peril, then it likely isn’t covered. However, you can always add endorsements to your policy to add more coverage for a certain peril if it’s not covered by a standard renters policy, like an earthquake or flood endorsement.
You’re a pet owner
Your renters insurance policy’s liability coverage protects you when your pet injures a guest under its provision for medical payments to others. This could include everything from dog bites to allergic reactions. However, if your pet causes damage to your physical rental dwelling, be it an apartment complex or house, renters insurance won’t cover it.
Note that having a pet that insurers consider to be higher risk, like a pit bull, can cause your premium rates to increase.
You work from home
If you work from home, you do have coverage for items you use for business, but it could be restricted to a certain dollar amount. These restrictions are called sublimits, and you may be able to purchase an endorsement, or a separate commercial property policy, to make sure your business-related belongings are covered.
What does renters insurance cover
When you purchase renters insurance, you’re actually getting several types of coverage in one affordable policy. Like other types of property insurance, renters insurance is made up of multiple components, all of which offer different types of protection:
Liability coverage and medical payments to others: Liability insurance provides protection if you’re responsible for someone getting hurt and they sue you. Medical payments to others coverage helps pay their medical bills. Liability coverage can also cover you if you damage someone else’s property.
Loss-of-use coverage and additional living expenses: Pays for additional living expenses if you need to stay somewhere else because your home is unlivable due to a covered peril.
What perils does renters insurance cover?
Renters insurance covers theft and damages to your personal property by a covered perils. Some popular covered perils are
Fire and lightning
Windstorm and hail
Damage from steam-heating/water-heating appliances/systems
Freezing of plumbing, heating, air conditioning
Short-circuit damage caused by electrical appliances
There are two types of renters insurance policies: all-risk or named perils. An all-risk renters insurance policy will reimburse you for the loss regardless of how it was caused. A named perils renters policy will only reimburse you for the predefined perils outlined in your policy.
What doesn’t renters insurance cover
You may need to add some additional coverage to your policy if you want to be covered for perils that are excluded from a basic renters policy. Typical exclusions include natural disasters like floods) and earthquakes).
Depending on your insurance company, certain types of property can also be excluded from your policy or have low limits. You may need to add extra coverage for specific items like jewelry, electronics, or expensive collectibles.
How much renters insurance coverage do I need?
Before you purchase renters insurance, you should first take a home inventory and add up the total value of your personal property. Then, try to estimate how much you can afford to pay out of pocket if a guest gets seriously injured in your home. Without renters insurance, you could struggle financially to pay these costs. Since renters insurance is so affordable, and a basic policy will cover most of an average renter’s belongings, it’s a smart buy, and there’s really no downside to investing in coverage.
Each component of renters insurance has its own maximum coverage amount. Most renters insurance companies have these typical coverage maximums:
$10,000 to $25,000 for personal property coverage;
$100,000 to $300,000 for personal liability coverage;
$1,000 to $3,000 for medical payments to others; and
$3,000 to $10,000 for loss-of-use coverage.
If you need more than that – or less than that – you can purchase a policy with higher limits, and your premiums will be adjusted accordingly.