Renters insurance protects people who are renting their living space from certain types of damages or losses. There are three basic types of coverage that can be bundled together to create a comprehensive package.
No state currently requires renters insurance, but you might find that some landlords or rental agencies require it before they’ll rent to you. Even if it’s not required, it’s still a good idea. Renters insurance works like a homeowners policy, offering you different layers of protection if something happens to your living space, to you or other people, and to your possessions.
How Does Renters Insurance Work?
Renters insurance gives renters a way to protect their belongings. It’s unwise to assume that your landlord’s insurance will cover you. In fact, there is no law that requires the property owner to have landlord insurance. Even if your landlord has insurance, it almost never covers your losses and damages.
Each renters insurance policy will list several perils that they cover. It’s best to look at the policy to see what your specific coverage options are, such as:
- Fires and smoke damage
- Certain water damage situation
- Windstorms and hail
- Vandalism and theft
- Damage from aircraft or vehicles
In addition to protecting your belongings, your renters insurance may cover the bill for a hotel or temporary residence if your apartment is destroyed or unlivable. Some policies also kick in to cover expenses like food, laundry, parking, and other essentials.
Another benefit involves liability. If a friend gets injured at your place, your renters insurance may cover some legal fees and hospital bills. And, in some cases, your insurance will extend to damages that you cause when you’re not at home.
How Much Does Renters Insurance Cost?
According to the National Association of Insurance Commissioners, the average cost for renters insurance in the United States ranges between $15 to $30 per month. That amount varies depending on how much insurance you want to take out, where you live, if you have expensive valuables, if you pick a cash value or replacement cost policy, your credit rating, and any add-ons you attach to the policy.
What Does Renters Insurance Cover?
Every renters insurance policy contains three basic buckets of coverage. Within each of those buckets are different options and those will be detailed in your specific policy. The buckets include personal property, personal liability and injury to others, and temporary relocation or compensation for loss of use.
Your Belongings, or Personal Property Coverage for Renters
This portion of your renters insurance is where all of your “stuff” resides. If your property gets damaged, stolen, or destroyed due to a peril that’s named in your policy, it will be covered. This coverage may extend to some of your items even when they’re not in your apartment – for instance, a computer stolen out of your vehicle would be covered.
Because renters insurance policies are flexible, you get the option of picking how much coverage you need for your personal property. If you have a lot of electronics or expensive furniture, you might want more coverage. Rather than simply guessing, it’s best to look at your items and estimate their value and then estimate the cost to replace those items. This leads you to another big decision – replacement cost or cash value coverage.
When it comes to the differences between the two, it’s important to note that cash value coverage takes depreciation into account, whereas replacement cost coverage does not. For example, you have a 10-year-old television that gets struck by lightning. Its value has probably decreased significantly, so having cash value coverage on it is not going to help. But if you have replacement cost coverage, you can go buy a new television to replace the ruined one.
Most renters insurance policies will allow for property coverage in the range of $10,000 to $25,000. If you have expensive items, perhaps an art collection or priceless heirloom, then you’ll want to find a different type of coverage for these specific items because your renters insurance may not cover high-value items like this.
Injuries to Others, or Personal Liability Coverage for Renters
The injury and personal liability portions can be very useful parts of renters insurance. When it comes to personal liability, this coverage can step in if you damage your landlord’s property or someone else’s property. For example, you don’t know how to work the stove in your apartment and break it. Your renters insurance will most likely cover repair expenses or replacement.
Your renters insurance might also step in if you injure someone. Perhaps you trip and knock a friend down and she breaks her leg. If this happens in your home, your renters insurance will help with her bills and attorney fees, if they decide to sue. Your policy might also kick in if the same situation happens but you’re not home.
If you have pets, then you could benefit greatly from renters insurance as the injuries or damage your pet causes might be covered. Most pets and situations are covered, but there are some pets, including some dog breeds, that are excluded from renters insurance.
It is important to note that renters insurance policies usually cap liability payments at $100,000. Sometimes you can purchase a higher liability policy, but this amount is considered enough for most renters.
Temporary Relocation, or Loss of Use Coverage for Renter
A nice perk with renters insurance policies is that they’ll step in with temporary living expenses or even permanent relocation expenses. If your home is unlivable during a repair or you won’t be able to move back in at all, your insurance can help. Some policies even go beyond housing expenses and will kick in with food and other necessities. How long they’ll cover and how much depends on your specific policy.
It’s important to note that this coverage is going to be limited by what is termed “normal” living needs. So, staying at the Ritz and ordering caviar from room service every night will not be covered, but a local hotel and a $20/meal per diem might fit within your insurance company’s view of normal. You also won’t be put up forever, there will be a time limit or dollar limit set for your temporary housing expenses. The goal is to get you back into your apartment or help you out while you find a new place to live.
What Does Renters Insurance Not Cover?
While renters insurance offers you a lot of coverage, it doesn’t cover everything. It’s important to look at your policy to see what perils are covered and what aren’t. If you’re interested in coverage for the following events, it might be possible to purchase an extra policy or a rider.
- Scheduled Personal Property: This is a supplemental policy that extends coverage for your property. This is very useful for the individual who has a valuable collection, artwork, or even an expensive piece of jewelry like an engagement ring.
- Flood or Earthquake Insurance: These events are usually considered disasters and not covered under regular insurance, but a rider policy is typically available, and it can be added if you want protection from these events. It should be noted that some water damage events, like a broken pipe, can cause “flooding” that will be covered in your renters insurance. Natural disaster floods are different than equipment failure floods.
- Umbrella Insurance: Umbrella insurance is a separate policy that works as a safety net financially if damages or expenses exceed your original policy. For example, when it comes to personal liability coverages, a renter’s policy may not cover an insured who commits slander against another person, but an umbrella policy would.
Policy Limits and Deductibles on Renters Insurance
Policy limits are set amounts in your renters insurance that are the upper limits of coverage. If you have a $10,000 policy limit for personal property but discover you have $12,000 in damage, you’ll only get reimbursed for the upper limit of $10,000. Each portion of your coverage will have a different policy limit and you might be able to adjust them, but this will also come with a premium adjustment.
Almost all renters insurance policies have deductibles. This is an amount of money that you’re expected to pay before your insurance kicks in payments. In the example above, if you had a $1,000 deductible, then you’d have to pay that $1,000 first, after that, your insurance will pay. Since the limit is $10,000 they’ll then pay the full $10,000 toward your total damage of $12,000. If you only had $10,000 in damage, you’d still pay your $1,000 deductible, but then your insurance would only pay $9,000, or the balance.
The deductible on renters insurance is often $500 or $1,000, some policies are higher, but it’s still low when compared to homeowners deductibles. This is because the policy limits are much lower and there is no structural coverage with a renters policy – that would be covered by the building owner’s insurance.
How to File a Renters Insurance Claim
If you feel you’ve had a situation that might require your renter’s insurance, there are several steps you should take to get the ball rolling and start your claim. If the situation requires police or medical intervention, contact them first, otherwise, your first call should be to your insurance company to ask for advice and start the process.
Most situations will also require a call to your landlord, even if they’re not directly involved in what happened, it’s usually best to let them know what occurred on their property.
Begin documenting the damages as soon as possible. Photos and videos are good, but medical bills, old receipts for damaged items and a list of what replacement items are, and even witness accounts or expert information can come in handy, too.
Walk through the paperwork your insurance needs with an agent if necessary. You don’t want to miss any important steps and it’s good to do it while the incident is fresh in your mind.
Some renters insurance companies will pay out quickly – within a week or two – and others can take longer. It’s not just how fast the company is, your reimbursement can also depend on you purchasing new items, repairs being made, or medical bills and follow-up appointments. Each situation is unique and comes with its own timeframe.
When it’s all said and done, it’s a great idea to update your personal possessions inventory, especially if you’ve purchased new items.
What to Consider When Purchasing Renters Insurance
When you start shopping for a renters insurance policy, make sure to ask about:
- Personal property coverage
- Liability coverage
- Relocation or temporary housing assistance
- Limits on each portion of coverage
- Any deductible amounts
- Monthly cost
- Can you add more coverage or less to fit your budget
- What is included/excluded (ask about perils specifically)
- Available rider policies
- Are pets covered (look for exclusions)
- Actual cash value or replacement cost policy options
Once you have all of that data, it’s time to evaluate the value of your property, the likelihood of a loss or incident occurring, and your budget.