What does renters insurance cover?
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As a renter of a home or apartment, you may be considering whether it’s worth the cost to purchase a renters insurance policy. Renters insurance is a type of coverage that is designed to provide financial protection for your personal property in your rental unit, and it also provides coverage for your liability exposure, should someone become injured on your property. And, the good news is that this type of coverage offers you extra protection, purchasing renters insurance generally won’t cost you a ton of money.
On average, renters insurance costs about $174 per year as of 2022, according to the Insurance Information Institute (Triple-I). And, much like the right auto insurance policy, renters insurance can be an invaluable part of your financial plan. That said, you may be wondering what is covered under renters insurance, and what may not be covered under this type of policy. By understanding your renters insurance coverage, you may feel more comfortable with your policy and more in control of your finances. Here’s what you should know.
What does renters insurance cover?
Your renters insurance policy provides several areas of coverage and may be able to be customized to fit your unique needs. The coverages discussed here are fairly standard, but all renters insurance companies are different. Checking with your agent regarding the specific coverages included on your policy may be a good idea.
With these coverages, you will first pay a deductible as determined in your policy before your insurance provider helps cover costs.
Liability coverage is designed to provide financial protection for you if someone is injured on your property. It could also help pay for attorney fees and legal representation. In fact, your liability coverage may even extend to injuries you are found at fault for that occur off of your premises, such as your dog knocking down a neighbor while you are on a walk.
Liability coverage is an integral part of a renters insurance policy. Most companies offer liability coverage starting at $100,000, although $300,000 and even $500,000 are not uncommon coverage levels. These amounts may seem high, but if someone is injured and sues you, the bills can add up quickly.
Personal property coverage
Personal property coverage is the backbone of a renters insurance policy. Because your landlord is responsible for the structure of your rental home or apartment building, a renters insurance policy does not include dwelling coverage like a home insurance policy does. However, you are responsible for your personal belongings, like your clothing, furniture and electronics, and that is where renters insurance comes in.
Renters insurance policies cover your personal belongings on a named peril basis, meaning that your belongings are only covered for certain situations. The named perils most commonly included are:
- Fire or lightning
- Windstorm or hail
- Damage caused by the weight of ice, snow or sleet
- Damage caused by the accidental discharge of water or steam from a household appliance, or from a plumbing, heating, air conditioning or sprinkler system
- Damage caused by the sudden and accidental cracking, burning, tearing apart or bulging of a steam or hot water heating system, air conditioner or sprinkler system
- Damage caused by the freezing of a household appliance or plumbing, heating, air conditioner or sprinkler system
- Damage caused by a sudden and accidentally generated artificial electrical current
Keep in mind that these perils only refer to your personal property. If your ceiling caves in after a heavy snow, for example, your renters insurance policy will help pay for the damage to your belongings, but your landlord’s policy will pay for the damage to the building itself.
Actual cash value vs replacement cost
Typically, you will have a choice between two types of personal property coverage on a renters insurance policy: actual cash value or replacement cost. You may even have a third option, called guaranteed replacement cost coverage. These will determine how your coverage applies after the deductible is taken into account.
Actual cash value (ACV) coverage will pay to replace your belongings at their depreciated value. For example, if you purchased a TV for $1,000 and it loses 10% of its value each year, after five years it will only be worth $500. If your TV is damaged, your insurance claims adjuster will calculate the depreciation to determine how much to pay you for it. More or less depreciation may be taken out depending on the condition of the TV. ACV policies are typically the least expensive option.
Replacement cost coverage will pay you the amount it will take to replace your damaged or destroyed items with comparable new items. For example, even if the TV in the example above is five years old, a replacement cost policy will give you the $1,000 that it would take to buy a similar new TV. Replacement cost policies are typically more expensive than ACV policies since they agree to pay you a higher amount.
Guaranteed replacement cost takes things a step further. If your damaged or destroyed items cost more than the original value to replace, a guaranteed replacement cost policy will pay the higher amount. If it would take $1,500 to replace your damaged TV, even though you only paid $1,000 for it when you purchased it, a guaranteed replacement cost policy should pay the $1,500. Guaranteed replacement cost typically costs the most of these three options, and may not be available from every company.
What does renters insurance not cover?
Although renters insurance offers a good amount of financial protection for its relatively low cost, not everything is covered. Some common exclusions on renters insurance policies include:
- Flood damage: If you live in an area prone to flooding and are worried that your personal belongings could be damaged in a flood, you may want to consider a separate flood insurance policy.
- Earthquake damage: You may be able to add earthquake coverage to your policy by endorsement. If you live in an area of the country where earthquakes are common, you may need a separate policy.
- Damage caused by pests: Because it is your landlord’s responsibility to maintain your rental home or apartment building, pest damage, even to your personal belongings, is usually excluded from a renter’s insurance policy. If your landlord is found negligible for allowing a pest infestation, the liability on their landlord insurance policy should cover your damages.
- Damage to or the theft of your vehicle: To get coverage for your vehicle, you need to have auto insurance. Your personal belongings may be covered under your renters policy if they are stolen, but the car itself or any damage to it is never covered under a renters insurance policy.
- Your roommate’s belongings: Unless you and your roommate have a joint policy where you are both listed as named insureds, your roommate’s belongings are not covered under your renters insurance policy.
- Damage in excess of your policy limits: If you have a renters insurance policy, you should consider how much coverage you need to replace your belongings. Your liability coverage will also only pay up to the limit you choose. However, damage you cause to the unit or injuries you or your family sustain are not covered by renters insurance.
Every renters insurance company is different, so talking to your agent is the best way to determine what is and is not covered by your policy.
What customizations can you make to a renters insurance policy?
Renters insurance policies often come with endorsements that you can add to customize your coverage. Common endorsement options include:
- Replacement cost coverage for your belongings
- Identity theft protection
- Scheduled articles coverage
- Business property coverage
- Refrigerated property coverage
If you are not sure how much renters insurance you need or what coverages to choose, talking to a licensed agent may help you to decide on policy options that are appropriate for you.
Frequently asked questions
Deciding which renters insurance company is right for you can depend on a range of personal factors and preferences. There are numerous renters insurance companies on the market, and one of the best ways to find coverage that fits your needs is to request quotes from several companies. This lets you compare the available coverages, discounts and price before making a decision on a policy.
Your renters insurance policy may extend your liability coverage to cover injuries that your pet causes to others, although there are certain dog breeds that are frequently excluded from coverage. Exotic pets may also be excluded. If you are looking for health insurance coverage for your pet, you will need to purchase a pet insurance policy.
No, your renters insurance policy will not pay for your medical bills if you hurt yourself. Your renters insurance medical payments coverage only applies to your guests, and your liability coverage only provides financial protection for injuries and damages that you are found at fault for. If you are injured on your property and your landlord is found at fault, their landlord insurance may provide coverage for your medical bills. Otherwise, you would need to have health insurance to cover your injuries.