Woman moving in into new apartment
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As a renter, do you know how your personal property is protected? If you rent an apartment, condominium or townhouse, your personal belongings are likely not protected in the event of an emergency, such as a burglary, fire, smoke damage or vandalism.

In these cases, your landlord’s insurance should cover any damage inflicted upon the building itself, but it won’t offer protection for your household items. This is why having renter’s insurance is so important.

According to the Insurance Information Institute, renters insurance offers three types of protection: personal possessions, liability and additional living expenses. We’ll discuss what renters insurance covers in more detail below, but here’s a quick overview of each type of protection.

Personal possessions are the items in your home that you own, such as clothing, furniture and musical instruments. To get your personal belongings covered by renters insurance, you need to know the value of each item you own. Understanding that amount can then help you decide how much insurance to purchase.

Liability covers any damage that you or your household members (including pets) cause to other parties. For example, if you, your children or animals accidentally destroy a friend or neighbor’s property, your renter’s insurance could pay for the cost. This includes costs if a friend of neighbor is injured in your home.

Finally, if you need to live somewhere else after damage has occurred to your dwelling, you could benefit from the additional living expenses coverage that renters insurance provides. In these instances, your insurance will cover hotel bills, meals from restaurants and other incurred expenses from having to leave your rented home or apartment.

Benefits of renters insurance

As identified above, renters insurance can be beneficial in certain circumstances. For example, if you have many high-value items in your rented home (and can afford to take out the appropriate amount of insurance), then renters insurance can benefit you in case of emergencies.

Drawbacks of renters insurance

On the other hand, there are a handful of reasons why renters insurance might not be the right choice for you. If you don’t have many valuable belongings, for instance, you may not need the coverage. Or if you live in an area that doesn’t anticipate many natural disasters, you may also spare yourself from the expense of renters insurance.

Also, if you can’t afford the premium that would cover all of your items, the expense may not be worth the cost.

What does renters insurance cover?

Before we get into the nitty gritty, let’s take a look at what renters insurance is. Renters insurance is also known as home and contents insurance, and it’s meant to cover your belongings in case of theft or damage and cover your pocketbook in case of injuries that occur in or on your rental property.
Renters insurance typically covers:

  • Loss of property from burglaries
  • Financial reimbursement for lost property in cases of fire and vandalism or other natural disasters
  • Losses of property that occur while traveling or in your car (for example, it may cover your stolen laptop if your car is broken into)
  • Medical bills for injuries that occur on your rental property
  • Lawyers fees or settlements in case of injury that happens on your rental property
  • Compensation for hotels or other living arrangements in case your rental can’t be lived in after storm or fire damage

Your specific policy may not cover all of these things, though. These are the standard items that are covered under a typical renters policy. What your policy covers will depend on the type of loss and the amount of coverage you have in place. As with any other type of insurance, what renters insurance covers can vary from policy to policy, which is why it’s important to make sure you’re choosing the best policy for your needs.

Types of renters insurance

  • Actual Cash Value: This type of renters insurance will replace the cost of your possessions (minus the amount of depreciation they have incurred over the years). It’s important to note that this type of insurance only covers up to the limit of your policy.
  • Replacement Cost: If you would prefer to take out a policy that reimburses you for the price of your possessions (without the depreciation value), you’ll typically pay more. However, depending on the value of your individual possessions, it can be worth it.

How much is renters insurance?

It won’t cost you much to buy a renters insurance policy. The average renters insurance cost is somewhere between $100 and $250 per year. As with anything else, the actual cost of your policy will depend, in part, on where you live and the type of coverage you want. Chances are good, though, that it will be somewhere within that range, considering that the national average for renters insurance is about $12 per month, according to the Independent Insurance Agents and Brokers of America.

Is renters insurance required?

We know what you’re thinking: “OK, so we know it won’t cost me much, but do I have to have renters insurance?” The short answer is no, probably not. There are certainly landlords who will require you to have it in your lease, but there are no laws requiring renters to have this type of insurance.
The reason some landlords will require you to have renters insurance is because it helps protect the landlord’s investment. If they have a policy on the property and you have a policy on the property, chances are good that everyone will be safe from major financial losses that occur on the property. But even if your landlord doesn’t require renters insurance, it’s a good idea to purchase it.
Renters insurance covers protection for your personal property, and this type of insurance will also keep you from having to shell out large amounts of money to attorneys or on judgments in case you’re sued for an injury that happened at your home. If something like that happens, your renters insurance is probably going to be what covers the attorney bills, settlements and judgments related to that lawsuit.

Who needs renters insurance?

It’s probably not a requirement that you have renters insurance, but should you? If you rent, yes, you probably should. That includes:

  • College students living in dorms who are not covered under their parents’ homeowners policy
  • College students living off campus in a house or apartment rental
  • Renters in high-crime areas
  • Pet owners
  • Seniors renting in an assisted living rental
  • Renters in disaster-prone areas
  • Tenants in most types of rental housing