If you are a renter, insurance can be an important part of your financial plan. Although it is not required by law, it may be required by your landlord. Additionally, having a renters insurance policy can protect you from financial devastation if your belongings are destroyed or if you are found at fault for someone’s injuries or damage to their property.
But what is renters insurance? And how do you know what renters insurance covers, how much coverage you need and how much a policy costs? If you are considering purchasing a renters insurance policy, understanding the details of renters insurance may help you to make a more informed decision.
What is renters insurance?
Renters insurance is a type of property insurance policy designed to cover your personal belongings, liability exposure and additional living expenses if you rent, rather than own, your home or apartment. Optional coverages can often be added as needed to customize your policy to your needs.
Although this insurance is not required by law, your landlord may require renters insurance. Even if it is not required for you to have a policy, you may find that renters insurance can be beneficial. For example, if you do not have the finances to repair or replace your personal property if it is damaged or destroyed, you may want to consider covering your belongings with a renters insurance policy. Renters insurance also provides liability coverage, which can help to protect you from financial stress if you are found at fault for someone’s injuries or damage someone’s property.
There are situations where renters insurance may not be the right choice for you. If you are a college student away at school, for example, you may have some personal property and liability coverage extended to you from your parents’ homeowners policy. Understanding what renters insurance does and does not cover may help you to decide if a policy is right for you.
What does renters insurance cover?
Renters insurance primarily covers your personal property and liability exposure. It may also include coverage for your living expenses if your rented home or apartment is unlivable due to a loss.
Personal property coverage
Renters insurance covers your personal property on a named peril basis, meaning your property is only covered for the specific perils listed on your policy. You will typically need to decide between two types of personal property coverage: actual cash value and replacement cost.
Actual cash value (ACV) is designed to replace your possessions at their depreciated value. Replacement cost coverage replaces your personal belongings at their current replacement value, with no depreciation taken out. Actual cash value policies are typically less expensive than replacement cost policies.
You may even have a third choice, although not all companies offer it, called guaranteed replacement cost. This type of coverage is generally the most expensive and covers your property for the actual cost to replace it, even if that amount is higher than your policy limits.
Another important component of your renters insurance policy is liability coverage. If someone is injured on your property and you are found at fault, your liability coverage may pay their medical bills and your legal fees. Liability coverage often extends to situations off your premise as well, such as if your dog jumps at someone on a walk and knocks them down, injuring them. Liability coverage also protects you against financial devastation if you are found at fault for damage to someone’s property.
Additional living expenses
Finally, your renters insurance policy will often include coverage for additional living expenses. If your home or apartment is unlivable after a loss, this coverage can include the cost of a hotel, laundry expenses and other expenses that might occur while you cannot use your home.
Renters often have the option to add additional coverages to their policies, including identity theft coverage, pet liability coverage and coverage for personal property damaged caused by water backup. If you are not sure what coverages you should consider, talking to a licensed agent could help.
How much does renters insurance cost?
On average, renters insurance costs $509 per year for a policy with $25,000 of personal property coverage. This premium includes coverage for medical payments, which pay medical bills for guest injuries regardless of fault, liability coverage and loss of use coverage.
The cost of renters insurance varies by state and insurance company. Your premium will also depend on the specific coverages and limits that you choose. If you are shopping for a renters insurance policy, it may be helpful to get quotes from several renters insurance companies. This allows you to compare the price that each company offers for the same coverages.
Who needs renters insurance?
Renters insurance is not required by law, but landlords often require their tenants to carry renters insurance coverage as a condition of their rental agreements. Even if renters insurance is not required, you may want to consider it if:
- You are a college student living on or off campus and are not covered under your parents’ homeowners policy.
- You own a pet.
- You do not have the finances to cover the repair cost or replacement cost of your belongings.
- You do not have the finances to pay for medical bills or legal fees if you are found at fault for someone’s injuries or damage to their property.
- You live in an area where theft is common.
- If you are a senior living in an assisted living facility.
Although most insurance professionals do recommend that you purchase renters insurance if you can afford it, there may be situations where a renters insurance policy is not the right choice for you. Talking to a licensed agent may help you to decide what options best fit your needs.
Where do you get renters insurance?
Most insurance companies that offer property insurance like homeowners or condo owners insurance will also offer renters insurance. There are also newer, digital-only insurance companies that offer renters insurance.
If you prefer to work with a live agent for your insurance coverage, you could consider getting a quote from a local insurance agency. Most insurance companies also offer quotes by phone and many offer online quotes, if you prefer to handle your policies yourself.
Frequently asked questions
Do I really need a renters insurance policy?
Everyone’s situation is different and purchasing any kind of insurance policy is a highly individualized decision. That said, renters insurance does typically offer quite a bit of coverage for a relatively low cost. If your budget is particularly tight, you may be able to take advantage of discounts to lower the cost of a renters insurance policy while still getting valuable coverages.
How do I choose a renters insurance company?
Because there are so many renters insurance companies on the market, you may not know where to start your insurance search. Determining what kind of coverages you need and what features you want — like a digital app, 24/7 customer service or a live agent — may help you to find companies that fit your needs. You can then request quotes from several companies to compare prices, coverages, discounts and features.
Bankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on 40-year-old male and female renters with a clean claim history, good credit and the following coverage limits:
- Coverage C, Personal Property: $25,000
- Coverage D, Loss of Use: $5,000
- Coverage E, Liability: $100,000
- Coverage F, Medical Payments: $1,000
The renters also have a $500 deductible.
These are sample rates and should be used for comparative purposes only. Your quotes will differ.