So you found the perfect rental. The view is amazing and after a little shopping splurge, you’ve filled it with some pretty incredible furniture and artwork. It feels almost too good to be true, and it has you thinking: What if something happens to your rental? What if there’s a kitchen fire, say, or a pipe breaks? Who has your back now?
That’s where renters insurance comes in. At the most basic level, renters insurance exists to protect people when something unexpected happens to their home. But there are nuances to the policies, and various types to choose from. Which coverage is right for you? Use this renters insurance guide to learn the why, how, and what of renters insurance coverage and arm yourself with the information you need to purchase your policy.
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What does renters insurance cover?
Renters insurance protects your belongings, but not the building itself (your landlord has insurance to cover the structure and any furnishings provided with the rental), in the case of a catastrophic event such as a home fire. It may also kick in to help cover the cost of additional living expenses, such as hotel bills, if you have to move out while your home is being repaired.??
Renters insurance also protects you by offering liability coverage. Say, for example, a guest staying at your rental home trips, strikes her head on your coffee table, and requires medical attention. If you’re in the US, you might normally be on the hook for covering those medical bills. But your renters insurance policy will help with these costs.?
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Why you need renters insurance
It might seem like overkill — paying for coverage from a fire that’s unlikely (you hope!) to ever happen. But take a quick mental inventory of your belongings. Start with the most expensive items you own: your laptop, television, furniture, and other items that were an investment to purchase. Do you have enough cash to replace these items if a disaster destroyed everything in your apartment today? Suppose a guest at your holiday party is seriously injured, can you easily manage medical and legal costs? For most people, the answer is no, which is why you need renters insurance.?
In a nutshell, renters insurance is used to:
replace your belongings if they're lost, stolen, or damaged
protect you (and your assets) if an accident occurs and you’re liable for damages
help cover the costs of additional living expenses while your rental home is being repaired from an event like a fire
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What is a covered loss?
A standard or basic renters insurance policy clearly states what events or disasters qualify as situations in which property loss will be covered. The Insurance Information Institute lists the following events as covered under standard renters insurance policies: Smoke, fire, lightning, vandalism, theft, explosion, windstorm, and certain types of water damage (e.g., a burst pipe).?
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What events aren’t covered?
Most standard policies don’t cover floods or earthquakes. However, you can purchase flood insurance through another provider, such as the National Flood Insurance Program. Earthquake coverage may be purchased separately or added to your policy, depending on where you live; these policy additions are called riders, floaters, or endorsements.
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Different types of renters insurance?
Everyone’s needs are different, so you’ll want to do your homework. Depending on your living situation and finances, you may decide you need more coverage for your personal assets and less coverage for home injuries, or vice-versa. Renters insurance offers three types of coverage: Personal property, liability, and additional living expenses. Here’s what you’ll get from each type of coverage:
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Personal property
Clothing, furniture, electronics, linens, kitchen items, and appliances are all covered here. Personal property coverage applies to your belongings and the cost to replace and repair those items, up to your policy’s stated limits. Be sure you understand the policy’s limit, as this is the maximum amount of coverage you’ll receive for lost or damaged items.?
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Liability
Liability insurance covers the costs of repairs from damage you’ve caused and medical expenses if you’re responsible for an accident involving bodily injury. For instance, say your guest is cooking on the stove and the gas burner malfunctions, causing him to burn his hand and need medical attention. You can be liable for those bills, but in this instance, your insurance policy would cover the cost of the person's medical bills up to your coverage limit.
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Additional living expenses
If a fire or burst pipe sends you to a temporary living arrangement, like a hotel, this type of renters insurance covers the cost of additional living expenses.
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How to estimate your coverage amount
After moving into your new rental, take stock of what you own. This inventory list will help you start to estimate the amount of renters insurance coverage you need. Most insurance companies offer a home inventory checklist you can use. It’s wise to save your list to a cloud-based app, so a record of your possessions will be accessible even if your home computer is destroyed.
As you complete your home inventory, include details about each item, including purchase date and value. Inventory apps, like Under My Roof, are convenient ways to keep tabs on your stuff — some even make it possible to upload photos of items to accompany the information. Once your inventory is complete, you should have a rough idea of the value you need to insure.?
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Policy deductible
Another factor in your coverage is your policy deductible. Your deductible is the amount of money you’re responsible for paying out of pocket when you experience an insured loss. For example, if your deductible is $1,000 and you experience an insured loss of $4,500, your insurance company will issue a claim check for $3,500. The amount of your deductible will affect your policy premium; the lower the deductible, the higher the insurance premium.
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Actual cash value vs. replacement cost
An actual cash policy depreciates the value of your belongings over time, issuing a payout based on their value at the time of loss. This type of policy is generally less expensive. While more expensive, a renters insurance policy with replacement cost coverage will pay out the cost to replace items you own with new versions. So, if your television is 10 years old, your policy would pay you the cost of replacing it with a new model.
It’s worth noting that your policy will only pay to replace items up to your policy limits. So, if your individual item limit for electronics is $1,000 and you have high-value electronics worth more than the policy limit, you’ll want to consider adding additional coverage.
According to the Insurance Information Institute, you’re able to increase your policy coverage for valuable items in two ways:
Raise the liability limits.For example, you could try increasing your item limit for electronics. However, the overall limit for loss may still not be enough to replace items if you lose all of your electronics.?
Purchase a policy endorsement or floater policy.This covers losses of any type (e.g., dropping an engagement ring down a sink drain) and allows you to insure individual items for their total values.
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If you go the route of an endorsement or floater policy (typically used to cover expensive items such as artwork, antiques, or jewelry), items to be insured must have an accompanying professional appraisal or purchase receipt.
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Do you need a policy rider??
Depending where you live, sometimes you need coverage beyond what your basic policy offers, such as protection from natural disasters like hurricanes, floods, and earthquakes. You might consider discussing these needs with an insurance agent — a licensed professional adept at helping people find the insurance products and policies that best fit their lifestyles. Some additional policy endorsements you might discuss include:
Scheduled property?
Pet damage
Identity theft
At-home business
Earthquake coverage
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How to choose the right insurance company for your needs
If you own a car and have a policy with a standard property and casualty insurance company, you might start your search with them. Most major insurance providers offer discounts if you hold multiple policies (auto and renters insurance) with the same company. Some companies also offer additional discounts for security systems or if you have no previous insurance claims.
A great way to get an idea of the marketplace and narrow down your options is to read insurance reviews so you can get a sense of carriers to explore (and ones to avoid).
Many major insurance companies allow people to apply for policies online, but if you’re new to insurance, you could consider working with an insurance broker who’s familiar with many different insurance carriers and can help narrow down the best fit for your needs. When you work directly with an insurance agent or broker, you can request an annual policy review. Annual reviews ensure your coverage still meets your needs (and whether you need to update your policy if you’ve made any significant purchases in the last year).
Whatever type of renters insurance policy you purchase, know that you are not locked in for life — or even for the duration of your rental. You can review and change your policy at any time, so don’t hesitate to move forward with coverage that works for you. Now that you know everything you need about renters insurance, it’s time to go shopping (just don’t forget to check reviews before finalizing your decision)!
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