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If someone else owns your home, whether it’s a house or an apartment, carrying renters insurance is a good idea. It gives you financial protection against a number of risks you can’t control.
Renters insurance is important because your landlord’s property insurance doesn’t protect your personal possessions or your personal liability. It also doesn’t pay for you to live somewhere else if your home is damaged or destroyed.
Here’s what you need to know about renters insurance policies, including how much it costs and what it covers:
- What is renters insurance?
- How much does renters insurance cost?
- What does renters insurance cover?
- What renters insurance doesn’t cover
- How to get a renters insurance quote
- Potential discounts to lower your renters insurance
What is renters insurance?
Renters insurance is the more commonly used term for what the insurance industry calls an HO-4 insurance policy. Your coverage will depend on what state you live in, what insurance company you buy your policy from, and what optional policy features you select.
Essentially, renters insurance helps you get back on your feet after a covered event occurs. Your insurance carrier will pay your claim based on the coverage you’ve purchased — after you pay your deductible, a small fee that helps keep your premium down.
See: Types of Homeowners Insurance (Policy Forms)
Renters insurance covers losses caused by named perils (i.e., any event listed in your policy). These perils typically include fire, lightning, smoke, vandalism, explosion, windstorm, hail, vehicles, aircraft, water, weight of ice or snow, theft, and a few other less-common events.
How much does renters insurance cost?
The average renters policy cost $174 per year, or $14.50 per month, according to the latest data from the National Association of Insurance Commissioners (NAIC). Most renters carry less than $75,000 in coverage.
Your actual cost will depend on many factors, including:
- Where you live
- Your insurance score
- Your policy limits
- Your deductible
- Any expensive items you buy extra coverage for, like jewelry or electronics
Luckily, renters insurance isn’t pricey: You can probably afford at least a small policy. Remember that a higher deductible will give you a lower premium, and a lower deductible will give you a higher premium. And if you have good credit, you likely have a good insurance score too, unless you’ve filed numerous claims in the past.
What is an insurance score? Insurance companies use an insurance score, also known as an insurance credit score, to evaluate risk and determine your premiums. While they’re both three-digit numbers, insurance scores aren’t the same as credit scores. An insurance score is based on your claims history and credit score.
Check Out: Rental Property Tax Deductions: A Comprehensive Guide
What does renters insurance cover?
Here’s what renters insurance covers in more detail:
Common renters insurance coverage
- Personal property: Covers damage or destruction to your belongings — things like your clothes, furniture, and appliances.
- Loss of use: Also called additional living expenses, or ALE. Covers reasonable extra costs for you to live somewhere else while your landlord repairs or rebuilds your home after a covered loss.
- Personal liability: Covers your legal defense and financial damages if someone sues you for bodily harm or property damage that occurred at a place you’re renting.
- Medical payments: Covers the injured party’s medical expenses if they’re injured at a place you’re renting.
Read: Homeowners Insurance Guide: Everything You Need to Know
Optional renters insurance coverage
- Replacement cost coverage: A basic renters policy may only provide actual cash value coverage for your possessions (i.e., the cost to replace the item, minus depreciation). If your 10-year-old couch goes up in flames, you’ll be hitting garage sales, not Crate and Barrel, for a “new” sofa — unless you have replacement cost coverage.
- Scheduled personal property: A standard renters policy may not cover your $5,000 road bike. When you own high-value items, ask your insurer about insuring them through a policy endorsement.
- Identity theft coverage: For a small extra premium, some renters policies will reimburse you for expenses you might incur if someone steals your identity.
- Pet liability: While this coverage is often standard, you should double-check your policy if you’re a pet owner. If it doesn’t cover liability for incidents like your dog biting a neighbor’s child, or the limits aren’t very high, you’ll want to switch insurers, ask for extra coverage, or get an umbrella policy.
Learn More: What Does Homeowners Insurance Cover?
What renters insurance doesn’t cover
- The building itself: Landlord insurance covers your home’s structure. If your toaster starts a fire and burns the place down, renters insurance covers your possessions and your personal liability. Your landlord’s insurer will pay to rebuild the place — but may then sue you for damages, so you’ll want plenty of liability coverage.
- Flooding: Hurricane Harvey taught many people the heartbreaking lesson that renters insurance doesn’t typically cover flooding caused by storms. You’ll need a separate flood insurance policy for financial protection against this form of water damage. You can purchase a policy from the National Flood Insurance Program.
- Earthquakes: If you come home from work one day to find that your first-floor apartment has been crushed by the unit above, renters insurance alone won’t replace your stuff. You’ll need an earthquake endorsement or separate policy, depending on what’s customary in your state.
- Infestations: Mice, rats, roaches, ants, bedbugs, termites, and any number of other unwanted critters can become a huge problem when you’re a tenant, no matter how clean you keep your place. Unfortunately, renters insurance doesn’t cover these problems — so hound your landlord to fix them ASAP.
- Your roommate’s belongings: Your roommate can try to mooch groceries off you, but they’ll have to buy their own renters insurance policy to cover their stuff. (If your roommate becomes your spouse, you’ll be able to share coverage. Just make sure to add them to your policy.)
Find Out: How to Refinance Rental and Investment Properties in 2022
How to get a renters insurance quote
Follow these steps when shopping for a renters insurance policy:
- Gather basic information. Common questions on a renters insurance application include the property address, what security features it has, whether you’re married or have roommates, and whether you have pets: pretty simple stuff.
- Decide how much coverage to buy. Find out how much renters insurance your landlord requires you to carry (if any). Beyond that, you may want to buy as much coverage as you can afford. A home inventory can help you estimate the full value of your belongings.
- Choose your deductible. Pick an amount you could comfortably afford in an emergency. You can always increase or decrease it later.
- Select additional coverages. These might include an endorsement for earthquake damage or additional coverage for expensive camera equipment that’s for personal — not business — use.
- Submit an application. It’s best to apply with several insurance companies to see who offers the best coverage for the price. Simplify this process by comparing renters insurance quotes from multiple providers through Credible (powered by Young Alfred).
Potential discounts to lower your renters insurance
Discounts vary by insurer, but you might pay less for renters insurance if your unit has a security system, smoke detectors, deadbolt locks, or other insurer-approved safety features.
Bundling your renters and auto insurance — getting both policies from the same company — can also reduce your premiums.
So can having good credit, being loyal to the same insurance company, and being 55 or older.
But don’t assume any of these things will save you money: Compare quotes to find out for sure.
Related: Buying a Rental Property: Everything You Need to Know
Frequently asked questions about renters insurance
How much renters insurance do you need?
You need enough renters insurance to protect yourself and your belongings against several risks. If you’re a minimalist with 100 possessions that all fit in your backpack, you might not need much personal property coverage. However, if you collect vintage guitars, you’ll want to protect them with extra scheduled property coverage. It’s also smart to carry a lot of liability coverage: lawsuits can get expensive fast.
Do I have to get renters insurance?
Some landlords require their tenants to carry renters insurance. In particular, they might want you to have liability coverage. Read your lease or talk to your landlord to see if you have to purchase renters insurance and if so, how much.
What happens if you don’t get renters insurance?
If you don’t get renters insurance, you’ll have to pay out of pocket (or go without) if your personal possessions are stolen, damaged, or destroyed. You’ll also be responsible for your own legal defense if someone sues you — and any damages if you lose. The cost of insurance is minimal compared to the cost of covering your own losses, also called self-insuring.
When do I need to get a renters insurance quote?
If you’re applying for an apartment or other rental property and the landlord requires tenants to be insured, you’ll need to get a renters insurance quote right away. Make sure you can afford any required insurance before you sign a lease. Even if coverage is optional, having a policy from day one of your lease will give you the best protection.
Disclaimer: All insurance-related services are offered through Young Alfred.