What Is Renters Insurance? | The Simple Dollar

What Is Renters Insurance? | The Simple Dollar

If you’re signing a lease and see one of the requirements is to have insurance, you might be asking yourself, “What is renters insurance?” If this is the case, know that you are not alone. However, there is a reason why so many people purchase renters insurance and many landlords recommend or require it. Learning everything from what renters insurance covers to how to get renters insurance is key to securing your possessions and lowering the risks of loss.

What is renters insurance? 

Renters insurance is an insurance policy intended to protect the people and possessions inside a rented property. While your landlord would focus their insurance on the building itself and could potentially have some liability if it wasn’t well-maintained, liability for what you personally do in your apartment can fall on you. If theft or a natural disaster, like a fire, were to occur, you could lose your possessions. Renters insurance will lessen the impact of loss in such an event.

Why do I need renters insurance? 

Renters insurance will typically cover three components: your liability in the case of an injury to someone in the rental, your personal property in the case of theft or destruction of the property, and additional assistance known as “additional living expenses” to help you pay for a hotel while your rental home is repaired.

While it is not legally mandated to have renters insurance in any state, your landlord can require a certain level of policy as part of the lease for the apartment or house, depending on where you live. Having the policy protects you from lawsuits if someone is injured in your rental home and protects your possessions in the event of a disaster.

Landlords don’t want to face a liability situation like burst pipes resulting in flooding, so having their own insurance coverage combined with your renters insurance can be beneficial for avoiding legal claims and focusing on getting everyone’s items repaired or replaced.

What does and doesn’t renters insurance cover? 

Renters insurance policies will specify what perils are covered, like losses based on fire or smoke, lightning, windstorms and some kinds of water damage from broken pipes and other internal sources. Most policies won’t cover floods from outside, like flash floods from hurricanes or other heavy rain, and most don’t cover earthquake damage either. Renters insurance also doesn’t usually cover losses due to infestations of pests like bed bugs.

As far as what will get replaced, it will depend on the value of the possessions that were lost, your coverage and other factors like your deductible and the maximum limit on your insurance.

So, how much renters insurance do I need? 

When considering renters insurance options, start by downloading any of the variety of apps that let you take inventory of your possessions. Many of these allow you to itemize your possessions, input how old it is, any existing damage and get an approximate value. If you don’t know which app to pick, consider asking the insurance provider you are considering since having documentation that they recognize can help with filing claims if you ever need to.

An insurance agent can help you consider what you would want to be paid out if these items were destroyed. For instance, some insurance will cap how much they’ll cover for high-value items like jewelry and electronics, and if you want a customized quote that helps you replace those items, you can request one. On the other hand, if you don’t think your possessions are worth very much, you can opt out of renters insurance costs unless they are required, in which case you can get the minimum required by your landlord.

How much does renters insurance cost? 

While costs will vary, the average renters insurance policy is only $15 per month, according to the Insurance Information Institute. Because the events leading to a claim are unlikely, renters insurance costs remain quite affordable, though there are ways to make your bill even lower.

When you choose a renters insurance policy, the renters insurance costs are dependent on a few factors. First, you choose your deductible, or how much you’d pay in the event of a claim before the insurance would kick in. A higher deductible will lower the risk to the insurer, so your policy will be cheaper.

Second, you’ll choose a maximum limit — this is the most that the policy will pay out since personal possessions can vary widely in cost. If you know that you have expensive items, you can choose a different maximum limit. Finally, each policy will specify whether your payout will be based on the “actual cash value” or the “replacement cost” of your possessions. Replacement cost policies are more expensive since replacing items new that you’ve had for a long time will be more expensive than their value.

How to find affordable renters insurance?

  • Ask your landlord if their past tenants had good experiences with a particular company and ask about what renters insurance cover in its policies.
  • Request online quotes based on your home inventory, any requirements from your landlord and your own preferences like whether you prefer actual cash value or replacement cost.
  • Compare quotes from various companies. For a faster process, consider one of the sites that request multiple quotes for you from different companies or work with an insurance agent who can help you lower your costs, since they know how to answer questions like “What is renters insurance?” and “What does renters insurance cover?”.

Renters insurance FAQs

Determine the value of what you own and your current budget. If you lost everything you own, would you have enough money to replace it? The best way to evaluate how much renters insurance you need is to take inventory of everything you own, determine its value and choose a coverage that will cover in case of a loss.  

No states require renters insurance by law, but getting it is strongly encouraged to avoid the risk of loss and to ensure you are covered against possible lawsuits.

There are several ways you can decrease your insurance premiums. For example, by increasing your deductible, you will handle smaller issues on your own but will pay a lower premium. You can also reduce the costs by shopping around and finding a more competitive price from a different insurer.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

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