What is renters insurance?
Renting a property comes with a ton of advantages. When major work needs to be done on your apartment or home, you can live-care free. Large expenses, like plumbing repairs or outdoor maintenance, are all covered by your landlord.
After researching the real estate market, you might have decided that renting a place is the right fit for you. While your landlord might be responsible for the safety, structure and amenities of the apartment, they aren’t accountable for all the personal items you keep there. In the event of a fire, natural disaster, theft or other property-damaging event, some tenants are left to carry the cost of replacing possessions all on their own.
Renters do have the option to protect themselves and their belongings by signing up for a renters insurance policy.
What's renters insurance?
Your landlord’s homeowners insurance might protect their stake in the property in the event of a fire or structural damage, but these policies do not extend to a building’s tenants. In the event of a natural disaster or other adverse event, you’ll be paying for your lost items on your own. Unless, of course, you hold a renters insurance policy.
Renters insurance provides coverage to help reimburse tenants for lost property, personal liability, or living arrangements if the property is unusable for an extended period of time. Sometimes referred to as “tenant insurance,” these policies help renters guarantee that unexpected events don't turn into financial disasters.
Although renters insurance is not covered by law, some landlords might require you to provide proof of renters insurance to sign the lease. Whether required by the property owner or not, renters insurance is a safe option for tenants who can afford the monthly payments.
How much is renters insurance?
Insuring your property as a renter is much less expensive than if you owned the home. While homeowners insurance does cover the landlord’s personal property, it also covers the structure of the home as well as the cost of any necessary major repairs. Since renters insurance only applies to the tenant, these big ticket expenses are not a part of the policy, resulting in much lower monthly premiums.
According to Business Insider, renters insurance costs around $15 a month, or about $180 per year. However, your monthly payment depends heavily on the specific renters insurance policy you choose. In addition to this monthly fee, your provider will also outline how much you’ll need to pay in a deductible.
On any insurance policy, the deductible is the amount you pay before your insurance coverage kicks in. Say, for example, your deductible is set at $400 and your laptop is stolen, which is valued at $1,200. You would be responsible for covering $400 of the stolen property, while your insurance company contributes the remaining $800.
Of course, it’s not a guarantee that your insurance policy will cover lost or stolen items in any scenario. Before signing up for a renters insurance policy, be sure to carefully review what is covered by your plan and how you can prepare to make a claim.
What is covered by renters insurance?
While renters insurance typically covers incidents related to property damage, personal liability or additional living expenses, insurance companies won’t hand over reimbursements outright. To get the full benefit of your policy, tenants will often develop an updated home inventory.
As an extra step of preparation, home inventories are a detailed list of all the possessions the tenant keeps in their home and their associated value. These inventories help verify property loss and will allow you to make an appropriate insurance claim. A current and organized home inventory will help settle your insurance claim and replace your belongings much faster.
In addition to a home inventory, you can also document your belongings with pictures. Taking photos of your things in each room of the house can help jog your memory if the time ever comes to file a claim.
Aside from only replacing property, renters insurance can provide coverage in a number of other scenarios. Let’s take a closer look at the three main instances where renters insurance would apply:
- Property damage
- Loss of use
A major reason tenants might apply for renters insurance is to replace their personal property if it’s ever damaged, destroyed or stolen. Anyone with a large stereo system or an expensive computer wouldn’t want to replace that expensive equipment themselves and policies like these can help them significantly reduce the cost.
Renters insurance does cover damaged, destroyed or stolen items, but only if the incident falls within 16 outlined events known as “perils.” Perils are the insurance company’s way of defining the exact instances where an insurance policy will apply. If your property is damaged in a way that is not outlined by the 16 perils, your insurance provider might not be able to provide assistance.
Here’s a look at the 16 perils in renters insurance:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage caused by an aircraft
- Damage caused by a vehicle
- Smoke damage
- Volcanic eruption
- A falling object
- The weight of ice, snow or sleet
- Accidental discharge of water or steam from within certain household systems or appliances
- Sudden and accidental tearing apart
- Freezing of certain household systems
- Accidental damage from artificially generated electric currents
Loss of use
Fires, floods or other structural problems can not only damage your personal items, but can render the home itself unlivable for an extended period of time. Tenants in this situation still need to work in the area and are forced to rent a room at a hotel or motel. Since their kitchen is inaccessible, all of their meals will need to be bought from restaurants.
Through no fault of their own, these renters end up paying a ton in additional expenses as they wait for their home to be livable again. Luckily, renters insurance can step in to cover these costs until the home or apartment is usable.
Renters insurance also protects you from lawsuits that arise due to incidents that happen on the property. If you’re ever found legally responsible for loss of property or severe injuries that occur in your apartment, you might spend years paying off thousands in legal fees.
While it may seem unlikely, policyholders understand that accidents do happen and renters insurance can mitigate some of that uncertainty.
What renters insurance doesn’t cover
There are a few instances where your renters insurance policy won’t cover damaged property. Any incidents that fall outside of the 16 perils, won’t result in reimbursement. Earthquakes and floods, for example, are typically covered by separate policies
Renters insurance also won’t cover the cost of damage caused by pests or insects. Common infestations like bed bugs or mice will need to be covered by the landlord or a separate insurance policy.
Your renters insurance also does not cover your roommate’s possessions. These policies are designed to protect the possessions of one tenant, so your roomies will have to sign up for their own coverage.
Do I need renters insurance?
While some apartments might be full of expensive stereos, computers or other high-ticket items, there are plenty with a few pieces of furniture and not much else. If you’ve taken this minimalist approach to filling your apartment, renters insurance might not seem worth the extra expense.
However, incidents like lawsuits and loss of use can still arise, costing tenants thousands in unexpected bills.
Renters insurance might not be required by law, but if you can afford it, you could be better off signing up for a policy.
Renters insurance helps tenants protect themselves from some of the vulnerabilities that come with renting a home or an apartment. The high cost of replacing property, legal liabilities or being forced to live elsewhere can all be mitigated through one of these policies.
If you’re interested in a renters insurance quote, be sure to check out Guaranteed Rate Insurance for more information.*
*Guaranteed Rate, Inc. may choose to recommend Guaranteed Rate Insurance, LLC to provide insurance services. Guaranteed Rate, Inc. has 100% ownership and a direct or indirect financial interest in Guaranteed Rate Insurance, LLC (d/b/a Larchmont Insurance Agency, LLC in California (License 0k09890)) You are not required to use Guaranteed Rate Insurance, LLC as a condition for, settlement of your loan on, or purchase, sale, or refinance of, the subject property. There are frequently other settlement service providers available with similar services. You are free to shop around to determine that you are receiving the best services and the best rate for these services.