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What is Renters Insurance and What Does it Cover?
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So you’ve probably heard of renters insurance, but what exactly is renters insurance and what does it cover? We’ll get into that in a moment. In the meantime, you’ll be happy to know that coverage is cheaper than you might think. Therefore, having a comprehensive insurance plan for your household is a must to protect against the unexpected. Unsure where to start your search? Use this guide as your handy sidekick when securing the best renters insurance plan for your home.
What is renters insurance?
Before we get into the details, let’s figure out just what is renters insurance? Renters insurance is a form of property insurance that acts as a financial safety net for your personal belongings. It offers coverage against liability and medical claims, and some living expenses during specific times of hardship. In case of a loss, without renters insurance, you would have to pay for these damages and fees out of pocket. Coverage varies by carrier and the limits you choose to purchase. Keep this in mind and be sure to look over your policy to ensure you have adequate coverage. If an accident happens, you don’t want to be caught under-insured.
Renters insurance does cover your personal property from certain damage, loss, or theft. But, unlike homeowners insurance, it does not cover damage to the structure of your rental. This falls on your property management company’s insurance.
What does renters insurance cover?
You now know that renters insurance covers your personal belongings within your home. Don’t think your furniture is valuable enough to justify purchasing coverage? Think again! Renters insurance covers more than just your household belongings. It also covers liabilities, as we mentioned earlier, and additional living expenses should your home become uninhabitable. Here’s a breakdown of the three main types of renters insurance coverage:
Personal Property
Lose your sofa to water damage or your TV to a power surge? Thankfully, standard renters insurance policies cover the loss of personal property. This coverage only reaches up to a certain amount, though, so be sure to take out a policy that accurately covers your personal property.
Be careful not to underestimate the value of your belongings. Once you consider your furniture, clothes, electronics, and appliances, you might be surprised to see just how much your household is worth. Make sure you purchase a Replacement Cost on Contents settlement for your personal belongings. Without it, you could receive only the depreciated value of your assets, so you could get $50 to replace your $600 flat screen TV.
Medical Payments and Liability
Under certain circumstances, renters insurance also covers injuries to other people within your home. This means that if your friend has an accident at your home and deems you responsible, your renters insurance policy might step in to help cover their medical costs. If your injured friend then decides to file suit, renters insurance may also cover your legal defense up to a predetermined amount.
Additional Living Expenses
If you’re wondering what else renters insurance covers, your additional living expenses coverage can be a real lifesaver. This type of coverage pays for your living expenses if your home is uninhabitable due to an event covered by your insurance. So, if a tree falls on your home leaving it uninhabitable, living expenses coverage will pay for your hotel, food, and other expenses while your home is being repaired, up to the limits of your policy.
But just what does renters insurance cover, specifically? Policies cover damage to personal property. So items like your computer, bike, and TV would be covered if they were damaged. Depending on your policy, renters insurance might also offer coverage for losses caused by the following:
Fire
- Lightning
- Vandalism
- Theft
- Hail
- Water damage
- Frozen pipes/plumbing
- Windstorm
- Impact by vehicle
- Power surges
- Riots
- Water backup
That said, standard renters insurance policies do not cover everything. There are some perils and circumstances that renters insurance does not cover:
- Flood
- Earthquake
- Mudslide
- Nuclear hazard
- Intentional damage caused by the policyholder
- Home business
- Valuables such as jewelry
- Motorized vehicles
You may be able to take out additional policies to cover flooding, for example, but it’s not covered in standard renters insurance policies. If you live near a fault line or in a flood zone, talk to your insurance provider when you set up your policy to determine which options are best for you.
Is renters insurance required?
While there is no state-wide law enforcing renters insurance, many buildings and properties do require it, so read your lease carefully before signing. Remember, your property management company’s coverage only extends to the structure of the building, not each unit’s contents. Therefore, your building would be responsible for fixing your fallen ceiling, but not for replacing any of your belongings.
Even if it’s not required by your property management company, knowing that you have good renters insurance coverage gives you peace of mind that you won’t go broke trying to replace your belongings should you experience a burglary or a fire. To be sure that your belongings are protected, renters insurance is a must.
How much coverage do you need?
Before you get too excited and leap into a new policy, you should first determine how much coverage you need in personal property and liability coverage.
Personal Property
To calculate how much personal property coverage you need you’ll want to do the following:
- Take stock of what you own – How much would it cost to replace all of your personal belongings in your rental? Keep in mind that your insurance payout will not exceed the coverage amount you choose, so take your time and be as accurate as possible. Make sure that whatever amount you come up with will be enough to get you back on your feet in a worst-case scenario.
- Make a detailed list – Take note of each item in each room, its price, the date it was purchased, and the brand (if applicable).
- Supply evidence – You’ll also want to take photos of your home and your belongings as you list them to use as evidence of ownership. This might take some time but it’ll be worth it if you need to file a claim.
- Come up with a dollar amount – You’ll use this number to discuss your options with an insurance agent, so be diligent when taking inventory of your things.
Liability and Medical Payments
What if a friend is injured while they’re at your home? Liability coverage helps to cover any legal expenses, while medical payments help to cover any medical bills you might be responsible for if someone accidentally gets injured in your home. Liability payments can also cover legal payouts if they file suit, so it’s best to go big. A basic policy typically includes $100,000 of liability coverage. It sounds like a lot (and it is) but so are legal fees, and you don’t want your plan to max out before it covers these costs. Increasing your coverage could cost just a few extra dollars a month so trust us, you’ll be happy you took out the extra coverage if you ever need it.
How much does renters insurance cost?
Renters insurance costs far less than you may expect. The average cost of a renters insurance policy is between $15 and $30 per month. So for the price of a few pumpkin spice lattes or a couple of pizzas, you can cover the contents of your rental. Worth it? We think so.
Here are the primary criteria that insurance companies use to determine the price of your renters insurance policy:
- How much liability coverage you choose – Taking out a policy with high liability coverage is a smart move, but it will increase your monthly premium.
- How much personal property coverage you need – The more your personal belongings are worth, the higher your premiums will be.
- Whether you choose actual value or replacement cost coverage – What’s the difference? Actual value coverage will cover the value of your belongings at the time of damage or loss, while replacement cost coverage will cover the price you purchased your belongings at originally. So, take that smartphone you bought for $700 three years ago for example. Whereas replacement cost coverage will cover the full $700, actual value coverage might only cover $300, depending on the phone’s depreciated value.
- The location of your rental – Homes in areas prone to extreme weather or high crime activity will usually have higher interest rates.
- The cost of your deductible – The higher your monthly payment, the lower your deductible. If you have some extra cash ($5-$10) each month to put toward your renters insurance, it could help lower your deductible. This would be a wise decision since your insurance doesn’t kick in until you meet this deductible.
Some insurance companies offer discounts if you have a smoke detector connected to your home security system, if you maintain a high credit score, or if you have a fire extinguisher in your home.
How do I purchase renters insurance?
So, you know what renters insurance is and what it covers, but just how do you go about purchasing it? Make sure you do your homework and shop around for the best policy for you. Remember, the best policy is not always the least (or most) expensive. Look for plans that offer the coverage you need and companies that have excellent customer service reviews. You’ll have to go to these representatives for help if you need to file a claim, so you want to be sure that they can put your mind at ease.
Call around to gather quotes, or search online and compare your findings. Ideally, you’ll pick a plan that both fits your budget and offers comprehensive coverage.
Can I update my renters insurance coverage later?
Just bought an engagement ring or decided you need less coverage? Good news! Most companies will let you update your renters insurance policy online, over the phone or through the mail. That way, if you have a big life event, you can continue to protect your rental and its contents.
Renters insurance is a must for all residents, and deciding on your policy is crucial to protecting your home (and your wallet) when things go wrong. You don’t want to be left to repurchase your computer or TV if it’s stolen, so use this guide to find the best policy for you and your household.
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