Renters insurance is a type of insurance designed for tenants living in a rental home or apartment. It provides 3 types of coverage:
Liability coverage insures you for any damage you cause to your rental unit. It also covers medical costs if a guest is injured at your rental and you‘re found to be liable.
Personal property coverage protects you against losses of your personal belongings. It typically covers a wide range of circumstances, including damage due to fire or pipe bursts and loss due to theft.
Many renters insurance policies cover your personal belongings even when they’re outside your home. For example, your policy may pay for losses if items are stolen from your car or damaged while you’re traveling.
Renters policies typically cover all of your belongings. However, expensive items such as jewelry, musical instruments, or photography equipment may require add-on coverage.
Additional living expenses coverage pays for costs you incur if your rental property is uninhabitable for a time. For example, if there’s fire damage to your apartment, your policy will cover the cost of a hotel while repairs are made.
Renters insurance isn’t required in any state. However, your landlord may require renters insurance and specify a minimum liability coverage as part of your rental agreement.
Even if apartment insurance isn’t required, it’s a good idea for most renters. Accidents happen, and you never want to be on the hook for thousands of dollars in damage to your rental unit. Personal property coverage can also provide peace of mind that your stuff is protected in case of an accident or theft.
There are a few things to think about when choosing a renters insurance policy.
You need to decide on what limits you want for your liability and personal property coverage. Most insurers let you customize these limits when requesting renters insurance quotes, but some offer preset values.
Liability coverage: Most insurers offer limits of $100,000, $300,000, or $500,000. A good rule of thumb is to purchase coverage that’s equivalent to or greater than your net worth. You can roughly calculate your net worth as the amount you have in your bank and investment accounts plus the value of major assets like your car.
Personal property: Think about how much it would cost to replace everything you own. It can help to take an inventory of all your belongings and look up what it would cost to buy each item. You should choose enough coverage to pay for at least 50% of the total cost and up to 100%.
Your additional living expenses coverage limit is usually determined by your insurer as a percentage of your chosen liability coverage.
Personal property coverage typically includes a deductible that can range from $250 to $2,500. Most insurers let you choose your deductible, and choosing a higher amount can significantly reduce the cost of your policy.
Insurers can use 2 different methods for valuing your personal property when paying claims.
The replacement value method is more favorable but also more expensive. If you choose a policy that uses the actual cash value method, you could end up paying some money out of pocket to replace your items.
Add-on coverage can expand the range of situations in which your renters insurance applies or offer increased coverage for specific belongings. Some examples of add-on coverage include:
Renters insurance policies can offer very different coverage when it comes to pets. Some cover damage and injuries caused by your pets, including bites. Some cheap renters insurance policies don’t cover pet damage or pet-related liability at all. Others cover some dog breeds but not all.
Unless your policy clearly states that it fully covers liability stemming from your pet, it’s a good idea to invest in pet liability insurance alongside renters insurance. Otherwise, damage or injury caused by your pet can turn into a major financial strain.
Typically, roommates and their belongings are not covered under your renters insurance policy. They must have their own policies. However, in some states, insurance companies will allow roommates to be named together on a policy to share coverage.
A growing number of renters insurance providers let you file a claim online or through a mobile app. This reduces the time it takes to file and streamlines the process of getting your claim approved. However, some providers still require you to manually fill out claims forms and then mail or email them.
Be sure to check how long it typically takes for a provider to pay out claims. Top insurers can typically approve and pay claims in 5-7 business days, but some providers take longer.
You can cancel a renters insurance policy at any time, usually by calling or emailing your insurance provider. If you’ve prepaid your premiums, you’re entitled to a prorated refund for any unused time remaining on your policy.
If you’re moving, you may be able to transfer your policy to your new address. Contact your insurance provider to find out whether this is possible. This is a good time to revisit your coverage limits and policy add-ons to see if you need to make any changes.