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You may need renters insurance if you wouldn’t be able to afford to replace all your stuff after a disaster.
Your landlord’s insurance policy covers the building, not your belongings.
Renters insurance can protect your finances from a lawsuit.
Could you afford to replace your entire wardrobe if your apartment caught fire? What about your phone, your laptop and all your furniture? If the answer is no, you probably need renters insurance.
“Renters insurance can’t stop awful things from occurring, but it can make life a little easier if and when they do occur,” Yael Wissner-Levy, vice president of communications at the insurance company Lemonade, said by email.
But 56% of renters who responded to a NerdWallet survey said they don’t currently have renters insurance. Of those, 20% said they haven’t bought it because it’s too expensive, while 16% “haven’t gotten around to it.”
If you’re worried about the expense, renters insurance coverage may cost less than you expect — in fact, some tenants could pay next to nothing. Here's why you may want renters insurance and how affordable it can be.
1. Your landlord’s insurance won’t cover you
Some landlords require their tenants to have renters insurance, but if yours doesn’t, it’s not because they’ve got you covered. In NerdWallet’s survey, 13% of respondents without renters insurance said they didn’t buy it because their landlord’s policy covers their residence. Unfortunately, this usually isn't true.
Landlord insurance covers the structure of the building but not tenants’ personal belongings. If someone steals your TV or a fire destroys your bedroom furniture, your landlord’s insurance won’t pay to replace them — but a renters policy typically will.
A landlord’s policy is also unlikely to help if you accidentally damage a neighboring apartment. “If you [let] your bathtub or sink flood out the apartment below you, the landlord’s not going to cover that,” says Jeff Schneider, president of Gotham Brokerage Co. in New York City. “You can be sued for … causing damage to the apartment below you.”
A standard renters insurance policy includes liability coverage starting at $100,000, which can pay damages and legal expenses if you’re responsible for accidentally injuring someone else or damaging their property.
» MORE: How does renters insurance work?
2. You probably own more than you think
“[One] reason why people avoid renter's insurance is the thought, ‘I don't have anything valuable worth protecting,’” Wissner-Levy said. But you might be surprised.
Brandon Okita, vice president at FIA Insurance Services in Torrance, California, advises opening each drawer and closet in your home to take an inventory of your belongings. Once you start tallying up the value of each item — electronics, jackets, shoes and so forth — you’ll probably find that it would cost a lot more than you expected to replace everything.
3. Renters insurance can pay for housing after a disaster
“Most policies provide what’s called a ‘loss of use’ or ‘additional living expense’ benefit,” Schneider says. “It pays you if you are forced out of your apartment by a major claim — usually fire or extensive water damage — and you have to stay in a hotel.”
Loss of use coverage can also pay for restaurant meals or other expenses associated with living away from home while it’s being repaired.
» MORE: The best cheap renters insurance
4. It can protect your finances
Maybe you’re saving for a down payment on a house, or you’ve worked hard to get out of debt and build an emergency fund. The last thing you need is a lawsuit wiping out everything you have.
“Let’s say you go golfing … [and] you hit someone in the head and they turn around and sue you,” Okita says. If a court finds you responsible, your renters liability insurance will typically cover costs up to your policy limit, even if the incident takes place away from home.
This coverage can also come in handy if your dog bites someone at the park, your child breaks a valuable heirloom at a friend’s house or a guest slips and falls inside your apartment.
5. It covers belongings away from home
Many renters policies provide some coverage for your stuff even when it’s not at home. “If your laptop was swiped at the neighborhood cafe, or your phone stolen on the subway, your policy could cover you,” Wissner-Levy said. (Keep in mind that it would make sense to file a claim only if the lost item were worth more than your deductible, the amount subtracted from your claim payout.)
You may also have coverage for items in a storage unit, Okita says.
6. The cost may be less than you expect
One common reason to avoid renters insurance is the cost. “A lot of people are not looking for added expenses these days,” Schneider says.
The average cost of renters insurance is $148 a year, or about $12 a month, according to NerdWallet’s rate analysis. But if you have a car, you could pay less by bundling your renters policy with your auto insurance, thanks to multipolicy discounts offered by many carriers.
For example, Okita notes, a 5% bundling discount on a $3,000 auto policy would be $150, which would nearly pay for the average renters policy premium.
You may also be eligible for discounts if your apartment has smoke detectors, burglar alarms or other safety and security devices.
If the worst happens, you’ll likely be glad you paid for the coverage. In NerdWallet’s survey, 77% of renters whose landlords required them to buy renters insurance said they would likely buy a policy even if they moved to a different building where it wasn’t required.
“Renters insurance is the best defense against things in life you have no control over,” Wissner-Levy said. “Once covered, most people see the benefits.”