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What Is Renters Insurance, and What Does It Cover?

Renters insurance can be a smart (and affordable) investment, but it doesn't cover everything.
July 8, 2020
Insurance, Renters Insurance
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One of the perks of renting is that it’s your landlord’s responsibility, not yours, to insure the building and make repairs when necessary. But as a tenant, you’re not off the hook completely. Your landlord’s insurance won’t pay to replace your belongings if a storm destroys the building or a thief breaks into your apartment. If you want coverage for these and many other disasters, you’ll need a renters insurance policy.

What is renters insurance?

Renters insurance covers your personal belongings and provides liability coverage when you’re living in an apartment, house or condo that you don’t own.

Also known as tenants insurance or an HO-4 policy, renters insurance is similar to homeowners insurance in that it covers many of the same scenarios — such as fire and theft — but it’s much cheaper because it only includes what’s inside your home and not the structure itself.

» MORE: The best cheap renters insurance

Is renters insurance required by law?

No, but some landlords require proof of renters insurance before you sign a lease, or within a certain time period. Usually, though, it’s your call.

If your worldly possessions amount to a futon, a coffee maker and a toothbrush, you probably don’t need renters insurance.

But for everyone else, it can be a smart (and surprisingly affordable) investment that could prevent you from paying out of pocket to replace everything that could be damaged or stolen: your jewelry, TV, computer, furniture, clothing and so on. And a landlord’s insurance policy won’t pay for your living expenses while the building is under repair, either. Renters insurance generally does.

College students may not need renters insurance if their parents’ homeowners policy provides adequate coverage for dependents’ possessions. Check the policy to be sure — in many cases such coverage applies only to students living in on-campus housing and may be limited to a certain amount.

» MORE: 7 little-known benefits of renters insurance

What does renters insurance cover?

A standard renters policy covers your personal items, pays your expenses if you need to relocate temporarily during covered repairs and includes liability in case you are sued for negligence.

Personal property

Most renters insurance reimburses you for the loss or destruction of items such as clothing, jewelry, smartphones and other personal belongings due to 16 specific events:

  • Fire or lightning.
  • Windstorm or hail.
  • Explosion.
  • Riot or civil commotion.
  • Damage caused by aircraft.
  • Damage caused by vehicles.
  • Smoke.
  • Vandalism or malicious mischief.
  • Theft.
  • 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, cracking, burning or bulging of certain household systems.
  • Freezing of certain household systems or appliances.
  • Certain sudden, accidental damage from artificially generated electric currents.

Note that your personal belongings aren’t just covered when they’re in your home, but also when you’re out and about. So if your bike is stolen from outside a store, or a pickpocket nabs your phone when you’re traveling abroad, your renters insurance policy will cover you — with a few caveats. First, your deductible will apply, and second, there may be a limit on how much coverage you have outside your home (typically 10% of your total personal property limit).

Most insurance companies offer two reimbursement options for your renters policy:

  • Replacement cost policies pay for the actual cost of replacing your possessions with new ones. For example, if your TV is ruined, you’d get enough to buy a new, similar TV.
  • Actual cash value policies pay to replace your belongings based on their value at the time they’re damaged or stolen. That means that if your ruined TV is a couple of years old, your claim check would be enough to buy a 2-year-old TV. To get a new TV, you’d pay the difference yourself.

Replacement cost coverage is more expensive, but if you think you’ll want brand-new items to replace those lost in a disaster, it may be worth spending the extra money.

Renters policies typically cap the amount they’ll pay out for valuable items such as jewelry, firearms and electronics. To get coverage for certain valuables, you may need what’s called a rider, endorsement or floater. These policy add-ons offer coverage for specific items and may require professional appraisals to purchase. So if you have a treasured diamond ring handed down from your grandmother, you may need a rider to cover its full value.

Additional living expenses, or loss of use

If your home becomes uninhabitable due to circumstances covered by your policy, renters insurance coverage generally pays for additional living expenses as your home is repaired. These include hotel bills, restaurant meals and other costs above what you would normally pay.

Liability insurance

If someone is injured in your rental and sues you, a lawsuit could wreck your finances for years. The liability portion of your renters insurance policy covers you in these events, paying out for someone else’s bodily injury or property damage. It also covers damage you and your family accidentally do to others.

Liability may also pay out if your dog bites a visitor, neighbor or stranger, either on or off the property. However, some insurers exclude dog bites or certain breeds from renters policies, so if you have a dog, check with your agent to be sure you’re covered.

Renters insurance typically covers legal representation in a lawsuit and any money awarded to the other party. Liability protection also typically includes no-fault medical payments coverage, which pays out if someone is injured on your property, regardless of whether you were at fault or not.

What renters insurance doesn’t cover

Most renters insurance won’t cover damage from earthquakes or floods, so you’ll have to pay for repairs yourself if you experience one of these disasters. (One exception is USAA, which includes earthquake and flood coverage as a standard part of its renters policies. USAA insurance is only available to active military, veterans and their families.) Flood insurance is available under a separate policy from any insurer that participates in the National Flood Insurance Program. Earthquake insurance can be bought separately or as an endorsement or rider to your renters policy.

Renters insurance won’t cover bedbugs, mice or other unpleasant infestations. It also won’t cover your roommate’s possessions unless the two of you share a policy, which not all states or insurance companies allow. In most cases, it’s best if you each get your own renters policy.

» MORE: Can I share a renters insurance policy with my roommate?

How much renters insurance do I need?

The amount of renters insurance you need depends on how much stuff you have and what your savings and other assets are worth. The more you have to lose, the more insurance you need.

Before buying renters insurance, take stock of your belongings to decide how much personal property coverage you need. There are several home inventory apps available to catalog your possessions, which can be useful when choosing your coverage options, but also if you ever file a claim.

To get a quick idea of how much your belongings are worth, use our renters insurance cost calculator below.

Liability limits typically start at $100,000 and top out at $500,000. You’ll want at least enough to protect your current assets, including savings and any vehicles, because they’re part of your net worth and could be seized in a lawsuit.

» MORE: Renters insurance quotes: What you need to know

How much does renters insurance cost?

The average renters insurance cost varies from state to state but is generally about $14 a month, according to NerdWallet’s rate analysis. Most insurance companies offer discounts if you bundle your auto and renters insurance policies, or if your apartment has a security system, smoke detectors or deadbolt locks.

If you’re looking for more ways to save money, consider raising your deductible. That’s the amount that will be subtracted from an insurance claim check.

For example, if you have a $1,000 deductible and a claim for $5,000 in property damage, your insurance check will be for $4,000. The higher your deductible, the cheaper your premium.

When deciding on a deductible amount, ask yourself: How much can you pay out of pocket in the event of a disaster? Keep in mind that you’ll pay the deductible each time you file a claim for personal items. Your rate is likely to increase after each claim, so weigh carefully whether to file one for an amount close to the deductible.

There’s generally no deductible on liability claims against you, additional living expenses claims or riders for high-value personal belongings.

How to get renters insurance

Ready to buy a policy? Take these steps.

  • Figure out how much coverage you need by using the calculator and tips above.
  • Research insurance companies. Most major U.S. insurers sell renters policies, including Allstate, Farmers, Geico, Progressive and State Farm. You may also want to consider newer insurance startups such as Lemonade and Toggle, which offer quick coverage, slick apps and affordable rates.
  • Shop around with at least three companies to get quotes. In many cases, you can either get a quote online or call an agent to talk through your options.

» MORE: The best renters insurance companies

Frequently asked questions about renters insurance

Does renters insurance cover theft?

Yes, theft of your personal belongings is typically covered by renters insurance, even if you’re not at home — with one major exception. If your car is stolen, you’ll have to file a claim under the comprehensive section of your auto insurance policy, not your renters policy.

Does renters insurance cover a storage unit?

Generally, yes. Just as your renters policy covers your belongings when you’re traveling, it will usually cover them when they’re stored somewhere other than your own home. However, you may have less coverage for belongings stored off-premises (typically limited to 10% of the total personal property value on your policy).

If the belongings in your storage unit aren’t adequately covered, you may need to raise your personal property limit, consider a separate policy or seek insurance through your storage rental company.

Does renters insurance cover mold?

It depends on the cause of the mold. Renters insurance is designed to assist with damage from sudden, catastrophic events — like a burst pipe that floods your bathroom, leaving mold in its wake. This type of event would likely be covered. But if the mold has been slowly developing over time because you haven’t gotten around to cleaning your basement or tightening a leaky faucet, you’re out of luck.

Does renters insurance cover broken windows?

Again, it depends. Say your bedroom window is shattered by a falling tree branch in a storm. Because falling objects are a covered event, the damage would be taken care of through the personal property part of your policy. But if you accidentally break your own window through an errant game of fetch with your dog, it wouldn’t be covered.

Your liability coverage can help here as well; it may pay out if you accidentally break someone else’s window.