What You Should Know About Renters Insurance

best renters insurance

Whenever you rent an apartment, condominium, house or another type of dwelling, it is the property owner’s responsibility to provide insurance for the structure. However, this insurance does not cover the belongings of the renter. Renters insurance protects the personal property of the renter against financial loss due to fire, water, smoke, theft and other perils listed in the policy.

What Are the Features and Benefits of Renters Insurance?

Renters insurance is similar to homeowners insurance, except that it provides coverage for the renter’s personal belongings, but not for the structure itself.  Additionally, renters policies may provide reimbursement for the cost to stay at a hotel or eat meals at a restaurant if the rental unit becomes uninhabitable because of a covered cause of loss. These policies usually also provide liability coverage for injuries or property damage renters are legally liable for that occur in the renter’s home.

Coverage is provided either for the perils specifically listed in the policy or for all perils not specifically excluded. Most policies cover similar perils to standard homeowners insurance:

  • Fire
  • Lightning
  • Explosion
  • Windstorm
  • Hail
  • Damage by aircraft or vehicles
  • Riot or civil commotion
  • Vandalism or malicious mischief
  • Smoke
  • Theft
  • Volcanic eruption
  • The weight of ice, snow or sleet
  • Falling objects
  • Accidental discharge of water or steam
  • Sudden accidental damage from electrical currents
  • Freezing
  • Sudden accidental tearing apart, burning, cracking or bulging of household systems

Who Needs Renters Insurance?

Anyone who lives in a rental home and owns valuable personal property can benefit from these products. Without insurance, any personal property destroyed by a fire, storm or another catastrophe would be entirely the responsibility of the renter to replace. Insurance provides financial protection for renters against catastrophic loss. Additionally, renters are also protected against damages they may be liable for if a guest in their home is injured or their property is damaged. Without insurance, renters would have to pay these expenses out of pocket.

Even renters who do not own a lot of expensive personal property can benefit from renters insurance, both because of the liability protection and because the insurance is relatively inexpensive to purchase. This insurance also protects renters who may have to pay for a hotel room or other living expenses while their rental unit is not able to be occupied due to a covered cause of loss. However, because not all types of property are covered by this insurance, renters who own certain types of property, such as musical instruments, may need to purchase separate insurance or add a rider to their renter’s policy.

When Should You Purchase Renters Insurance?

For most renters, it is a good idea to purchase renters insurance when first moving into a rental property. Some landlords may require renters to purchase insurance in the terms of the rental agreement. It is a good idea to update your policy any time you have any major life changes, such as a marriage, divorce or new child. You may also need to update your policy if the value of your personal property has significantly changed. Any time you make a large purchase, such as a new computer or furniture, it may be worthwhile to review the limits of your policy.

Examples of Using Renters Insurance

You are frying chicken on the stove in your apartment kitchen and some grease splashes out and starts a kitchen fire. The fire destroys your air fryer, microwave and coffee maker, and the smoke damages your curtains and your clothes. Depending on whether you have an actual cash value or a replacement value policy, your policy pays you either the cash value or the replacement value of your damaged or destroyed items, less your deductible. It may also cover expenses such as having your clothing and curtains professionally cleaned to remove the smoke smell.

If you need to rent a motel room while your unit is being repaired due to the fire, your policy will also cover that expense. The liability coverage on your policy would apply if you are found to be negligent for starting the fire and your landlord or neighbors sue you for damage to their property.

Steps for Purchasing Renters Insurance

The process of purchasing renters insurance is fairly straightforward. However, it is worthwhile to shop around for the company that offers you the most coverage at the lowest rate. Follow these four steps to obtain your policy:

  1. Determine how much coverage you need by estimating the value of your personal property.
  2. Research insurance companies, taking into consideration price, coverage, customer service and reputation.
  3. Obtain quotes from at least three different insurance companies. 
  4. Purchase a policy from a reputable company that offers the best price, coverage and service. 

Quick Questions

What is the difference between actual cash value and replacement value?

Replacement value is the cost to replace a lost or destroyed item with a new item. Actual cash value is the replacement cost less depreciation. It is similar to what you could expect to sell your item for, used.

Is theft covered by renters insurance?

Most policies do provide theft coverage.  The limit may be reduced for theft that occurs away from your home, and some property, such as automobiles, is excluded.

How much does renters insurance cost?

The average cost is about $15 per month or $180 per year. The price will vary depending on the amount and type of coverage.

Renters insurance is a smart investment because it protects the policyholder from catastrophic financial loss due to the destruction of personal property or damages the renter becomes liable for in their home. Life insurance can be similarly important, check out our guide here.

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