Who Needs Renters Insurance?
Pamela is a pediatric nurse who spends six months per year as a traveling nurse. When she is away for work, she worries about her belongings back home. To safeguard against a burglary, frozen pipes or a broken furnace, she purchased renters insurance to protect her possessions while she’s on the road.
Janice and Mitchell are renting a single-family home after losing their own house to foreclosure. With two elementary-aged children and a dog, they have a large assortment of family belongings. In addition, Mitchell is an avid fisherman with lots of expensive gear. To financially protect their personal property, they purchased a basic renters insurance policy with $35,000 coverage and an additional $5,000 floater to insure Mitchell’s fishing gear.
Mark is a 24-year-old recent college graduate and photographer who lives in San Francisco with three college friends in an area known for break-ins and theft. With a $2,000 per-month rent payment, Mark is left with little wiggle room in his budget for extras, so he purchased a $25,000 renters insurance policy to protect his high-tech equipment for $27 per month in premiums.
Zoey is starting off her sophomore year in her very first apartment off-campus with her two best friends. All three college students are excited to live on their own and decorate their new home together, but none of them even thought about purchasing renters insurance. One night after studying, Zoey came home to find the front door slightly open. When she entered the apartment, she realized they had been robbed and all of their brand new electronics were gone, among other valuables. It took Zoey and her roommates more than six months to replace the stolen items because they didn’t have renters insurance and couldn’t afford to immediately re-purchase everything they lost.
Rachel is a 32-year-old securities trader who commutes to Manhattan to work for a major investment firm. As her salaries and bonuses increased during the past few years, she moved out of her cramped walk-up. Moving into a bigger apartment and purchasing new furniture, appliances and a better wardrobe, she is concerned about keeping her items safe while she’s commuting, at work or seeing friends and family. She purchased a $50,000 renters insurance policy for peace of mind.
After 46 years of marriage, Miriam lost her spouse, Hank, to cancer. Deciding to sell their long-term home to move closer to her adult children, Miriam rented a modest, one-bedroom apartment. In addition to her television, clothes and furniture, Miriam inherited an expensive collection of stamps and coins from her late husband. To protect her own belongings and insure her husband’s long-term investment, Miriam purchased a $40,000 policy and a $15,000 rider specifically to cover the collection.
Learn more about why renters insurance is valuable for any tenant and get expert advice on how to find the best coverage.
Reasons to Get Renters Insurance
Most people think only homeowners need to protect themselves and their belongings, and many renters believe their landlord is financially responsible if something is stolen, personal property is damaged or someone is injured. “Many renters think because they don’t own the property,” says Farmers Insurance Agent Ryan Scruggs, “that they can’t be held liable for injuries or damages.”
But they’re wrong. A landlord’s insurance typically only covers the rental property itself, structures on that property (e.g. sheds) and items the landlord owns (e.g. washers and dryers). It does not cover your personal belongings in case of damage, destruction or theft. In addition, if you’re injured on the property, you’ll have to file a claim against your landlord to be compensated. Yet, only 41 percent of renters have renters insurance, according to a 2016 Insurance Information Institute Poll.
Here are five reasons why the other 59 percent of renters should consider insurance:
Your possessions are more valuable than you think
You may not think you have many expensive possessions, but consider how much it would cost to replace a laptop, clothing, furniture, jewelry, stereo systems, sports gear, tablets and a mobile phone. Even the basics can add up to thousands of dollars you may not be able to spend immediately if you needed to replace items all at once due to theft or damage. According to USAA estimates, the average renter’s belongings in a two-bedroom apartment are worth $20,000, while Allstate puts the value at $30,000.
You can’t control the actions of others
As Cody Thompson, a licensed insurance advocate at GetMargo.com, points out, no matter how careful you may be with your apartment and possessions, you can’t control what others in the building do. “When you’re living in an apartment, it just takes one neighbor upstairs to accidentally leave the water on and ruin everything in your home. I’ve seen this happen many times with my clients,” explained Thompson. Renters insurance helps ensure you don’t lose everything when others are at fault.
Renters insurance is relatively cheap
The average renters insurance policy costs $190 per year, or less than $16 per month, according to the latest information from the National Association of Insurance Commissioners. That’s less than what someone might spend on coffee in a month.
It covers more than just your personal items
Most policies include liability provisions (generally up to $100,000) if guests are accidentally injured or their personal property is damaged while in your rental unit.
It may be required by your landlord
Although no law requires tenants to carry renters insurance, more and more landlords are requiring prospective tenants to provide proof of insurance when signing a lease.
What’s Your Stuff Worth?
The cost of renters insurance can vary depending on how much coverage is needed and whether you get an actual cash value policy or a replacement cost policy (more on the difference in the next section). So when evaluating insurance options, you’ll need to assess how much personal property coverage you’ll need. This doesn’t have to be an exact number, but you should have a good idea of what all your possessions are worth. To get a general idea of this amount, enter how much you paid for the items listed below:
Pants$ Shirts$ Jackets & outerwear$ Shoes$ Dresses$ Other clothing (e.g. underwear, socks, etc.)$
Estimated grand total
Computers/laptops$ Tablets$ Computer/laptop accessories (e.g. mouse, keyboard)$ Speakers/sound bars$ TVs$ Cameras$ Game consoles$ Streaming devices (e.g. Google Chromecast)$ Wearable devices (e.g. Apple watch, fitbit)$
Estimated grand total
Bed$ Couches$ Tables$ Chairs$ Shelves$
Estimated grand total
Microwave$ Toaster oven$ Toaster$ Blender$ Coffee machine$
Estimated grand total
Estimated grand total
Bags$ Scarves$ Neckties$
Estimated grand total
Dishes$ Silverware$ Cookware$
Estimated grand total
Books$ Musical instruments$ Home decor$ Workout/sports equipment$ Luggage$
Estimated grand total
Estimated grand total
If you lost all or even just part of this, would you be able to replace it on your own?
What Renters Insurance Covers
The main difference between homeowners insurance and renters insurance is that renters insurance doesn’t cover the building or structure. Policies typically cover three areas: personal property, liability and additional living expenses.
Renters insurance provides basic coverage of your personal property – such as electronics, appliances, clothing and furniture – if they’re damaged or stolen. Referred to as “perils,” qualifying events are typically listed in the renters insurance policy and include:
- Fire and smoke
- Theft and vandalism
- Windstorms and hail
- Damage from weight of snow and ice
- Accidental damage from heating or cooling systems
- Plumbing systems freezing
- Accidental water discharge from pressurized plumbing systems or appliances
However, insurance companies impose limits on personal property to ensure affordable premiums. According to the Rocky Mountain Insurance Information Association, which represents casualty insurers in Colorado, New Mexico, Utah and Wyoming, these limits vary from an average of $200 for money, gold and silver and coins to $2,000 for firearms and $2,500 for silverware. (You may be able to get a rider or separate policy to cover a wedding ring or other heirlooms that exceed the standard limits.) The table below offers a sample of average personal property limits.
|Money, gold and silver, coins||$200|
|Property damaged off-premises||$250|
|Securities, letters of credit, passports||$1,000|
|Watercraft and trailers||$1,000|
|Jewelry, stones, watches, furs||$1,000|
|Gold- and silverware||$2,500|
When it comes to coverage, insurers usually offer two options:
Under these policies, your belongings are covered at “fair market value,” or the cost of the item minus depreciation. For example, a TV purchased three years ago for $1,400 may only be worth $600 today because of depreciation. So if you filed a claim for it tomorrow, you’d receive $600 from your insurance company, not the $1,400 you originally paid three years ago.
In this case, your belongings are replaced at face value, without depreciation, up to a specified limit or replaced at the cost for something of comparable material and quality that’s used for the same purpose. Using the same $1,400 TV from three years ago as an example, if you had replacement cost coverage and filed a claim for it tomorrow, your insurance company would give you the current market value for the exact same TV or one with similar specs.
Personal liability coverage offers protection in cases where you are found responsible for causing accidental bodily injury or damage to other people or their property. For example, if a guest trips over something in your house and injures his or her arm, liability coverage can help cover the costs of medical treatment. “Many renters,” Scruggs says, “think just because they don’t own the property, they can’t be held liable for injuries or damages, but that’s not true. Liability coverage protects your future earnings from liability claims.”
Nearly all renters liability coverage include compensation for court and legal fees associated with a lawsuit. Some insurance companies offer $100,000 in liability coverage, but many allow you to purchase more if needed.
Sometimes disaster hits, such as a fire, and you’re forced to temporarily relocate. That’s where additional living expenses (ALE), also referred to as “loss-of-use” coverage, becomes valuable. ALE covers your normal living expenses, such as meals and hotel rooms, while you are displaced. According to the Insurance Information Institute, most companies only reimburse the difference between your traditional living expenses and your claimed additional living expenses.
Some policies also offer medical payments coverage, usually limited to $1,000 to $5,000, reports the Insurance Information Institute. If a guest has an accident in your rental property, they may submit their medical bills to your insurance company to pay directly. Medical coverage, however, does not extend to you or individuals living in the rental unit.
What’s NOT Covered?
Renters insurance offers peace of mind, but these policies do not cover every incident or every piece of property. Although a few states will allow you and your roommate to file a combined claim for damage to personal property, “I always advise my clients that renters insurance does not cover flood damage, your roommate’s personal property or any damage you cause to the rental, such as damaging carpets and regular wear and tear,” says Scruggs. Below is a list of things not covered under most policies:
Damage to physical structures is typically not covered by renters insurance policies, but should be covered under your landlord’s insurance policy. For example, if faulty electrical wiring causes a fire, your renters insurance will not pay to rebuild the walls.
Floods and earthquakes commonly occur throughout the U.S., but most insurance companies will not include these events in their renters insurance policies. You can, however, purchase a separate policy or add-on/floater to cover natural disasters. The National Flood Insurance Program estimates flood insurance premiums cost, on average, $33 per month.
Most insurance policies cover damages due to accidental discharge of water from a pressurized plumbing system such as sinks and toilets, but not for unpressurized lines, such as the sewer, which run away from the property. To cover water backup/sewer damage, you need to purchase a floater, individual insurance policy for certain expensive valuables or add-ons for specific items. Floaters and add-ons, however, will likely increase your annual insurance premium.
Family members who are listed on your insurance policy are covered, but most states require housemates to get separate coverage. If your roommate has a policy, but you don’t (and vice versa), your belongings are not protected.
Before paying any claims, insurance companies will conduct an investigation. If they find you intentionally destroyed an item and filed a claim, you could be liable for insurance fraud.
Belongings in your vehicle are covered, but not the vehicle itself. You need to purchase a separate auto insurance policy for that.
Damage caused by rodents or pests are typically not covered by renters insurance. These events are considered a home maintenance issue, and the responsibility falls on the landlord to pay for rodent or pest infestation removal.
Renters Insurance and College Students
- Where you live
- Your credit score
- The safety of your neighborhood
- Size of the property
- Security or fire alarm systems
- Your insurance claim history
- Your deductible
- Your coverage amount
Most insurance companies don’t place restrictions on dog ownership before providing a renters insurance policy. Yet, these policies vary from state to state, and some companies may not issue policies to individuals who own certain breeds including:
- German Shepherds
- Pit bulls
- Staffordshire Terriers
- Doberman Pinschers
- Alaskan Malamutes
- Great Danes
- Siberian Huskies
- Presa Canarios
College students have a long checklist of things they need when they head to school, but renters insurance is usually not on that list. Yet college campuses are often plagued with theft, with bikes, computers and smart phones among the most-stolen items. Besides computers and smartphones, many students have musical instruments, sports and camping equipment, digital cameras, tablets and other electronics. All of these items would max out a credit card if they needed to be replaced.
If You Live On-Campus
Students under the age of 26 who live in campus housing are typically covered under their parents’ homeowners or renters insurance, according to the National Association of Insurance Commissioners. However, some home insurance policies have limited coverage – usually 10 percent of the policy’s limit – for items stored away from the primary resident, according to Insurance Information Institute. As a result, parents often add floaters to their policy to fully cover the cost of individual items such as laptops and other electronics that their kids take with them to college.
If You Live Off-Campus
Students residing off campus are typically not covered under their parents’ insurance policies. Scruggs and the Insurance Information Institute recommend students purchase their own renters insurance policy to protect their belongings against a “qualified event,” such as theft. These policies are also good investments since they include liability coverage.
Below are a few common scenarios in which renters insurance can come in handy for college students:
Monica was pulling a late night studying session at her university library. When taking a restroom break, she left her laptop on the table. When she returned, it was gone.
What renters insurance covers:
Because Monica selected an actual cash value policy, her insurance covered the loss but only provided $850 to replace the computer since it had depreciated in value since she purchased it five years ago.
Chris lives off-campus and owns a $1,500 55-inch TV. While on break from school, he accidentally started a grease fire that spread to the living room, destroying the TV.
What renters insurance covers:
Chris opted for replacement cost coverage for his belongings so his insurance company will cover the costs for repairing the TV or replacing it with a similar one.
Rami lives in an on-campus dorm. One evening, while playing football in the hallway with friends, he hit a sprinkler head with the ball and caused the sprinkler system to go off across the entire floor, damaging many of his floormates’ electronic devices.
What renters insurance covers:
Rami’s liability coverage covers damage to the building itself and damage to the belongings of other students.
What Students (and Parents) Should Know
According to Scruggs, the best thing parents and their college-bound kids can do is consult with their insurance company or agent before the big move to review the following:
Some homeowners policies provide coverage to dependents attending college, but only if they live on campus and usually only up to 10 percent of the policy limit. Parents and college-bound students should make sure they understand what’s covered and what isn’t and purchase additional coverage – or a separate plan – if necessary.
Create a detailed list (with pictures and receipts, if possible) of every item to be covered under the renters insurance policy and keep it updated as items are purchased or purged. This will help ensure you always have the right amount of coverage and make it easier if you submit a claim on any of these items.
Consider buying additional coverage, called “scheduled” personal property, for high-value items that have been appraised such as musical instruments, expensive sports equipment or jewelry to ensure their full value is covered in the event of a claim. Each item the insured wishes to schedule needs to be added separately to the insurance policy and generally, an additional premium is charged.
How to Choose: Renters Insurance Checklist
While affordability is important, don’t let that be the only thing you consider. Conduct a side-by-side comparison of multiple insurance policies to determine which one best fits your needs. “The biggest mistake when purchasing any insurance policy,” Scruggs says, “is basing your decision on the price alone. Select a policy that provides the most coverage you can reasonably afford. I have seen renters policies that are so cheap they cover almost nothing.”
Carefully think about the following questions before committing to a policy and insurance company:
How much coverage do you need?
Thompson says the biggest mistake most shoppers make is not getting enough coverage. Most policies default at $15,000, which is not enough for most renters. Take a home inventory and determine what each item is worth to calculate the grand total and select a policy amount to cover your needs. Keep in mind that if you experience a loss, your reimbursement costs cannot exceed the amount of coverage you have. Get more details on how to create a home inventory to get an idea of how much coverage you should purchase.
What type of deductible can you afford?
Before an insurance company pays a claim, you typically need to pay a deductible. The higher the deductible, the lower the premium – and vice versa. Because you are responsible for paying the deductible for each claim, select an amount that fits your budget.
What events are covered?
Typically, renters insurance covers losses or damage from vandalism, theft, fire, smoke and some types of water damage. Be sure to check the fine print and add endorsements, if necessary.
What types of floaters and policy riders are available?
If you have expensive personal belongings, such as jewelry or collectibles, be sure to compare floaters from several insurance company. Different companies may charge different amounts and provide different coverage limits on the same item.
Do you need natural disaster coverage?
If you live in a flood-, earthquake- or tornado-prone region, you should consider optional insurance coverage. Insurance companies sell these as separate policies or may append your existing renters insurance policy with an endorsement for each event or disaster.
Do you need replacement cost or actual cash value coverage?
Most people choose replacement cost coverage to ensure they get the full amount they paid for the item instead of the replacement cost minus depreciation.
Do you need extra liability coverage?
Medical and legal bills can add up fast if someone is injured in your home. You may want to consider additional liability coverage or a separate umbrella policy to cover expenses above the standard coverage stated in your policy.
Money Saving Tips
Renters insurance is already seen as affordable protection, but there are still ways to lower your premiums. To learn more, check out the following guide:
Optional Floaters & Add-Ons
Sometimes basic coverage isn’t enough. To ensure your most expensive and irreplaceable items are covered, you can buy floater policies to fit your needs. The table below outlines common floaters and add-ons you may want to consider when purchasing renters insurance. Many of these are offered by insurance companies for an additional cost, which is likely to vary depending on the insurer and items being insured.
Policy or Add-On
Who Would Need This and Why?
Good for all renters because it covers the cost to replace or repair personal property without deductions for depreciation.
|Scheduled Personal Property||
Adds coverage for high-value items (usually that have been appraised). It also covers more causes for loss and replaces items at full cost. Good for renters with expensive items, such as jewelry, antiques and cameras.
|Identity Theft Extension||
Provides coverage for legal work and lost wages if your identity gets stolen. Ideal for all renters.
|Sewer/Drain Back-up Coverage||
Additional coverage to ensure against damage from sewer backups or water lines running away from the property. Individuals living in older homes or apartments could benefit from this policy add-on.
|Business Merchandise Coverage||
For tenants who run their own business out of their homes, such as those who sell products via eBay and other online sites, getting business merchandise coverage could be a lifesaver.
Renters Insurance and Subletting
Subletting has increased significantly in the past decade, especially with the rise of short-term rental companies such as Airbnb. On top of that, with rents increasing in many major cities, subletting has become a go-to for tenants looking to make extra money to cover living expenses.
Whether you’re subletting an apartment or moving in as a subtenant, there are several things to be aware of.
Notify your landlord in writing
If you’re allowed to sublet, most leases require your landlord’s consent beforehand.
Make sure your subtenant has rental insurance
Whether it is a short- or long-term agreement, both you and the subtenant need to have your own renters insurance policies. Renters insurance does not transfer from you to the subtenant.
Evaluate your own rental policy
Let your insurance company know you’re changing residencies. Regulations vary from state to state and you may need to update your policy if you are leaving belongings behind while subletting. In some cases, you may even need to purchase a landlord insurance policy if you sublet your apartment.
Screen your tenant
When subletting, screen your prospective renters carefully by running a credit check and contacting their references and previous landlords.
Read the lease agreement
In addition to your sublease agreement, be sure to read the original lease since it includes the landlord’s responsibilities, building rules and other conditions pertaining to living in that rental unit.
Purchase renters insurance
Your landlord’s insurance – as well as the original tenant’s renters insurance – does not cover you. Make sure you get your own policy and that it’s associated with the unit you’re subletting.
Using Your Insurance
If you experience property loss from a qualifying event, such as a fire or burglary, you’ll need to file a renters insurance claim. The steps outlined below can help you prepare should a named peril occur and also ensure you receive payment for your claim in a timely manner.
What to Do Before Something Happens
Step 1Create a home inventory
Create a detailed, itemized list of your personal property to be covered by your renters insurance policy. For each item, determine how much it would cost to replace it if it were damaged or stolen.
Step 2Gather receipts and document your inventory
For each item, take a photograph and, if possible, find the receipt. Document the serial numbers, makes and models of your electronic equipment, as well as the date you purchased each item.
Step 3Purchase a renters insurance policy
Working with your insurance agent, purchase a policy and determine if you need additional coverage for specific items or floaters to safeguard against natural disasters and other events.
Step 4Place your inventory, documents and policy in a safe place
Put your policy information, inventory, documents and receipts in a safe place that you’ll remember. Keep the inventory list updated as you make new purchases – or get rid of things – and review annually with your insurance agent to make sure you have enough coverage and/or aren’t overpaying for your coverage.
What to Do After Something Happens
Step 1Report criminal activity to the police
In the event of theft, burglary or vandalism, contact the police department as soon as possible and file a report. In most cases, filing an official report is required in order to submit a renters insurance claim. The report should include a list of the damaged or stolen items. If possible, take photographs and video, even if the police report doesn’t ask for these. Also keep a record of who you spoke with, when you spoke with them and a copy of the police report, if possible.
Step 2Contact your insurance agent or company to file a claim
Call your insurance company to file a claim. Your agent will discuss the process timeline and paying the deductible and answer any questions you may have. Be sure to carefully complete all paperwork and provide your inventory list and/or any other requested documents.
Step 3Keep your receipts
If you need to temporarily relocate, keep all your receipts. You’ll need this information to be reimbursed for additional living expenses.
Step 4Work with the claims adjuster
The insurance company will send a claims adjuster to investigate and review the claim. This is typically the last step in the process prior to receiving a check or reimbursement for your claim.
Terms You Should Know
Below is a list of common renters insurance terms you should know before signing on the dotted line.
Actual cash value
The amount of the replacement cost for a stolen or damaged item, minus depreciation. This is the actual value for which the item could be sold at the time of loss or damage, which is usually much less than what it would cost you to buy a new item for replacement.
Additional living expenses
Part of a renters insurance policy that offers partial reimbursement for the cost of maintaining a comparable standard of living in the event of relocation, such as fire damage that requires you to temporarily move out.
Professional review of high-value personal items to estimate their worth and replacement costs. Appraisal is typically required for additional coverage for expensive possessions such as antiques and/or jewelry.
The out-of-pocket cost you must pay before the insurance company provides coverage for a loss. Deductibles can range from $250 to $1,000, depending on the policy.
The loss of value of an item due to passage of time and normal wear and tear.
Restrictions placed in an insurance policy for location or property. Standard exclusions include earthquakes and floods.
An additional insurance product that can be added to your existing rental insurance policy for extended coverage.
Insurance provided and purchased through an employer, union or professional association.
An itemized record of personal property and belongings.
The maximum amount of coverage an insurance company will provide in the event of a covered loss. Limit amounts vary by individual policy.
Your individual possessions in your insured property (e.g. furniture, electronics, clothing, etc.).
The amount you pay monthly or annually to keep your renters insurance policy active.
Replacement cost coverage
If you have replacement cost coverage, your insurance company will cover the costs to repair or replace damaged or stolen items at the current price. You’ll need to pay for the item upfront, then submit receipts to your insurance company. This type of coverage usually gives you more accurate compensation for your belongings.
List of specific high-value items, such as antiques, art and jewelry, that have additional coverage in your renters insurance policy.