What is renters insurance, and do you need it?

You’ve found the place you want to rent and are preparing to sign the lease. But before you can start moving in, your landlord may ask you about purchasing renters insurance. So what is renters insurance?

While homeowners can protect their properties with homeowners insurance, renters can do the same with renters insurance. Your landlord or building owner may have insured the building, but that coverage doesn’t extend to your personal belongings and possessions. So you might want to consider your own renters insurance policy.

Key takeaways

• Renters insurance is a type of insurance policy for renters.
• Like homeowners, medical and auto insurances, renters insurance is meant to cover you in case of an emergency. 
• Renters insurance can be one of the cheapest insurance policies offered and tends to be widely available by national carriers.

Renters insurance can help renters protect their belongings while renting or leasing a home. It’s sometimes called tenants insurance or apartment insurance. It covers your personal property in the event of an emergency, like a fire or theft.

Renters insurance vs. landlord insurance

When your landlord buys the property, they can buy insurance for it. This is specifically designed to protect the property and any liabilities that may occur on it. It usually covers the general dwelling or structure and other structures if they’re detached from the property. 

The liability portion typically covers landlords in case someone gets hurt on the property—including the tenants—and the landlord is found to be responsible for the incident. The insurance policy can then cover that person’s medical bills and other associated costs.

Landlord insurance doesn’t cover anything belonging to tenants, like their belongings and assets, though. Renters need to purchase their own individual policies for that coverage.

You can either buy a renters insurance policy separately, or your landlord might offer one when you sign your lease agreement. Your landlord might require coverage as part of your agreement, but that isn’t always the case.

If your landlord doesn’t require renters insurance, you can still get your own policy through many traditional insurance carriers. It works like an insurance policy for home or auto—you’ll pay a monthly premium, and in turn, you’re covered up to a certain amount. 

Usually there’s a deductible, which is what you’re required to pay out of pocket before insurance coverage kicks in. In most cases, the lower the deductible, the higher your monthly premiums will cost.

There are three common types of coverage that you may have in your renters insurance policy: personal property, liability and additional living expenses.

Personal property

This can cover the cost to repair or replace your things in the event they get stolen. Most renters insurance policies will cover your belongings if they’re damaged in a fire or from vandalism. Like home insurance, they might not be covered in flood or earthquake damages, but you can buy a separate policy for those potential events. 

Renters insurance typically offers two types of policies related to personal property coverage: actual cash value and replacement cost value. Actual cash value is when the insurance company pays to replace your possessions after depreciation, usually up to the limit outlined in your policy. Replacement cost—which tends to cost more than actual cash value—will cover the cost for replacing your possessions at market value.

Liability

This can cover you if someone gets hurt in your home. It typically only covers guests or anyone who doesn’t live in the home, though. But it can help with their medical bills. It may also cover you in case you’re liable for causing damage to someone else’s property. For instance, if you spill your drink and end up ruining your neighbor’s couch, your renters insurance might cover the cost to repair or replace their furniture. 

Additional living expenses

Like most homeowners insurance policies, renters insurance policies may also have coverage for additional living expenses. For example, if the apartment building you live in gets fully or partially destroyed in a fire, your policy could cover the cost of temporarily living somewhere else, meals and other household expenses. 

The average cost of renters insurance is about $15 a month. But it depends on the insurance companies and different factors, including:

• Where you live
• Your deductible
• Your credit score
• The value of your belongings
• The size of the home you’re renting
• Actual cash value vs. replacement cost value
• Any pets 

Insurance companies can also determine what is and isn’t covered. There is no blanket coverage that all insurance policies must offer. Instead, each company has its own standards and policies, which means it’s a good idea to compare providers and thoroughly vet all your options.

If you want to make sure your belongings are covered in case of theft or an emergency, having renters insurance can be very helpful. If you can’t get your things back, you may recoup some of the costs from losing them. In some cases, very valuable assets, like jewelry and computers, could be worth getting insured.

With some policies charging as low as $5 a month to cover your assets, you might want to check out renters insurance. You may also consider asking your insurance carrier if they’re offering any discounts, deals or bundles to save on your renters insurance policy.