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What is Renters Insurance and Do I Need It?

What is Renters Insurance

You just rented a new home and your landlord is asking for a copy of your renters insurance policy. You tell them, “no problem.” Then it dawns on you, what is renters insurance anyway? Does it protect me or my landlord? If it protects me, then why do they want a copy? It’s all so confusing.

Let’s start by setting the record straight, renters insurance does protect you and not your landlord. It provides protection for your personal belongings in case of damage caused by fire, theft, or other covered perils. It also provides financial protection if someone is injured at your residence or sues you for negligence. It’s a common insurance protection when your rent apartments, condos, townhouses, and or other type of rental property. Renters insurance doesn’t cover the physical dwelling you live in — that’s your landlord’s responsibility.

How does a renters policy pay claims?

The claims process is straight forward and will work like a typical home insurance policy. If your personal belongings are damaged or stolen, or someone is injured in your home, you can file a claim with your insurance company. If the loss is covered, the insurance company will pay for the damages or losses up to the the limits shown on your policy.

When you buy your policy, you’ll select a property deductible. This is the amount you are responsible to pay if you have a property loss claim. For example: You have a $500 deductible and a thief steals your $2,000 television. You’ll be responsible to pay $500, and your insurance company will pay the remaining $1,500.

What does renters insurance cover?

The real answer to the question, “what is renters insurance” lies in what it covers. Renters insurance helps provide financial security for covered losses to your personal belongings. Additionally, if you’re liable for someone else’s injuries in your home, renters insurance can help. If you have to get temporary housing because of a covered loss, most renters policies will also pay for any temporary living expenses while your home is being repaired. Also, in addition to property and liability coverages, you can add optional coverages to increase your renters protection – like identity theft recover protection. 

Personal belongings covered by renters insurance

As long you haven’t exceeded the property limit you purchased on your policy (per claim), the typical renters insurance policy covers these personal possessions:

  • Your Clothing
  • Audio & video equipment (TVs, stereos, computers, etc.)
  • Home furnishings
  • Decorations
  • Toys/other games (arcade systems, pool tables, ping-pong tables, etc.)
  • Tools/power equipment
  • Your appliances — not the landlord’s (refrigerators, washers and dryers, etc.)

Just like a homeowners policy, art, jewelry, firearms, rugs, silverware and other expensive or fine items have sub-limits. If you need to insured these types of items you should review the sublimit to see if they are sufficient. If not, you can schedule them or purchase a personal article floater.

Pro Tip:

Most people do a quick estimate of their things and run the risk of under stating the value of their property to save money on their policy. Make sure you properly evaluate your personal belonging to make sure you have the right coverage. Also, schedule expensive or fine items or buy a floater if you have high-value jewelry, firearms or other items.

Personal liability coverage

If a guest is injured at your home or you’re responsible for their damaged property, personal liability coverage can help protect you. For example, if a visitor trips and falls because of uneven tiles on your patio and is insured, liability insurance can pay for their medical bills. Moreover, if they sue you, liability insurance can pay for your legal defense. As a side note, your medical payments coverage could also pay for the medical bills. Medical payments is a separate coverage that pays for medical bills if a guest is injured at you home. However, the payments would be subject to the limits you purchased.

If you want additional protection, some insurers offer personal injury coverage. This protection can protect you from other types of lawsuits and claims (slander or libel, wrongful entry, false arrest, and wrongful eviction).

Loss of use or temporary living expenses

This coverage is some time called additional living expenses. So, if your home is damaged from a covered loss and you have to temporary housing, this coverage pays for hotel or rent expenses for the time you’re displaced (subject to limit). It can even pay for food expenses above what you normal pay. For example, if you usually spend $100 on groceries in a week, but had to spend $300 on food while in temporary housing, you could recover $200 for food expense.

What if I have roommates?

When you have roommates, you need to think about how you setup your renters insurance. If you want your renters policy to cover your roommate’s property, personal liabilities, or temporary living expenses, then they will need to be listed on the policy. Otherwise, they won’t have coverage on your policy.

Splitting renters insurance with a roommate is not recommended. Sure, you may save a few bucks, but any claim your roommate files will show up on your claim history. This could cost you at renewal and on future policies. It’s usually best for roommates to get separate renters policies.

What causes of loss are covered?

Some thing that renters insurance only covers theft and fire. That’s not correct. Renters will cover many different causes of loss, also called perils. The types of perils covered will depend on the insurance carrier as they very from company-to-company. Below are the most common covered perils:

  • Windstorms
  • Fire and smoke
  • Lightning
  • Hail
  • Tornadoes
  • Explosions (e.g., aerosol can or gas grill accidents)
  • Theft and vandalism
  • Car or aircraft crashing into your home
  • Falling trees or other objects
  • Weight of snow, sleet, or ice

Sometime a renter will need a flood or earthquake insurance policy. If you need floods insurance or an earthquake quote, you can purchase a separate policies either from FEMA or your state’s earthquake authority as well as private insurers.

What does my landlord’s policy cover

Landlord’s buy coverage classically called a dwelling fire policy, and more contemporarily called a landlord protector. Below are the likely things covered by a typical landlord’s insurance policy:

  • The actual dwelling (roof, ceiling, walls, etc..) when damaged by covered perils
  • Attached structures damaged by covered perils
  • Damage caused by a burst pipe
  • Vandalism to the home

Summary of what renters insurance does and doesn’t cover

Item or SituationCovered?Description
Your personal belongingsYesHighly valuable possessions should be added to your policy as riders.
Your liabilities for damages & injuriesYesIncluded with personal liability and medical payments coverage.
Your temporary living expensesYesIncluded under your loss of use coverage.
Personal injury & other lawsuitsOptionalCovered legal situations may vary by insurer.
Your roommate’s belongings, liabilities, & loss of useNoYour roommate must be on your policy for coverage to apply.
Fire, theft, and other perilsYesCoverage will vary by insurer and policy type.
FloodsNoYou must purchase a separate flood insurance policy.
Property damage & vandalismNoYour landlord’s insurance should cover any property damage you’re not responsible for.

Do I need renters insurance?

There is no legal requirement to have renters insurance. However, many landlords or property managers make it a requirement of a lease. Because it’s not legally compulsory, and not all landlords require it, it’s estimated that only 37% of renters have a renters policy. Required or not, it’s always a good idea to get renters insurance to cover your stuff.

Think of it this way. An average renter has approximately $24,000 in personal property coverage. If this average person was robbed, or had all their stuff burned in a fire, that could be a significant financial setback. Your landlord is not responsible for your belongings, their policy won’t pay. Renters insurance is really the only protection you have in should these type of things happen.

How much does renters insurance cost?

Renters insurance is pretty reasonable. Most are surprised by how affordable it really is. However, if you’d like to know what drives the premium, these three items generally factor most significantly into the price: 

Location: The safer the area and the lower the crime, the lower the rates.

Coverage limits: The amount of insurance your need. You should always buy the right amount of insurance, but understand that the premium is proportional to the limits.

Type of rental property: If you live in a large complex, it could be more expensive than a single family home. The more units on the property, the higher the premium.

The bottom line

Renters insurance is an affordable way for a tenant to get coverage for their belongings as well as personal liability protection. There are also many optional coverages that can extend your liability coverage and provide you more protections.

If you’re thinking about a renters insurance policy, or your new landlord is making it a requirement, give us a call and we’ll help you find a good policy. Also, bundling with your auto insurance is a way to save money. Give us a call at (877) 334-7646 or get a quote online.

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