What you need to know about insuring your unit as a renter
  • Renters insurance covers your unit’s contents, and your landlord’s insurance covers dwelling. 
  • It will also cover liability and additional living expenses if your home becomes inhabitable. 
  • Many landlords will require you to purchase minimum liability coverage for your unit. 

Only 47% of renters in the US own a

renters insurance

policy, according to data from S&P Global Market Intelligence. An unexpected event like a fire or theft can result in significant financial loss, and many renters are underprepared. 

Renters insurance is relatively inexpensive and could be worthwhile when safeguarding your investments.  

What is renters insurance? 

Renters insurance (HO-4) protects your personal property when damaged by a covered peril, or a loss listed in your policy, like fire, smoke, theft, and storms.  

There are three parts to renters insurance coverage: personal property coverage and personal liability coverage. The third part is “loss of use” coverage, which pays for additional expenses if your unit becomes temporarily unlivable and you have to make alternative living arrangements. 

Do you need renters insurance? 

Renters insurance protects you from financial hardship if the contents in your unit undergo damage or if someone gets injured on your property. 

Many renters are under the misconception that their landlord’s renters insurance policy will cover all home-related losses. Several landlords require minimum liability coverage of $100,000, according to Mitchell Stella, managing director of Goosehead, an insurance comparison platform. Check your lease agreement to see if your landlord requires renters insurance when moving into a new unit. 

While your landlord’s policy will typically cover the building and the structure, you’re responsible for the contents inside the unit. For instance, your landlord’s renters insurance will be financially responsible for replacing that loss if someone steals your laptop. 

Ask yourself these questions to determine if you need renters insurance:

  • Can I afford to replace damages to my personal belongings?
  • Can I afford to pay for legal or medical expenses if someone gets injured in my unit?
  • Can I afford additional living expenses if my unit is temporarily unlivable? 

If the answer to any of these questions is no, consider purchasing renters insurance. 

What is personal property coverage renters insurance?

Personal property coverage will replace or repair furniture, clothes, sports equipment, and other personal items. The amount you need depends on the value of your belongings. You may need to purchase more coverage if you own jewelry or high-valued electronics that are more expensive to replace. 

Many policies will cover your belongings with the actual cash value amount — the cost of your item minus depreciation. However, several providers may offer replacement cost coverage, which covers the amount it would take to repair or replace your item of similar value at an additional cost. 

Your landlord’s insurance policy should cover any damages to built-in appliances they provide. You will need renters insurance to cover appliances that you bring, such as a blender or a TV, according to Stella. 

What is personal liability coverage for renters insurance? 

“Standard renters insurance policies provide liability protection against lawsuits for bodily injury or property damage that you or your family members cause to other people,” according to the Insurance Information Institute (III). If your dog bites someone on your property, a renters insurance policy will cover medical or legal fees related to the incident. 

Minimum liability limits are typical $100,000; however, experts at the III recommend having at least $300,000 worth of liability protection. Liability coverage does not pay medical bills for your own family or pet. 

What is loss of use for renters insurance? 

Loss of use coverage will reimburse you for increased living expenses if your home becomes temporarily unlivable. This coverage will pay for public transportation, pet boarding, groceries and dining, moving costs, storage costs for household items, parking fees, and other related expenses. 

Loss of use coverage will not cover expenses you were paying before the damage, wear and tear, floods, and earthquakes. 

Damages that are covered by renters insurance

Renters insurance covers your unit’s contents, liability expenses, and loss of use expenses if a covered peril causes the damages. Here is a list of named perils in a standard renters insurance policy:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riots
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or steam
  • Sudden and accidental tearing, cracking, burning, or bulging
  • Freezing
  • Sudden and accidental damage due to short-circuiting
  • Volcanic eruption

Unlike a standard homeowner insurance policy, renters insurance will not cover dwelling. Your landlord’s insurance policy should cover that instead. 

Renters insurance does not cover floods, earthquakes, wear and tear, or any peril not listed in your policy. Unlisted perils will require separate coverage or a floater. Roommates are also not covered under your policy, so each roommate should get their own renters insurance. 

How much does renters insurance cost? 

In the US, renters insurance is $174 per year or about $15 a month, relatively inexpensive compared to

homeowners insurance

. Mississippi has the most expensive renters insurance at $252, and North Dakota has the cheapest at $115, according to the III.

​​Factors that determine your premium are the amount of coverage you need, where you live, if you own a pet, and if you have a good credit score

If you rent in disaster-prone areas — flood zones, hurricanes, tornadoes, wildfires, mudslides, hail, and earthquakes — you may need to purchase additional coverage, which may increase your rates.

How to lower renters insurance cost

Renters insurance providers have significantly fewer discount and saving opportunities than homeowners insurance because coverage is already affordable. However, there are still little-known ways to reduce your premiums without lowering your coverage.  

  • Shop around annually: Shop and compare quotes annually to see if you can get a better deal elsewhere at the same coverage. Note that some insurers may charge you a fee for early cancellation. 
  • Increase your deductible: Your deductible can impact how much you’ll pay for your insurance premiums. The higher the deductible, the lower your monthly rate. Be aware that deductibles can be subtracted from your total coverage amount.
  • Take advantage of discounts: Get savings on your insurance premiums by bundling multiple products like your auto insurance policies. Discounts can also largely curtail your premiums. ” Since auto insurance can be a more costly policy, the discounts one receives on this policy can help offset your overall household cost of (renters) insurance,” says Stella.
  • Have good credit: Insurance providers use credit-based insurance scores when determining how much you will pay for insurance. These scores calculate your risk and your likelihood of filing a claim. A good credit score (above a 700) could qualify you for lower premiums. 

How to buy renters insurance

When it comes to buying renters insurance, it is important to shop around for a provider that’ll give you the most value for your buck. Here are four steps to purchase renters insurance.

Step 1: Get a copy of your landlord’s renters insurance policy 

Your landlord’s insurance policy will typically cover only the structure of your unit. You’re responsible for ensuring your personal belongings and having liability and loss of use coverage. Your landlord’s policy may not cover certain damages, such as wear and tear of appliances. Be sure to speak to your landlord and get a copy of their renters insurance policy to determine what your landlord’s policy covers. 

Step 2: Determine what needs coverage

Create an inventory that details all the contents of your home, from your furniture to your clothing. A home inventory will make filing a claim much easier and allow you to determine how much coverage you’ll need to replace those items if damaged. 

High-valued items like expensive jewelry and electronics are targets of theft and are often susceptible to damage by other perils. Expensive items usually have sub-limits between $1,000 to $2,000 in your renters insurance policy, according to Stella. Protect your investments by purchasing a special personal property floater for belongings that need significant coverage. 

You’ll also want to consider your lifestyle. You might need more liability coverage under particular circumstances, like having a pet or being in a household with teenage drivers. In that case, consider umbrella insurance, which offers more liability coverage. 

Your lifestyle budget also will determine how much you might need for loss of use coverage. You’ll probably need more coverage than you usually spend every month. Consider keeping a record via bank statements or receipts of your normal living expenses before a loss occurs. Your insurance provider will usually have you fill out an application detailing your average monthly spending on essential expenses if you need to file a claim. 

Step 3: Gather quotes from three insurance companies

The III recommends gathering quotes from at least three different companies. Consider asking your friends and relatives for insurance recommendations to begin your search. Alternatively, you could use an independent agent or

online brokerage

to pull multiple quotes at once. 

It is important to know what’s going into your policy to make the best apples-to-apples comparison. Ensure coverage types, deductibles, and coverage limits are the same across all policy estimates. You don’t want to be underinsured if you need to replace your belongings or get sued for accidents on your property. 

Step 4: Choose an insurance company and apply for coverage

Before you purchase a policy, research the trustworthiness of the company you choose. An insurer’s financial strength, rated by independent agencies, can help you determine if it can compensate you for a claim when you need it. AM Best assigns insurance companies to letter grades from A to F. If a company is rated anything below a B, it is not financially stable and cannot pay claims reliably at any given time. 

You can also check a company’s trustworthiness by looking at customer satisfaction. The JD Power’s home insurance customer satisfaction survey ranks major insurance companies on a 1,000-point scale. 

You’ll need a few basic information on hand to complete a renters insurance application. 

  • Name
  • Date of birth
  • Email address
  • People living in your apartment
  • Address/location of the insured property

You may also need to provide a list of the safety features in your rental, how close your unit is to a fire station, and your insurance history. 

After filling out an application, you’ll get a quote estimate. Ensure all your information is correct, and adjust your coverage as needed. You can either pay your premiums in monthly increments or upfront. 

While renters insurance may seem straightforward, many individuals are underinsured, according to Stella. For instance, liability is an essential aspect of coverage. Allowing yourself more coverage doesn’t usually result in significant premium increases, but many renters opt for the cheaper option. It is worth getting more coverage as you need so that you aren’t underinsured. Consult a professional like your insurance provider or an independent agent before purchasing a policy to determine how much coverage is enough. 

Ronda Lee was formerly an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. Before joining Business Insider, she was a contributing writer at HuffPost with featured articles in politics, education, style, black voices, and entrepreneurship. She was also a freelance writer for PolicyGenius. She worked as an attorney practicing insurance defense and commercial litigation. 

Alani Asis

Personal Finance Reviews Fellow

Alani Asis is a Personal Finance Reviews Fellow who covers life, automotive, and homeowners insurance. Prior to Insider, Alani was a Mortgage Support Specialist and a personal finance freelance writer based in Hawai’i. You can reach her via email at aasis@insider.com or through Twitter @AlaniAsis. 

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