Renters Insurance: Why You Need It & What It Covers

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November 4, 2020

One of the perks of renting is not having the expense and responsibility of owning a home. If something breaks, just call the landlord and it’s their problem to fix. Your landlord isn’t responsible for your possessions though. In the event of an unexpected emergency like fire or burglary, you could be left shouldering a hefty financial burden if you don’t have renters insurance. 

What is renters insurance?

Renters insurance, sometimes referred to as apartment insurance, provides coverage for your personal property and belongings in the event they are damaged or stolen. A landlord’s insurance policy only covers the building structure, leaving your property and belongings unprotected. The good news is that unlike homeowners insurance, renters insurance is fairly inexpensive.

What does renters insurance cover?

Renters insurance typically falls within the categories below, but you can purchase additional coverage should you need it. 

Replacement Cost Coverage: A replacement policy will pay for the cost of replacing your belongings with new ones. If your laptop gets destroyed in a disaster, the policy will allow you to buy a new, or similar one. This option is more expensive, but worth it if you know you’ll want to replace your belongings with brand new ones if they were to get damaged or destroyed. 

Actual Cash Value Coverage: An actual cash value policy will only pay the cost of replacing your belongings at the value they were when they were destroyed. Using the example above, if your laptop was five years old, you’d only get a check covering the amount the laptop was worth. 

Liability Coverage: A liability policy covers you in the event someone injures themselves in your home and sues. This can also cover injuries or damage your pets cause to others. 

Additional Living Expenses Coverage (ALE): An ALE policy provides money to pay for temporary housing in the event your home becomes uninhabitable due to a covered event. 

For coverage of jewelry or other expensive items, consider adding a rider to cover the full value. Providers may require that you get the items appraised, but that’s a small hoop to jump through to ensure your most treasured possessions are covered. 

Similar to homeowners insurance policies, all renters insurance policies have a list of “perils” that are covered. A peril is a mishap like fire or theft that could cause damage to your belongings. 

Commonly covered perils include:

  • Fire and smoke damage
  • Lightning
  • Water and steam damage from appliances or HVAC systems
  • Theft
  • Vandalism
  • Explosions (like a gas explosion)
  • Damage caused by weather like hail or windstorms
  • Damage caused by snow or ice

What renters insurance doesn’t cover

Most policies won’t cover floods, earthquakes, or sewage backups. However if you are an active service member or veteran, USAA offers earthquake and flood coverage as standard with their renters insurance policy. For everyone else, you’ll need to buy flood or earthquake insurance separately. 

Bedbugs and other pest issues are also not included, nor are wear and tear or neglect covered. For example, if you have a dinosaur of a laptop that stops working because it’s old, chances are it won’t be covered.   

If you have a roommate, their possessions won’t be covered unless you share a policy, though some states don’t allow it. To be safe, it’s best for each of you to have your own separate policy.  

How much does renters insurance cost?

According to the Insurance Information Institute the average premium for renters insurance is $180 per year. Use this figure as a ballpark number as rates vary from state to state and are determined by the size of the home. For example, someone renting a studio will pay a lower rate than someone renting a detached house. You can view a state by state breakdown here

How much renters insurance coverage do I need?

The amount of coverage you need will depend largely on the value of your belongings. If you just have a small studio sparsely furnished with second hand furniture, you’ll need less coverage than someone with a larger apartment that has a home studio filled with recording equipment. 

Take inventory of your belongings. The amount of items you own may shock you, but it’s important to be meticulous and log everything. You don’t want to risk not having enough coverage when you need it most. Once you’ve completed your list, you can use a site like Policygenius to easily compare the cost of plans from multiple insurance companies.

Searching for a home in NYC? Let Robin, our home hunting advisor, jumpstart your home buying journey today. 

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