Do you rent a home or apartment? Your landlord’s insurance policy may cover their property, but it won’t protect yours. A disaster could strike at any time, and you’d be on the hook to pay for any costs. Renters insurance protects you from these potentially devastating disasters.
A renters insurance policy will cover you from a lot. Above all, it’ll take care of damage to your personal belongings and protect you from liability. You may also receive coverage for any additional living expenses you rack up if your home is unlivable after a disaster. It’s common for landlords to require you to buy renters insurance, but it isn’t a state requirement.
This article will teach you everything you need to know about renters insurance. We’ll explain how a renters insurance policy works and whether you need it. You’ll also learn about what it does and doesn’t cover. Finally, we’ll break down how much it costs.
How Renters Insurance Works
When you rent from a landlord, you won’t be part of their homeowners insurance policy. Their home insurance only covers the structure of the house and any of their belongings. This means that your landlord’s policy won’t cover anything that you have inside the rental unit. Renters insurance protects you and your belongings from disasters that could strike at any moment.
Technically, renters insurance is a type of homeowners policy. A renters policy usually refers to homeowners form HO-9. Renters insurance just doesn’t include the physical structure of where you live.
Your renters insurance policy will only cover damages that certain “perils” cause. There are about 16 perils that insurance companies cover.
Renters policies are made up of a few different coverages. Each type of coverage protects you from something different. For instance, liability protection covers you from damages that you or household members cause. On the other hand, personal belongings coverage will cover your items no matter where they are.
Who Needs Renters Insurance
Renters insurance is a smart move for any person who rents a unit from a landlord. It helps shield you from damages that can ruin your bank account. Like homeowners insurance, states won’t require you to have a renters policy. But you may still need it. Below are some instances where you may need to buy renters insurance:
Your Landlord Requires It
It’s common for landlords to require you to buy a renters insurance policy. They do this because they want to protect themselves from possible disputes and liabilities. Without a renters insurance policy, some tenants try to sue their landlords for damages to their belongings.
You don’t have a choice if your landlord requires you to buy renters insurance. They’re legally within their rights to ask you to buy it. Normally, this will be a condition that your landlord lists before you sign off on the lease.
You Can’t Afford to Pay for Damages Out of Pocket
For some people, renters insurance isn’t just a good idea, it’s a necessity. If damages to your personal belongings would financially ruin you, you should buy renters insurance. It’s too big of a risk to avoid buying it. Keep in mind that a renters policy can also protect you from expensive liability damages and lawsuits.
What Renters Insurance Covers
Renters insurance protects you from a lot of random disasters. A standard policy includes at least three major coverages. Here’s what you can expect a renters policy to cover:
- Personal belongings coverage. This covers damages to your personal items. It’ll cover them whether they’re in your rental unit or not. It’s best to keep an inventory of your items by using a written checklist. This will be helpful if you ever need to make a claim.
- Liability protection. This covers damages that you or any household members (including pets) cause to someone else’s property. This includes coverage for lawsuits that others may file against you.
- Additional living expenses (ALE). If a disaster causes your rental unit to become uninhabitable, ALE will cover your living costs until you can move back in. This includes costs like hotel fees and restaurant bills.
A renters policy is very similar to one you’d see with homeowners insurance. The major difference is that a renters policy won’t cover the physical structure of the rental unit or home. Your landlord’s policy would cover those costs.
What Renters Insurance Doesn’t Cover
While renters insurance covers quite a bit, it doesn’t make you bulletproof. There are some costs that it won’t protect you from. Here’s what you typically won’t receive coverage for with a renters insurance policy:
- Expensive items. Valuables such as jewelry, art, and antiques may cost too much to cover. In this case, you may need an endorsement or policy rider to help replace them.
- Cars or other vehicles. Vehicles on your property won’t fall under your renters policy. To get coverage, you’d need to buy a separate type of policy, such as auto insurance.
- Home-operated business. Any type of home business that you run from your home isn’t part of your renters policy. Belongings that your business owns wouldn’t get coverage. A policy rider may be able to help cover these types of objects. Be sure to check with your agent to see how you can get coverage for your home business.
Replacement Cost vs. Actual Cash Value
There are two ways that your insurer can pay you back for your personal belongings. The way they do it will depend on the type of policy you select. Each one will pay you a set amount of money, but the exact number differs. Here’s how each type of policy works:
One of the ways that your insurer can reimburse you for damages is with replacement cost. This is where your insurer pays you the exact amount of money that you need to replace your items. It doesn’t factor in any loss of value of your personal belongings. It’s always smart to keep an inventory checklist. This way you can keep track of your personal items’ value.
Replacement cost policies are typically more expensive. But they’ll also prevent you from taking a loss on your objects due to depreciation. This makes replacement cost a good idea to have on your policy.
Actual Cash Value
Actual cash value (ACV) policies will pay you the amount needed for replacing your items minus any depreciation. This means that insurance carriers will take your items’ loss of value into account when they decide how much to pay you. Loss of value can happen for the following reasons:
- Wear and tear
- Obsolescence i.e., the item is out of date or not as useful anymore
ACV policies tend to be cheaper than replacement cost. But keep in mind that you could be taking a loss on your items when you receive a payout.
How Much Renters Insurance Costs
Renters insurance tends to be cheaper than homeowners policies. This is because you’re only covering yourself and your items. Renters insurance doesn’t cover expensive home or building repairs.
How much you end up paying for renters insurance may depend on several factors. These factors are usually small details about you that tell insurers how you are as a customer and tenant. These factors help determine how much you’ll pay for renters insurance:
- Where you live
- How much coverage you buy
- How high or low your deductible is
- Credit history (in states that allow it)
- Claim history
Not all insurers will give you the same rates. It’s a good idea to shop around before you settle on a company. This way you can find the best insurance at the best price.
Frequently Asked Questions
Q: Is renters insurance required?
A: Renters insurance isn’t a legal requirement. But you may still need to buy it. Landlords will often require you to buy it as a condition of your lease. When you’re renting a unit, keep an eye out for renters insurance requirements hidden in your contract. Always read the fine print!
Q: Does renters insurance cover theft?
A: Your renters insurance policy should cover the theft of your personal belongings. Most standard renters policies include personal property coverage to repair or replace your items. This includes coverage for theft of your objects.
Your renters insurance limits may not be enough to cover expensive items, such as jewelry or art. It might be a good idea to consider buying a scheduled personal property policy rider to help protect more valuable items. You should speak with your insurer about how you can get extra coverage for your expensive household items.
Q: Will renters insurance protect me from liability?
A: Renters insurance protects you from liabilities up to your coverage limits. For example, let’s say your kid’s friend trips inside your rental unit and sprains their ankle. Your insurer would cover any medical bills.
Consider, though, that your current limits may not be enough to cover all the costs if it’s really expensive. This is often the case if the other party were to sue you for damages. Legal fees can rack up fast! Buying an umbrella policy would help you avoid paying out of pocket for these costs. It’s a good idea to speak with your insurer about buying umbrella insurance if you think you need more coverage.