June 21, 2019

How Much Renters Insurance Do I Need

Read more about Home Insurance

Don't wait 'til you need renters insurance. Not sure how much coverage to get? Read our guide to know what a policy covers and more.

Just 54% of all renters do not have renters insurance, according to the Insurance Information Institute. Here's why you need it.

What Is Renters Insurance?

Renters insurance, also known as tenants insurance, is designed for people who rent the place where they live. This could mean a home; a room or apartment in a home; an apartment complex; a condominium; a cottage on a residential property; or any other living arrangement where rent is paid.

College students living off campus (i.e., not in a dorm) are not covered under their parents' homeowners or renters insurance policy. They should consider buying their own renters insurance policy.

A renters insurance policy consists of 3 parts:

  1. Personal Property Coverage
  2. Liability Coverage
  3. Additional Living Expenses Protection

Let's take a look at what's included under each coverage.

Personal Property Coverage

This coverage protects your personal possessions from damage, theft, or a loss. Personal possessions include everything inside your living area that isn't owned or provided by your landlord.

That includes your:

  • Furniture
  • Appliances
  • Electronics
  • Home furnishings
  • Clothes
  • Jewelry
  • Exercise or sports equipment
  • Cookware and dinnerware
  • Hobby supplies
  • Musical instruments

Vehicles are covered under an auto insurance policy, not renters insurance. But, if you take your personal property off premises, say in your car, that may be covered by your renters policy.

Here's an example:

The electronics in your apartment are covered by renters insurance. You take your laptop computer with you to school, work, or on vacation. If it gets lost or stolen while outside your apartment, it is still covered under the policy.

Not all insurance companies offer off-premises theft coverage. It only may be offered in certain states. Check the policy's terms or ask an agent to see if it's offered in your area.

Personal property coverage covers losses due to:

  • Fire and smoke
  • Water damage
  • Vandalism and theft
  • Explosions
  • Hail and freezing damage
  • Lightning
  • Damage from riots
  • Windstorms
  • Damage from aircraft or vehicles

However, your renters insurance usually does not cover damage or loss from earthquakes or floods. Supplemental insurance may be available to cover these and other disasters not covered under tenants insurance.

Renters Insurance Misconception #1: It's Expensive
Actually, the national average for renters insurance is only $12 a month. Learn how much renters insurance costs later in this article.

Liability Coverage

The liability coverage of your renters insurance protects you from lawsuits and medical bills if someone gets hurt while in your rental unit.

For example, a guest trips on your living room rug and suffers a broken arm. The policy's liability coverage pays for your guest's medical bills. If the guest sues you for pain and suffering and loss of work, the coverage pays to defend you in court and covers court awards, up to the policy's coverage limit.

Without renters insurance, you would have to tap into your savings or sell assets you own to pay for what could be hundreds of thousands of dollars. If you can't afford to pay a court judgment, you may have the amount deducted from your paycheck as a garnishment until it's settled.

The liability coverage of the policy also provides property damage protection in case you, a family member, or your pet causes harm to another person or their property.

Here are two common examples:

You're at a coffee shop and accidentally spill your coffee. It lands on the laptop computer of the person sitting next to you. The computer is damaged. Your renters insurance covers the repair or replacement of the person's computer.

Your dog chews up your neighbor's expensive Persian rug. The policy's liability coverage pays for the cost of the damage up to the limits of your policy.

Additional Living Expenses Protection

This coverage pays for living expenses if you have to temporarily leave your rental unit because it's uninhabitable. This might be the result of a fire, water damage, or a natural disaster.

Coverage continues until the building is rebuilt or repaired or you reach the policy's limit. The coverage pays for your:

  • Hotel bills
  • Restaurant meals
  • Temporary rentals
  • Laundry expenses
  • Additional living expenses you incur

Renters Insurance Misconception #2: The Landlord Has Insurance
Landlord insurance is not required by law. Find out before you rent whether the property owner has landlord insurance or commercial residential property insurance.

Also, landlord's insurance only covers the physical structure of the building in case of fire, damage, or other loss. It does not extend to your personal belongings UNLESS the damage was due to landlord negligence.

For example, say you reported a leaking pipe, but nothing was done about it. The pipe finally burst and your belongings suffered water damage. The landlord's insurance would reimburse you for the loss.

How Does Renters Insurance Work?

A rental insurance policy contains an information page, also known as a declarations page, that outlines what the policy provides. Here's what it tells you:

  • Who is Covered
    A rental insurance policy covers the contents of everyone in your household listed on the policy. Household members can include people of blood relation, a spouse, or an adopted family member. Domestic partners, roommates, or boyfriends/girlfriends living together usually have to buy separate or joint rental insurance policies.

  • Amount of Coverage
    You choose the amount of coverage when you purchase renters insurance. There are limits to how much personal property, liability, and additional living expenses protection you can purchase. The limit is the most the insurance company will pay out per loss.

  • Type of Coverage: Cash Value or Replacement Cost
    These define the method the insurance company will use to calculate how to pay for a covered loss. Keep reading to learn about both types.

  • Deductible Amount
    That's the amount you must pay first before the insurance company pays out for the loss. You can reduce the cost of your renters insurance by choosing a higher deductible amount.

  • What is Covered
    It's usually listed as named perils on the declarations page. If something is not listed, then you are not covered for it. For example, most rental insurance policies do not cover flood and earthquake losses.

  • Cost for All the Coverages and Premium Amount
    The total amount is based on how much coverage you selected, the deductible you chose, and the area where you live.

You'll get to choose how often you want to pay your premium, such as monthly, quarterly, semiannually, or annually. You also select your payment methods, such as credit or debit card, automatic deduction, or check.

Types of Coverage

There are two types of coverage:

Actual Cash Value
Means your items are replaced minus depreciation. Depreciation takes into account how old the items are.

Replacement Cost
Means you get the amount they were worth at the time of the loss.

Here's an example comparing the two methods:

Three years ago, a big screen television cost about $1,500. Over those 3 years, its value depreciated to where the television is worth only $750. However, the cost of big screen TVs today is around $2,500.

  • Actual Cash Value
    The insurance company would cover the loss at the $750 depreciated value.

  • Replacement Cost
    The loss would be covered at today's cost to replace it, which would be $2,500.

If you choose a policy with actual cash value, you would have to pay more out-of-pocket to buy a new big screen television.

A replacement cost renters policy costs about 10% more than actual cash value. Weigh this savings against how much more you would pay out-of-pocket to replace all your personal property if a major loss occurs.

How Much Does Renters Insurance Cost?

Renters insurance is probably the least expensive type of insurance, with premiums starting as low as $4 a month. How much your policy will cost is based on the coverage amounts you select.

Other factors an insurance company takes into consideration when pricing your renters insurance are:

  • The crime rate in your zip code

  • The type of residence, such as an apartment complex, duplex, condominium, single family home, or an apartment in a home

  • The age and condition of the building

  • Your credit score

  • If you have a dog, the type of breed.

Here is a cost comparison for renters policies with a range of coverage amounts. It's based on $5,000 additional living expenses coverage and a $500 deductible for an apartment in a major city.

Personal PropertyPersonal LiabilityAnnual Premium
$15,000$100,000$125
$25,000$300,000$160
$30,000$100,000$144
$50,000$300,000$235

You may qualify for a discount on your renters policy if you get a policy with the same insurance company that covers your vehicle.

So How Much Renters Insurance Do I Need?

© CreditDonkey

To answer this question, you'll need to determine how much protection is sufficient for you for each of the three coverages.

Personal Property

The easiest way to figure out the right amount of coverage is to create a personal property inventory checklist. Set up the checklist as follows:

  • Item Description
  • Brand Name
  • Model Number
  • Age of Item
  • Where Purchased
  • Amount at Time of Purchase

Don't worry if you don't have all the information for each item. Simply estimate as best you can.

Here's what to do in each room of your rental:

  1. Write down all the items in the room. Include everything, even bedding, towels, rugs, kitchen utensils, toys, etc.

  2. Take a picture of the items or videotape the whole room. That gives you a permanent record of the items.

  3. Indicate the year you purchased the item and its cost. If you don't remember either, an estimate is fine.

  4. Total up the cost of your personal property. This is the minimum amount of coverage you should purchase. Most insurers offer personal property coverage that ranges from $10,000 to $250,000.

  5. Add new purchases to your personal property inventory list as you go. This way, you'll know whether you need to increase your coverage amount.

Some renters insurance policies limit personal property coverage for certain items. For example, some have limits of $1,500 for valuables, like jewelry, or $500 for electronics. Be sure to read the policy's limits or exclusions or ask your agent about increasing your coverage to cover these items.

Liability Protection

Most renters insurance policies offer limits from $100,000 to $500,000, with medical coverage from $1,000 to $5,000.

Usually, $300,000 in liability protection and $5,000 in medical coverage is sufficient. However, if you have assets, investments, or savings worth more than $500,000, you might consider buying a separate excess liability policy that offers $1 million in liability protection.

Additional Living Expenses Coverage

Determine the best amount for your circumstances. Consider:

  • The number of family members living with you.

  • How much you spend on weekly household expenses, like food, laundry, etc.

  • Any special considerations you may need if you had to live elsewhere, such as a crib.

Most insurers offer $3,000 to $200,000 in additional living expenses coverage.

Where Can I Buy Renters Insurance?

The coverage limits, exclusions, and cost of renters insurance vary among insurance companies. It's definitely worth your while to shop around.

These 3 resources are the easiest for obtaining a cost comparison:

Shop Online
Websites of most major auto and home insurers have the ability to provide a quote online. But rather than go to each company separately, find an insurance marketplace. These sites have an online quote tool that instantly delivers quotes from numerous companies at once.

Simply enter your:

  • Zip code
  • Desired coverages
  • Preferred deductible

In return, you'll receive prices from several insurers for easy comparison. You can also compare policies, particularly any limitations and exclusions.

Contact an Agent
If you're looking to compare quotes, it's best to contact an independent insurance agent. These types of agents have access to a large number of insurance companies. Independent agents can also help you figure out how much coverage you need and compare policies with you.

Get in Touch with Your Auto Insurance Agent
If you currently have auto insurance, you can get a multi-policy discount by purchasing renters insurance with the same company. Plus, it's easier to have all your insurance products with one company.

Bottom Line

It takes less than 10 minutes to apply for renters insurance. And it costs less than a daily cup of coffee to have a renters policy.

Even though you don't own a home, you still have most of the same risks as homeowners:

  • You have personal property you need to protect from a loss.

  • You have liability concerns if someone gets hurt in your rental unit or someone in your family damages someone else's property.

  • You might need to temporarily leave your home and live elsewhere after a disaster strikes.

Renters insurance provides this comprehensive protection AND gives you peace of mind.

More from CreditDonkey:


Average Cost of Renters Insurance


Average Cost of Homeowners Insurance


Average Cost of Insurance

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