What is Renters Insurance? (2024 Guide)
A renters insurance policy can protect you if you experience fire, theft, or another covered peril. Before purchasing a policy, read our guide to learn what renters insurance is, what it typically covers, and how much it costs.
When you rent instead of own the property you live in, you should consider purchasing a renters insurance policy. Many landlords require tenants to hold this policy type, but even if your landlord doesn’t, it’s a helpful one to have. What is renters insurance? A renters insurance policy is a low-cost way to protect your belongings and safeguard you against liability in the event of a loss. Keep reading to learn more about why renters insurance can be a strong investment.
Renters Insurance Explained
Think of renters insurance as a financial safety net for those who rent apartments or homes to help cover the gap between the landlord or homeowners insurance policies that won’t cover the tenant’s personal belongings or liability. A renters insurance policy can help protect against financial losses caused by covered perils like theft or fire.
This policy type also provides liability coverage to shield tenants from legal and financial repercussions that can occur from damages to another individual. Your renters insurance policy can help pay for costs associated with not being able to stay in the dwelling—like paying for a hotel room or restaurant food—after a covered event occurs.
Main Areas of Renters Coverage
Most renters insurance policies cover a few standard types of coverage, but you should also have the option to supplement your base policy with endorsements or add-ons for even more coverage. Let’s take a closer look at how the main areas of renters insurance coverage works:
| Coverage Area | Description |
|---|---|
| Personal Property | Personal property coverage is a standard type of renters insurance coverage that you can expect to find in all policies. It covers personal belongings like furniture, electronics, and clothing, protecting against perils like theft or fire. How much personal property coverage you need depends on the value of your belongings. |
| Liability | Liability coverage is another type of coverage you’ll find in your base policy. It protects renters from financial consequences if they’re found responsible for injuries or property damage to others. |
| Loss of Use | Loss of use coverage assists renters with additional living expenses if their rental becomes uninhabitable due to a covered event. |
| Medical Payments to Others | Renters insurance typically includes medical payments coverage, which helps tackle medical expenses if someone is injured on the rental property. This coverage type offers financial assistance for minor injuries, regardless of fault. Your risk tolerance will help determine how much of this coverage you want to buy. |
Benefits of Renters Insurance
If your landlord doesn’t require renters insurance, you may be tempted to skip adding this extra cost to your budget. As nice as it would be to save some extra cash, you can harm yourself financially by not purchasing a policy. The good news is that a renters insurance policy is typically very budget-friendly. How much is renters insurance? Based on data obtained from Quadrant Information Services, the average cost of renters insurance is $180 per year, or $15 per month. There are many companies that offer policies at a lower cost, but our highest recommended cheap provider is Lemonade which averages $15 per month.
It’s nearly impossible to predict when a disaster may strike. Renters insurance provides you with crucial financial protection against unforeseen events like uncontrolled fires, burst pipes, or theft. Without renters insurance, you will bear the full burden of these losses, risking financial strain. However, with renters insurance, the out-of-pocket expenses are significantly reduced, typically limited to the deductible and the annual premium.
Renters Insurance vs. Other Property Insurance Types
Renters insurance and homeowners insurance serve different purposes, and it’s easy to know which is the right fit for you based on whether you own or rent a property. Here’s how these policy types differ:
- Renters insurance: “Unlike a homeowner’s policy that covers the structure of a building, a renter’s policy only has coverage for personal property,” Bonnie J. Walker, AIC, CLX Technical Lead, Property at Lemonade explains. “Both a homeowner’s and renter’s policy covers damaged or stolen personal belongings, and they both cover any additional living expenses needed to reside elsewhere because your property has become uninhabitable due to a covered loss like a fire or water loss.” So if you suffer damages from an accidental fire, both policies will pay for your additional housing and food costs. In addition, both policies carry liability coverage and medical pay coverage.
- Homeowners insurance: This policy provides coverage for both the dwelling structure and personal property. In addition to protecting the homeowner’s possessions, it also covers damages to the house itself, such as structural damage or loss caused by covered perils like fire or vandalism. Homeowners insurance also includes liability coverage, which protects against lawsuits for injuries or property damage caused by the homeowner or their family members.
- Condo insurance: Similar to renters insurance, condo insurance typically focuses on personal property coverage. However, condo insurance also includes coverage for the interior structure of the condo unit, such as walls, floors, and fixtures. “Condo insurance is similar to homeowner’s insurance wherein there is coverage to the structure of the condo, however, the bylaws from the HOA and master carrier policy dictate what your own condo policy will pay for,” Walker said. For example, say you own a second-floor condo and your roof is blown off in a terrible storm. If the master carrier policy covers the exterior of the property including the roof, wall framing, and siding, they would cover those damages, and your own condo policy would cover the interior damages to the property.
- Rental property insurance: Also commonly known as landlord insurance, rental property insurance protects property owners who rent out their properties to tenants. It typically includes coverage for the physical structure of the rental property, loss of rental income, and liability protection for the landlord in case of tenant injuries or property damage.
Do I Need Renters Insurance?
In most cases, your landlord or property management company will require you to hold renters insurance while you’re a tenant. In the rare cases they don’t require you to get renters insurance, you can still benefit greatly from it. Because renters insurance is generally affordable, it’s a valuable tool to have by your side in case something goes wrong.
Frequently Asked Questions About Renters Insurance
What is the purpose of renters insurance?
The purpose of renters insurance is to help protect rental tenants from financial losses caused by unforeseen events. This insurance covers personal belongings against theft, damage, or loss, provides liability protection for accidents within the rental, and offers additional living expenses coverage if the dwelling becomes uninhabitable due to a covered peril.
Is renters insurance really worth it?
Ideally, you will never need to file a claim and put your renters insurance policy to use. But for a relatively low price, you can secure hundreds of thousands of dollars in personal property, liability, and other types of coverage that could help you out financially if things go wrong.
Who needs renters insurance?
Anyone who rents a property can benefit from having a renters insurance policy, but in many cases, renters are required to have one. Before you sign your lease, your landlord or management company will inform you if they require tenants to hold a renters insurance policy.
What happens if you don’t have renters insurance?
If you don’t buy a renters insurance policy, you risk being on the hook financially if your belongings are damaged, stolen, or destroyed. You may also be personally liable for injuries or damages that occur within your rented space, potentially leading to legal and financial consequences.
