Is Renters Insurance Required?

What You Need To Know About Renters Insurance

A renter moves into an apartment
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Renters insurance protects valuable possessions including artwork, clothing, electronic equipment, and furniture from unexpected events such as a fire or theft on a rental property.

A renters policy can also cover medical costs and legal expenses when someone sustains an injury in your rental home. Some landlords require all tenants to carry renters insurance as part of the rental agreement. Even if your landlord doesn’t require renters insurance, it makes good financial sense to get it. Renters insurance is an affordable way to protect your assets when calamity strikes.

Key Takeaways

  • Renters insurance protects your personal possessions and helps pay medical and legal costs if someone gets hurt in your residence.
  • Although renters policies have limits, you can increase your liability and personal property coverage with endorsements (also called riders) or additional stand-alone policies.
  • Rental property owners often carry landlord insurance, but their coverage doesn’t offer property or liability protections for tenants.

What Is Renters Insurance and What Does It Do?

Whether you rent a house or apartment, renters insurance provides valuable protection. Typically, renters insurance policies cover losses caused by catastrophes such as fire, smoke damage, theft, vandalism, and windstorms.

According to the National Association of Insurance Commissioners, the average cost of renters insurance runs $15 to $30 per month, depending on the value of your personal possessions and where you live. It’s affordability makes it a helpful financial tool for most renters.

Renters insurance doesn’t typically cover losses caused by floods. However, you can purchase renters flood insurance through the National Flood Insurance Program (NFIP) managed by the Federal Emergency Management Agency (FEMA).

Most renters insurance policies offer three types of protections:

  • Personal property: Renters insurance covers damages and losses to personal belongings such as appliances, clothing, electronics, and furniture. Typically, renters insurance also covers personal property stolen from your car or while you’re traveling.
  • Personal liability: Renters policies’ liability protections can help pay the medical costs of someone who sustains an injury in your residence and legal expenses if the injured party sues you.
  • Loss of use: A comprehensive renters policy may also include loss-of-use coverage, which can help pay your living expenses if you must temporarily move out of your rental unit following a covered disaster such as a fire.

You can choose how much renters insurance coverage you need. For example, you may purchase a policy that provides up to $25,000 in personal property coverage.

Most insurance providers set coverage sub-limits for certain types of property. For instance, your policy may only pay up to $500 for stolen jewelry or up to $2,500 for home office equipment.

Most renters insurance policies pay personal property losses on an actual cash value basis, which applies depreciation to damaged items such as computers, furniture, stereos, and TVs.

Some insurers offer replacement-cost endorsements, or riders, for an additional cost. Replacement cost coverage will pay to replace personal items at current market prices.

When Is Renters Insurance Required?

You aren’t required by law to buy renters insurance, but many landlords require you to carry a policy as part of your rental agreement. Some landlords offer rental insurance coverage, but this type of protection may only offer liability protection without covering your personal belongings.

A parent’s homeowners policy offers some protection for dependents who move away from home. For example, parents’ home insurance may cover their child’s belongings if they move into a college dorm room.

Relying on someone’s homeowners policy may not provide the best protection because it often only pays up to around 10% of a policy’s personal property coverage. So, for example, if your parent’s policy includes $50,000 in personal property coverage, it will only pay up to $5,000 for property damages that occur in your dorm room.

What Your Landlord’s Policy Does and Does Not Cover

Your landlord may carry a landlord insurance policy. However, a landlord’s policy will provide little or no protection for tenants.

A typical landlord policy includes three types of coverage:

  • Dwelling: Helps pay to repair or rebuild a rental unit following a covered loss.
  • Other structures: Covers detached structures on a rental property, such as a fence, garage, or shed.
  • Service personal property: Pays to repair or replace property such as maintenance equipment if it is damaged in a covered incident.

A landlord policy also includes liability protections to pay the medical bills of someone who sustains an injury in common areas or pay legal expenses when sued. Landlords can also add other coverages to pay for losses caused by burglary and vandalism that occurs on the property.

Landlord policy protections only extend to property owned by the landlord, not to tenants.

To understand what landlord and renters policies cover, let’s look at a few examples.

  • A fire destroys an apartment: The landlord’s policy will help pay the cost of repairing the ceiling, floors, and walls of the unit. The tenant’s renters insurance will help pay to replace their clothing, furniture, and other personal possessions.
  • A tenant’s visitor slips in a common stairway and sustains a concussion: The landlord’s policy will help pay the injured person’s medical bills and help cover legal expenses if the party decides to sue the property owner.
  • A tenant’s visitor trips over a child’s toy in the tenant’s apartment and suffers a broken arm: The tenant’s renters insurance can help cover the medical costs and associated legal expenses, if any.
  • A car smashes through an apartment wall, but doesn’t destroy any of the tenant’s personal property: The landlord’s insurance will help pay the reconstruction costs and the tenant’s renters insurance may help pay temporary living expenses if they need to move out during the construction period.

Alternatives to Renters Insurance

Renters insurance provides a comprehensive set of protections not available in other types of policies. Even so, a renters policy might not provide all the protection you need.

Renters with a high net worth might consider beefing up their liability coverage with an umbrella insurance policy. Umbrella insurance can cover costs such as damage to another person’s property, bodily injuries, and legal expenses.

However, umbrella insurance only pays after you’ve exhausted the limits of another type of policy. For example, let’s say your friend gets hurt in your apartment, which leads to $200,000 in medical bills. If your renters policy only provides $100,000 in liability coverage, your umbrella policy may cover the remaining costs.

An umbrella policy may also cover the cost of lawsuits unrelated to your rental home, like libel or slander.

Personal property sub-limits may leave some of your belongings virtually unprotected. For instance, if you own a wedding ring valued at $10,000, a renters policy with a $500 jewelry limit won’t replace it if a burglar strikes.

But you can protect your most prized possessions with valuable items coverage. You can buy this type of coverage for a wide variety of personal belongings, including antiques, jewelry, artwork, bicycles, coin collections, firearms, and wine collections.

Frequently Asked Questions (FAQs)

How much should a renters insurance policy cover?

Determine your renters insurance coverage based on the value of your personal belongings. For example, if you have $30,000 worth of possessions, you should carry a $30,000 policy. Remember, most renters insurance policies only offer actual cash value coverage, which applies depreciation to your damaged items. Some insurance carriers offer replacement-cost endorsements, or riders.

What does renters insurance not cover?

Renters insurance doesn’t cover damage to your rental unit or losses caused by floods. Most renters policies also exclude injuries to pets and damages caused by earthquakes or landslides. However, many insurance companies offer earthquake, flood, and pet insurance.

Is it worth it to get renters insurance?

Yes. According to the National Association of Insurance Commissioners, the cost of renters insurance ranges from $15 to $30 per month, depending on where you live, the size of your rental home, and the value of your personal belongings.