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What Is Renters Insurance, and Do You Need It?

Renters insurance will protect you from losses, even when they happen at a property you don’t own.

[Updated: Feb 04, 2021] Nov 11, 2019 by Maurie Backman
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It's standard practice for people who own property to buy homeowners insurance that protects them from financial losses. In fact, most of the time, you'll need homeowners insurance to qualify for a mortgage.

But what if you don't own a home and instead rent your living space? Although you don't need homeowners insurance in that case (and don't even qualify for it), you should get renters insurance.

What is renters insurance?

As the name implies, renters insurance is an insurance policy designed for renters. Also known as tenants insurance, renters insurance will protect you from losses related to your personal property in the event that there's damage to your home. When you rent a home, your landlord is responsible for insurance that covers the actual dwelling or structure. For example, if a pipe bursts and causes damage to your building, your landlord's insurance policy will cover that. But if that same issue somehow causes water to flow into your apartment, and your furniture gets damaged in the process, you're out of luck -- unless you happen to have a renters insurance policy.

What does renters insurance cover?

Renters insurance covers your personal belongings, but it does not cover damage related to the home you live in. If the items you own are destroyed or damaged by a fire, water leak, or electrical issue (such as a power surge, which can fry electronics), your renters insurance policy can pay to replace them. Renters insurance also protects you in the event that your belongings are stolen from your rental unit.

But it can and does go beyond simply covering personal possessions. Most policies will also include additional living expenses coverage, which will pay for extra expenses incurred for insured events that temporarily remove you from the property. Going back to that pipe bursting, it will take your landlord time to fix the pipe, potentially repair drywall, perhaps replace flooring, and more. Because this event is covered and insured by your policy, you can utilize the additional living expenses coverage to pay for a hotel room or other accommodations as well as food or other related items beyond your normal expenses while repairs are being completed. Keep in mind that there are both time and dollar limits depending on your policy.

You also gain some liability protection with most renters insurance policies. The amount varies, but this can offer you coverage if someone is injured on your property or is filing a lawsuit against you for a property-related claim. By having this coverage, the person can file a claim directly with your insurance policy rather than having to go through an actual lawsuit. It can cover both legal defense fees and medical bills depending on the scenario. This includes paying for damages caused by your acts of negligence. For example, if you leave a candle burning in your apartment that causes a fire, your renters insurance offers protection in the event that your landlord wants to come after you for those damages.

Items Covered Limits Personal Possessions
Personal Possessions Damage to personal items within the rental. Theft, rioting, and vandalism. Belongings stolen from inside your car. Flood, hurricane, or earthquake. Damage to the vehicle. Limited coverage for jewelry or high-value collections. Anything (even covered items) that are over your limit.
Additional Living Expenses Hotels, meals, laundry, pet boarding Damage to the physical property. Anything (even covered items) that are over your limit.
Liability Protection Legal fees, medical bills, financial claims Anything (even covered items) that are over your limit.

How do you buy renters insurance?

As you go about the process, though, make sure you're comparing apples with apples. Keep in mind that like all insurance policies, the amount of coverage you get will vary based on the premium you pay. For example, you might get a cheaper policy that offers up to $30,000 in coverage for personal property, while a more expensive policy might offer a higher level of coverage. And, as with homeowners insurance, you should also be aware of the deductible, which is the amount you need to cover before your insurer will write you a check for your damaged belongings.

When determining how much coverage you may need, start by taking inventory of your belongings and the cost to replace those items. It's important to realize that all coverage is not created equal. Some policies will offer you the full replacement value while others will offer you a depreciated amount based on age and condition. It's also not a bad idea to save receipts or take photographs of the higher- dollar items so that you have proof to submit to your insurance company in the event of theft instead of damage. However you decide to store this information, make sure it's accessible from outside your residence. If it's physical copies, keep a copy with you as well as at a family member's or friend's house. Better yet, store it digitally so you can gain instant access should the need ever arise.

As is the case with pretty much all types of insurance, it's a smart idea to shop around for renters insurance to snag the best deal out there. You can do so by contacting individual insurance companies directly or by using independent online insurance brokers to compare your options. If you're renting a home, it's wise to get renters insurance to protect yourself from financial losses. The good news? Renters insurance isn't particularly expensive, with the average policy costing just $187 per year. And that's a reasonable fee to pay in exchange for the peace of mind you'll get.

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