If you're renting, you might assume that your landlord carries the bulk of the risk. This may be true in some ways, but renters could still experience serious financial losses if something unexpected happens. Whether a pipe bursts and damages your belongings or a burglar breaks into your home, having basic protection can provide peace of mind and a financial safety net. Here are five important benefits of renters insurance.
1. It Protects Your Possessions
Can you guess how much it would cost to replace your belongings? According to one Assurant study, 63% of renters underestimate how expensive it can be. Personal belongings include:
- Clothing
- Furniture
- Electronics
- Jewelry
- Appliances
- Sporting equipment
- Cookware
If something happens and your belongings are damaged or destroyed, you could be on the hook for major out-of-pocket costs. Renters insurance offers property damage coverage. If a fire occurs in your apartment or your jewelry is stolen by a burglar, renters insurance would pay to replace your belongings (up to a certain point, which should be outlined in your policy). Like other types of insurance, there are exclusions. Flood and earthquake damage usually aren't covered, but you could always buy a separate policy for these.
2. It Offers Liability Insurance
One of the benefits of having renters insurance is that it offers liability protection. That could help safeguard your finances if you run into a costly mishap. This coverage protects you if:
- Someone gets hurt in your home: If you invite company over and someone slips and falls in your home, the liability portion of your policy should cover their medical bills up to a certain point. That's usually between $1,000 and $5,000, according to the Insurance Information Institute.
- You or a family member causes property damage or bodily injury to others : If your child breaks a neighbor's window, you could file a claim with your renters insurance company. Damage or injuries caused by your pets are also covered.
3. It Can Help Pay for Temporary Living Expenses
It may be hard to imagine, but certain disasters could render your home unlivable. Covered perils typically include fires, windstorms, certain types of water damage, lightning or an explosion. Expenses can add up quickly if you're forced to leave your home.
Additional living expenses can take the form of a new rental unit, hotel bills, restaurant meals and more. Most renters insurance policies will reimburse you for costs that go beyond your regular living expenses. That can come in handy while you're waiting for your home to be repaired or rebuilt.
4. It Might Cover Items Damaged Outside of Your Home
Renters insurance doesn't just cover personal belongings that are damaged or stolen within your home: Some policies also include covered perils that occur elsewhere. For example, if your phone is stolen out of your car or your tablet is snatched from a hotel room, you might be able to file a claim with your insurer. Your level of off-premises coverage will depend on your policy, so be sure to read the fine print carefully.
5. It Can Safeguard Your Financial Health
One of the biggest benefits of renters insurance is the peace of mind it can provide. As a renter, any of the following situations could cause a financial emergency:
- A storm damages or destroys your belongings
- A water leak floods your home
- Someone gets hurt on your property
- Your pet injures someone on their property or causes damage to their home
- You or a family member damage someone else's home
- Your home is vandalized
- Someone breaks into your home and steals valuable belongings
Without renters insurance, you'll have to cover unexpected costs on your own. That might require you to deplete your emergency savings or accumulate new debt to cover these expenses.
Frequently Asked Questions
Renters insurance costs can vary depending on:
- Your level of coverage
- Where you live
- Your rental and possessions
- Your past claims
- Your credit score
Opting for a higher deductible can reduce your insurance premium, though you'll pay more out of pocket if you file a claim. Having said that, the average annual renters insurance premium in 2020 and 2021 was about $15 per month, or $178 per year, according to Experian.
Tenants aren't legally required to get renters insurance, but some landlords may request or require it. Doing so can protect them from a potential lawsuit down the road. You can read over the rental agreement to see if it's a requirement.
Your level of coverage will depend on your policy and its limits, but renters insurance typically covers the following (up to a certain point):
- Property damage that's caused by a covered event
- Personal liability
- Additional living expenses if a covered peril makes your home unlivable
Like any other insurance policy, whether it's worth it depends on your risk tolerance and financial situation. In an ideal world, you'd never have to file an insurance claim—but it's impossible to predict the future. A basic renters insurance policy can offer financial protection and peace of mind, and most policies are pretty affordable.
The Bottom Line
Renters insurance can protect your financial health if the unexpected happens, and you can tailor your policy limits based on your risk tolerance and budget. Some states will consider your credit-based insurance score when determining your premiums. That means having strong credit could ultimately save you money. You can get your FICO® Score☉ and credit report for free from Experian to get an idea of where you stand.
