What Is Renters Insurance?

What Is Renters Insurance?

Renters insurance is financial protection for you and your belongings in a rented home. Similar to homeowners insurance, renters insurance helps pay to repair or replace possessions that are stolen, destroyed or damaged by a risk covered in your policy, such as a fire.

When a visitor is injured at your home, renters insurance helps pay their medical expenses and your legal costs if the injured person sues you. If your rental home isn't livable during repairs and you need to move out temporarily, renters insurance helps cover any additional living expenses.

Some landlords require tenants to carry renters insurance as a condition of their lease.

Learn more >> Is Renters Insurance Required?

How Does Renters Insurance Work?

Tenants can buy renters insurance to protect their finances and their personal property—including furniture, electronics, clothing, housewares and more—from risks listed in the policy, such as fire or theft. You can choose actual cash value or replacement cost value coverage for your possessions. Actual cash value coverage pays the amount your belongings are currently worth; replacement cost value pays to replace the items with comparable new ones.

Here's how renters insurance works:

• Select your coverage. Determine how much coverage you need and whether you want actual cash value or replacement cost value coverage.
• Choose a policy. Get quotes from several insurance providers and choose the policy that fits your needs and budget.
• Pay your premiums. You must keep up payments to maintain coverage.
• File a claim. When a covered incident occurs, you can typically file a claim online, by phone or with your insurance company's mobile app. Be ready to back up the claim with documentation such as photos of the damage, police reports and a home inventory.
• Pay your deductible. If your claim is approved, you must pay your insurance deductible before receiving a payout.
• Receive your payout. You may receive an amount up to your coverage limits.

What Does Renters Insurance Cover?

Standard renters insurance includes three types of coverage: property, liability and additional living expenses.

• Personal Property Coverage

  Personal possessions are covered if they're stolen or damaged by covered risks such as:

  • Fire and smoke
  • Windstorms
  • Lightning
  • Explosions
  • Theft
  • Vandalism
  • Some water damage, such as burst pipes

  Covered property typically includes all the contents of your rental that you own, such as:

  • Furniture
  • Appliances
  • Clothing
  • Jewelry
  • Electronics
  • Cookware
  • Musical equipment
  • Sporting equipment

  Renters insurance usually extends the same protection to personal belongings outside your rental property, covering items in a storage unit, your car or a hotel if they're stolen or damaged by a risk covered in your policy.

• Personal Liability Coverage

  If a visitor is injured on your property, liability coverage pays their medical bills. It also covers damage you, your pets or family members cause to another person or property outside your rental—for instance, if your child breaks a neighbor's window. If you're sued for these damages or injuries, liability coverage helps pay your legal bills.

• Additional Living Expenses (ALE) Coverage

  If the insurance company determines you can't stay in your rental during repairs, you could end up paying rent and a hotel bill. Restaurant meals and a longer commute to work could also drive up your expenses. ALE reimburses you for expenses above your normal costs of living, up to policy limits.

  Learn more >> What Does Renters Insurance Cover?

What Does Renters Insurance Not Cover?

There are some losses renters insurance doesn't cover.

• Physical structure: Damage to your rental home's structure isn't covered by renters insurance. The structure is your landlord's responsibility.
• Floods: Renters insurance doesn't cover floods, but you can purchase contents-only coverage of up to $100,000 from the National Flood Insurance Program (NFIP). Your renters insurance provider may also sell flood insurance.
• Earthquakes: Earthquakes aren't covered by renters insurance, but California residents can buy earthquake insurance through the California Earthquake Authority (CEA). CEA earthquake insurance covers possessions and loss of use and costs as little as $35 annually. You can also get quotes for non-CEA plans from insurance agents and brokers.
• Pest infestation: Damage from termites, cockroaches, bedbugs, mice and other insects and vermin typically isn't covered under renters insurance.
• High-value items: There may be dollar limits on coverage for certain valuables, such as electronics, collectibles, jewelry, artwork, musical instruments, bicycles or cameras. You can purchase an insurance rider to cover these items for their full value.
• Business equipment: Renters insurance generally won't cover belongings used for business, such as computers, inventory or furniture. You can get a home-based business owners policy to cover them.

How Much Does Renters Insurance Cost?

The average premium for renters insurance in the United States is about $14 per month, or $166 per year, according to 2023 data from Experian. Your policy may cost more or less, depending on factors such as:

• The amount of coverage: The more coverage you buy, the more you'll generally pay. Replacement value coverage also costs more than actual cash value coverage.
• Your deductible: Lower deductibles typically mean higher premiums, and vice versa.
• Where you live: Tenants in areas with high crime rates or extreme weather events usually pay more for renters insurance.
• Discounts: You may qualify for discounts on renters insurance if you bundle coverage with another policy from the same insurer. Installing safety or security equipment may also earn you discounts. Check with your employer and organizations you belong to to see if they offer any insurance discounts.

Learn more >> How Much Does Renters Insurance Cost?

How to Get Renters Insurance

If renters insurance sounds like a good move for you, here's how to get it.

1. Figure Out How Much Coverage You Need

To determine how much renters insurance to buy:

• Add up your net worth. Ideally, you want enough liability coverage to protect your assets from lawsuits. You can typically purchase liability coverage ranging from $100,000 to $500,000.
• Conduct a home inventory. Document your possessions by taking photos or videos, starting with the most expensive possessions or working room by room. Scan and save any receipts and estimate the cost of replacing everything.

2. Get Quotes From Several Insurance Companies

You can get quotes from insurance carriers online or by phone, or you can also work with an independent insurance agent or broker to find the right coverage. Consider starting with the company that handles your auto insurance since you might get a discount for buying renters and car insurance from the same provider.

Be sure to compare the same type and amount of coverage and consider any discounts you may qualify for. When you submit an application, be ready to provide your name, address, telephone number, birth date and Social Security number, your rental property address and the value of your belongings.

3. Compare Quotes

Review your quotes from each insurance carrier and check online ratings such as the Better Business Bureau to evaluate the company's reputation for customer service. You can also confirm the company's financial stability by reviewing ratings from A.M. Best, Moody's and Standard & Poor's.

4. Choose a Company and Policy

Select your renters insurance based on price, coverage and reputation. You'll typically need to complete a more detailed application for insurance and select your deductible amount.

5. Pay Your Premiums

Once your application is approved, pay your premium to activate coverage. You may be able to pay premiums annually or monthly. Consider setting up autopayments so your renters insurance doesn't lapse.

Should I Get Renters Insurance?

Some landlords require tenants to carry renters insurance. Even if yours doesn't, renters insurance provides financial protection at a relatively low cost. If you couldn't afford to replace all your belongings after a burglary or fire, renters insurance is a worthwhile investment. Renters insurance can also cover the cost of a hotel or temporary rental while your home is repaired, and protect your assets from personal injury lawsuits that could devastate you financially.

Learn more >> Benefits of Renters Insurance

How Much Renters Insurance Do I Need?

How much renters insurance you need depends on your belongings, your assets and your landlord's requirements. You can take these steps to get a better idea:

1. Inventory your possessions and their estimated value to determine how much personal property coverage to buy.
2. Add up your net worth and purchase enough personal liability coverage to protect your assets.
3. Investigate rates for local hotels or short-term rentals to estimate the cost of living away from home. Renters in high-cost regions may need more ALE coverage.
4. Check your lease for any insurance requirements your landlord may have.

Learn more >> How Much Renters Insurance Do I Need?

What to Look for in a Renters Insurance Policy

Look for a renters insurance policy that gives you the coverage you need at a price you can afford. Don't focus on price alone: Renters insurance should offer the type and amount of coverage you require, including any special riders your personal property needs.

Additionally, the insurance company should be financially stable with a good reputation. Look for a company that provides responsive, helpful service if you have a claim. Also consider convenience features that matter to you, such as how easy it is to use the company's mobile app, website or customer service tools.

Frequently Asked Questions

• Can You Cancel a Renters Insurance Policy Early?

  You can typically cancel renters insurance at any time. Depending on your insurer, you may be able to cancel by mail, phone, online or in person.

  Your policy may be canceled right away, or you may be able to set a future date for your coverage to end. You'll need to pay any outstanding premiums; if you paid annually, you may receive a prorated refund.

• Is Renters Insurance Tax Deductible?

  Renters insurance generally isn't tax deductible unless you use your rented home for business. In that case, you can include your insurance premiums when calculating your home office deduction. To take this deduction, the IRS requires meeting two criteria:

  1. You must use a part of your home regularly and exclusively for business.
  2. Your rental home must a) be your main place of business or b) be used for administrative or management activities that can't be performed at any other location.
• Can I Add My Roommate to My Renters Insurance?

  Some insurers let you add a roommate to your insurance policy, but others don't. Even if your insurance company allows it, putting your roommate on your policy can cause complications:

  • You'll need to update your policy whenever your roommate situation changes.
  • Any claims your roommate files will appear on your insurance record, and vice versa. A history of claims could raise your insurance premiums going forward.
  • Payouts from claims will be made out to all policyholders. If you and your roommate disagree, they could hold the payout check hostage.
• Can I Transfer My Renters Insurance to a New Apartment?

  You can typically transfer your renters insurance policy to a new apartment, provided your insurance carrier serves the new neighborhood. Check your insurance policy or contact your insurance company to find out. Keep in mind your renters insurance premiums may change as a result of the move. Once the transfer is complete, you'll receive an updated policy.

The Bottom Line

Renters insurance provides many of the same protections as homeowners insurance, but averages about one-tenth the cost, making it a worthwhile investment for most tenants.

If you're concerned about the cost of renters insurance, improving your credit score might help lower your premiums. Many states allow insurance companies to check your credit-based insurance score when you apply for renters insurance. Although this score differs from your consumer credit score, both are calculated with information from your consumer credit report. The same actions that can boost your consumer credit score, such as paying bills on time and keeping credit utilization low, may help improve your credit-based insurance score and save you money on renters insurance.