What Does Renters Insurance Cover?

If you're planning to rent a house, apartment, or condo in the next few months, you likely have a long to-do list. Whether you're busy searching for the ideal floor plan or organizing the move, you may also be looking for ways to spend as little as possible. It's tempting to skip certain costs, like renters insurance, especially if they don't provide an immediate benefit. But sidestepping an adequate renters insurance policy could leave you financially vulnerable.

What is renters insurance?

Renters insurance is a type of insurance coverage that provides financial protection if your personal property is damaged or destroyed due to water, fire, theft, or vandalism. These unexpected events are covered up to the policy limits. The individual renting the property is responsible for securing the policy from an insurance company. Landlords don't typically offer tenants insurance as part of their rental agreement, but they may require it.

Isn’t my landlord responsible if the unit is damaged or destroyed?

Renters should not expect to be able to recoup financial losses or the cost of replacing personal belongings through their landlord's insurance provider. Such policies protect the landlord, not their tenants. For example, if a fire destroys your apartment building, the landlord files a claim with their insurance company. The claim is for the cost to repair or rebuild the structure, not to provide financial support for tenants who suffered personal property losses.

What does basic renters insurance cover?

Renters insurance covers the costs a policyholder incurs to repair or replace their personal property if it's damaged or destroyed. For example, if a fire burns damages your rental unit, filing an insurance claim should help you pay for the cost of replacing personal items and provide money to pay for alternative housing and food expenses while the unit is being repaired.

Most policies also cover basic liability if you damage someone else's property, cause them personal harm, or are responsible for an injury that occurs at your rented residence. This could include legal and medical expenses that result from the incident. Basic coverage details vary by insurance company. Some may offer other protections at no additional cost.

What does basic renters insurance NOT cover?

Basic renters insurance coverage can vary by the insurance company, with few covering the cost of special items, such as firearms, without an additional policy rider and fee. Certain weather events, like flooding, are not covered under basic renters insurance. Fortunately, you can select the level of coverage needed based on your geographic location and budget.

Optional policy upgrades

The cash you receive from an insurance company for an unexpected event varies based on the incident and policy coverage limit details. Some optional coverages include:

• Water damage coverage in case of backed-up sewers or drains
• Weather coverage for devastating events such as volcanoes or earthquakes
• High-value coverage for items such as expensive jewelry, coin collections, or artwork
• Extended personal property coverage for items stored outside your unit, e.g., motor vehicles or watercraft

How much renters insurance coverage do I need?

It depends on how much you own and your existing financial cushion.

First, inventory all of your belongings. Could you replace them using your savings without experiencing a significant economic upheaval? If not, do your best to calculate replacement costs and use those as a guide. Then, consider other risks, such as how you'd pay for housing while your home is being repaired or you must move due to an unexpected catastrophic event.

Lastly, the amount you might need to pay to cover the legal or medical costs of someone injured on your property could easily surpass the amount you have saved. For these and other reasons, many renters secure a renters insurance policy when they sign their new lease.