What to Know About Renters Insurance

What is renters insurance?

Renters insurance is a type of insurance policy that protects your personal property and provides liability coverage and medical payments if someone is injured in your rental home. It also covers additional living expenses (ALEs) if your rented dwelling becomes unlivable due to a covered event.

What does renters insurance cover?

Renters insurance covers your personal property against named perils explicitly listed in your policy, such as fire, lightning, windstorms, theft, vandalism and accidental water discharge. Standard policies generally exclude floods and earthquakes, which require separate coverage. Personal property such as electronics, appliances, furniture and clothing may be included.

Renters insurance also provides personal liability coverage, which protects you if someone is injured on your rented property or if you are found legally responsible for damage or injury caused by you, your family members or your pets.

The third part of renters coverage is ALEs or “loss of use”. This coverage is triggered if the rented dwelling becomes unlivable as a result of a covered event. It addresses the increased cost of securing a comparable replacement dwelling while your home is unlivable.

What does renters insurance not cover?

Renters insurance, typically, does not cover:

• Damage to the building itself, which should fall under the landlord’s policy. However, if a fire, for example, makes a rental property unlivable, a policy may cover temporary living expenses.
• Normal wear and tear, negligence or misuse of personal property.
• A roommate’s belongings, unless they are on the same policy.
• High-value items, such as expensive jewelry or artwork. Policies normally have limits to coverage for specific items, so a close reading of the policy is important to understand where the limits exist.

Cost and coverage options

The cost of renters insurance may vary based on the amount of coverage you choose, the type of coverage selected and your deductible. Some providers will offer strong coverage options, such as $30,000 to $40,000 in personal property coverage and $100,000 in liability, for less than $25 per month. However, costs will depend highly on your specific situation and coverage preferences.

Current actual cash value vs. replacement cost

Many policies will cover your belongings based on their current actual cash value. This means older items will be covered based on the current, likely depreciated, value. You can opt for replacement cost coverage, which will include the cost of replacing your belongings based on the cost of buying new.

Remember, because renters insurance is intended to repair or replace your belongings after a covered loss, be sure that your policy provides coverage based on today’s replacement costs.

Re-evaluate coverage on a periodic basis

It is good practice to review your renters coverage regularly, especially after major life changes such as starting a new job, moving to a new location or welcoming a child. When you are ready to purchase a home or condominium, you can transition from renters insurance to homeowners insurance, which will entail yet another re-evaluation.

Frequently Asked Questions (FAQ)

• Q: Is renters insurance required?
• A: Many landlords require renters insurance as part of a lease agreement. Even if it is not required, it can provide valuable protection to the person renting the location.
• Q: How much renters insurance do I need?
• A: You should have enough coverage to replace your personal belongings and provide adequate liability protection.
• Q: How much does renters insurance cost?
• A: Renters insurance is generally affordable, but costs vary based on coverage, amount, location and deductible. Schedule an appointment to talk with an insurance agent.
• Q: Does renters insurance cover theft?
• A: Yes, most policies cover personal belongings if they are stolen, both inside and sometimes outside of your home, such as from a car.