Renters insurance: What to consider

If you rent an apartment or home, you may wonder whether you need to purchase renters insurance. While a policy is not legally required for renters, landlords may require tenants tenants to purchase a policy. This requirement should be outlined in the lease agreement.

Even if your landlord doesn’t make you buy renters insurance, policies are usually pretty cheap and may be a good investment that protects your property and peace of mind. We’ll cover key reasons to buy coverage as well as some cons to watch out for.

Benefits of renters insurance

Renters insurance protects you from liability for things that happen in your home and protects your belongings, among other things. These are some good reasons to buy a policy.

1. It covers damaged or stolen items

Most renters insurance policies protect your belongings from loss caused by fire, smoke, vandalism, theft, and non-flood-related water damage. If someone steals from you or a fire destroys your stuff, the insurance policy will reimburse you.

Keep an eye on any additional coverages (riders) offered by the insurance company because some types of damage or certain items may not be covered without these riders. You may also need to pay a deductible before the insurance kicks in.

Depending on your insurer, you may have the option to choose between actual cash value (what the item is worth in its used state) or replacement cost (how much it would cost to replace) when buying coverage.

2. It limits your personal liability

If someone visits your home and gets hurt, they may be able to sue you for the costs related to their injuries. Renters insurance can help protect you from liability in these cases, helping to cover legal costs.

Injuries and legal costs quickly get expensive, so it might be a good idea to buy a higher liability limit when purchasing coverage, as your insurer will only help cover costs up to the policy limit.

3. It covers loss of use

Your renters insurance policy can help protect you if your home becomes unlivable. For example, imagine that your apartment building burns down or is damaged by a natural disaster. You’d be left without somewhere to live.

If your policy includes loss of use coverage, which is usually optional or dependent on how much other coverage you buy, the insurance company will help you pay for the costs of a hotel or other accommodations while you look for a new place to rent or buy. If you’re not sure whether to continue renting, you can use this rent vs. buy calculator to help you help you decide.

4. It has pet liability protection

Pets can be great friends, but they do expose you to some risk. If your dog bites someone or otherwise causes injury, you can be on the hook to pay for their medical bills.

Your policy may include pet liability protection, meaning the insurance company can help pay the bills for any harm your pet causes. If you have a pet, make sure to ask your insurer about adding this protection to your policy.

Drawbacks of renters insurance

Buying renters insurance is usually a good idea, but it’s also important to keep the drawbacks in mind.

1. It might have a high premium

Renters insurance is typically relatively cheap, but that doesn’t mean there aren’t outliers. If you live in an area that is disaster prone, has a high rate of crime, or otherwise sees a lot of renters insurance claims, premiums and other costs, like deductibles, could be high.

2. It offers limited coverage

When you buy renters insurance, it’s important to pay attention to the fine print to make sure you understand precisely what is protected. Many policies exclude some high-value items and specific types of belongings, like collectibles or jewelry, from protection unless you add a rider, which comes at an additional cost.

Your roommates’ belongings and liability may also not be covered unless specifically named on the policy, so they might need to buy their own coverage.

3. It could be difficult to get paid out

If something does happen to your home and you want to get paid by your insurance company, it can involve a reasonable amount of paperwork, which can be frustrating.

At a minimum, you’ll need to file a claim that includes the damages, proof of ownership of the items damaged, their condition, and their value. If the insurer disputes any of this information, it can delay your reimbursement.

You might also have your claim denied if you don’t meet the policy’s conditions to file or don’t file before a deadline after the damages occur.

Can your landlord require renters insurance?

Yes, in many places, landlords can require renters insurance and often do make tenants buy a policy. This is particularly common for corporate landlords renting apartments in larger buildings, but check local laws to see if requiring coverage is allowed.

Landlords often carry their own coverage, but it only protects the building itself, not your belongings. Landlords make tenants buy insurance to protect them from liability for incidents that happen in their unit.

Your lease will outline the minimum coverage requirements and how you can provide proof of insurance.

How much renters insurance do you need?

The amount of insurance you need depends on your individual situation. If you have a lot of expensive belongings, you’ll want to buy more coverage. If you have a pet, that can increase your risk, so buying more coverage is a good idea.

To get a sense for how much insurance to buy, inventory your most expensive or rare belongings and take photos of them for future proof of condition and ownership. Tally up what they’re worth, and that’s about how much coverage you should buy.

Where can you get renters insurance?

Many different insurance companies offer renters insurance. You can buy policies from major providers like Geico, Progressive, and State Farm, as well as online insurers like Lemonade.

If you already have other types of coverage, like auto insurance, check with your current insurance company. Often, you can get a discount if you bundle auto and renters insurance together.

Renters insurance is usually inexpensive. It’s a good deal overall for the protection it provides. The average policy costs about $20 to $23 per month, depending on where you live and what kind of coverage you buy.

The bottom line: Renters insurance may protect you from unexpected loss

While renters insurance isn’t legally required, many landlords make their tenants buy a policy, and, for the cost, the protection offered is good. With how inexpensive it is, almost everyone who rents should buy a policy.

If you’re renting but want to own your own home one day, there are many ways to work toward homeownership. One path is rent-to-own homes. If you’re interested in taking this route to homeownership, check out Rocket Mortgage’s resources for rent-to-own properties today.