In a nutshell
A landlord's homeowners insurance policy only protects the building they own (and other structures on the property) while providing liability coverage in case someone gets hurt. Renters must purchase renter’s insurance to cover their personal belongings and other expenses related to perils in their apartment.
- Renters insurance can cover possessions, medical payments, living expenses and additional liability.
- Renter’s insurance is not mandatory, unlike auto insurance, but it may be a good idea if you have valuables in an apartment you are renting.
If you want to ensure you'll be made whole in the event of a fire, windstorm, or other covered event that causes damage to your personal belongings, read on to learn how renter's insurance works, what it typically does and doesn't cover, and who needs to purchase this important protection.
What does renter's insurance cover?
According to the Insurance Information Institute (III), renter's insurance provides several important types of coverage that can protect you in the event of damage or a total loss. These coverages are highlighted in the chart below, as well as the type of possessions and claims they apply to.
| Renter's insurance coverage types | Applications |
|---|---|
Coverage for possessions | Provides protection against financial losses caused by fire, smoke, lightning, vandalism, theft, windstorms, water, and other disasters that are listed in the policy. |
Additional liability coverage | Provides coverage for lawsuits that arise from bodily injury or property damage. |
Coverage for additional living expenses | Pays for an apartment or hotel when your rental property becomes uninhabitable due to a covered event. |
Medical payments coverage | Covers payments when a guest at your rental home or apartment is injured and needs medical care. |
Keep in mind that these are the main types of coverage you can get within a renter's insurance policy, but select add-ons may be available as well. For example, some renter's insurance policies let you pay more for additional protection against floods, identity theft restoration, and more.
Renter's insurance policies also come with limits on coverage and deductibles you have to pay to access your benefits. If your rental property sustains massive damage from a tornado and your renter's insurance policy has an annual limit of $15,000, for example, you can receive up to $15,000 in reimbursement for covered losses minus your deductible amount.
Finally, you should note that there are two main types of renter's insurance policies, each of which offers reimbursement using a different approach.
- Actual Cash Value coverage provides reimbursement for your ruined or damaged items after deducting a standard amount for depreciation. This type of renter's insurance typically costs less, but you won't get the full value of your items if you face a total loss.
- Replacement Cost coverage replaces your items or provides full reimbursement for what they cost today, at least up to the limits of your policy. This type of coverage costs more on average, but you'll be happy you have it if you need to file a claim.
What does renter's insurance not cover?
While renter's insurance provides a few levels of coverage for your possessions, additional living expenses, and liability situations that arise, some items are not covered by this type of insurance policy.
Items not covered with renter's insurance include:
- Personal property loss that exceeds the coverage limits on your renter's insurance policy.
- Liability situations that exceed the limits on your policy.
- Damages caused to the structure of the building you are renting (which is covered by your landlord's homeowners policy).
According to Allstate, certain types of personal property may be excluded by coverage as well, although this depends on the details listed in your policy. Examples of excluded items in renter's insurance policies include pricey jewelry you own and valuable collectibles or art.
That said, you may be able to purchase additional coverage for individual items you want protected, which is known as scheduled personal property coverage. This coverage can add to the annual costs of your renter's insurance policy, but you will sleep better at night knowing your most valuable possessions aren't at risk in the event a fire, tornado, or any other covered event leads to a total loss.
Is renters insurance mandatory?
Renter's insurance is not mandatory or required in any way, which is both good and bad news for renters. This means you don't have to buy renter's insurance at all and that you can skip paying for coverage if you don't have any specific possessions you want to protect. However, no mandatory requirement for renter's insurance also means many renters who need this coverage forget to buy it altogether.
Fortunately, you don't have to stress over the cost of renter's insurance or whether obtaining this type of coverage will be complicated. Renter's insurance companies like Lemonade let you apply for coverage in a matter of minutes. Their renter's insurance policies also start at just $5 per month, so getting coverage won't cost you an arm and a leg.
How much renters insurance do I need?
How much renter's insurance you need depends on the value of the possessions you own and how much liability protection you're willing to pay for. Before you buy a policy, you should make a list of all the major possessions you own and care about, from your furniture to electronics, firearms, jewelry, and clothing. From there, figure out how much you would need to spend to replace each item, or at least come up with an estimate of how much each of your possessions costs.
In the meantime, you'll also need to decide if you want actual cash value coverage or replacement cost coverage. While actual cash value coverage only offers reimbursement for how much your items are worth today (minus depreciation), a replacement cost policy will reimburse you for what you would have to pay to replace your items if you had to buy them new.
Finally, you'll want to consider how much liability coverage you want to purchase as a renter. While having liability protection in place may seem frivolous when you don't actually own a property, you will wish you had this protection if someone is injured on the property and decides to sue the owner of the home and you in the process.
At the end of the day, having some level of renter's insurance protection is definitely better than nothing — even if you opt for low policy limits in order to secure more affordable premiums. Fires, tornados, wind damage, lightning damage, and other hazards can and do ruin people's belongings all the time, and you'll be left in the lurch if you fail to purchase renter's insurance before disaster hits.