What Is Renters Insurance and What Does It Cover
Renters insurance can cover the loss of your belongings in case of damage to your rented home. It also covers expenses such as hotel bills you may incur if your rental home becomes unlivable and any liability for which you’re held responsible as the result of an accident or other mishap in your home.
Read on to find out everything you need to know about renters insurance — from what a standard policy typically covers to common exclusions, additional coverage options and why you should consider getting this coverage, even if your landlord doesn’t require it.
What is renters insurance?
Renters insurance is similar to homeowners insurance, with one main difference: it doesn’t cover the building itself or its structures. It covers only the personal belongings you keep in a property you don’t own, which could be an apartment, house, condo, townhouse or mobile home.
Renters insurance, also known as tenant insurance or an HO-4 policy, can cover the unexpected costs of repairing or replacing your personal possessions when they are damaged by a covered peril. It also provides personal liability coverage — say, if someone is injured in your home — and can pay for living expenses you may incur if you’re temporarily forced to live elsewhere due to damage to your residence.
Do landlords require renters insurance?
Although it’s not mandated by law, landlords may require tenants to have renters insurance as a condition of the lease agreement. This allows them to minimize their own liability for accidents that you, as their tenant, may cause.
Is renters insurance worth getting?
A renters’ insurance policy covers you where your landlord’s own insurance will not. Landlord insurance covers damages to the apartment complex and its structure, not to your personal belongings.
Even if your landlord doesn’t require renters insurance, there are a few reasons why a policy might be a good idea.
For starters, renters insurance is relatively cheap. On average, it costs $15 a month, or less than $200 a year, according to the National Association of Insurance Commissioners (NAIC).
Another reason to consider renters insurance is that it covers your possessions wherever you are, and not just when you (and they) are at home. For instance, if your laptop is stolen from your car or while staying in a hotel room in another state, your renters insurance could help you pay for its replacement.
How does renters insurance reimburse you?
Generally, renters insurance reimburses losses to personal property in two different ways: according to actual cash value or replacement cost.
Actual cash value is the least expensive option. This arrangement takes into account the depreciation of your personal belongings at the moment of a claim. This means it reimburses the current market value of your belongings, which might be less than what you really need to purchase the same item again.
Replacement cost coverage, on the other hand, covers the total amount needed to buy the same (or similar) item, without deducting depreciation. Because the payouts are larger than with an actual cash value policy, the monthly premiums are higher for replacement cost coverage.
What does renters insurance cover?
Renters insurance policy typically includes three types of coverage:
Personal belongings
Personal property coverage can help you pay for the cost of replacing your personal items if they’re damaged. This includes such possessions as:
- Clothing
- Money
- Appliances
- Electronics (TVs, computers, tablets)
- Jewelry (watches, rings, goldware)
- Houseware (rugs, tapestry, carpets)
- Furniture
- Collectibles (trading cards, coin collection, stamps)
- Watercraft and trailers
Insurers may also extend coverage to personal belongings stored in an off-site storage unit or, as noted above, in other locations such as your car or a hotel room.
Most renters insurance policies cover the following:
| Covered Peril | Example of what is covered |
| Fire and smoke | A fire — such as a cooking or electrical fire — destroys your personal belongings. |
| Lightning | Lightning sparks a fire or causes a power surge that damages your electronics and/or appliances. |
| Windstorm and hail | Hail or wind (caused by tornadoes or storms) wrecks the roof or walls of your home and forces in rain, snow or sleet, soaking and damaging your property. |
| Falling objects | A falling object — such as a meteor, tree branch, space debris or other object — first damages the exterior of your home and, as a result, the property inside your home. |
| Vandalism and theft | Someone vandalizes your property or breaks in and steals your TV, jewelry and other insured valuables. |
| Water damage | A fire protection system or HVAC system malfunctions or a pipe bursts, causing overflow of water and damaging your furniture, art or clothes. |
| Power surge | Short circuits, lightning strikes and similar electrical accidents that damage your appliances, electronics and other property. The loss of contents in your refrigerator in case of long power interruptions may also be covered. |
| Explosion | A gas grill, aerosol can or water heater explodes in or around your home. |
| Riot or civil commotion | Property damage as result of pillaging or looting during riots or periods of civil unrest. |
| Aircraft and/or vehicle damage | A motorized vehicle, car or aircraft crashes into your home, damaging its contents. |
| Weight of ice, snow or sleet | The roof caves in due to heavy ice, snow or sleet, causing damage to the belongings in your apartment, on-site storage unit or garage. |
Personal liability
Most renters insurance policies include liability coverage as well.
This coverage may pay for legal fees and medical expenses if, for example, someone gets hurt in your home or if you’re found legally responsible for property damage to others.
Unlike personal property coverage, which pays only for your damaged items, liability insurance can allow you to avoid paying out of pocket for damages that you (or someone in your household) caused to others and their property.
Some common claims covered by personal liability insurance are:
- Slips, falls and injuries: A house guest slips on your rug, breaks an arm and sues you for their medical expenses.
- Accidental damage to other people’s property: Your child accidentally breaks your neighbor’s window while playing baseball outside.
- Damage from perils that originate in your property: If you live in a multi-unit building and overfill a bathtub, causing water to overflow into the downstairs apartment.
- Dog bites: Lawsuit expenses or medical bills if your dog injures a guest while visiting your place, or damages your neighbor’s property. (Bear in mind that some breeds might not be covered.)
- Funeral expenses: Some insurance companies may cover funeral expenses if a guest dies as a result of an accident in your home.
Additional living expenses (ALE)
Additional living expenses (ALE) — also known as loss of use — coverage can help reimburse for additional costs you incur because your residence becomes inhabitable after a covered loss.
ALE may cover expenses related to:
- Hotel bills or the rental of another apartment
- Food expenditures, including restaurant bills
- Temporary storage of your personal belongings
- Pet boarding
- Furniture rental
- Laundry expenses
Loss of use coverage will reimburse you the amount in excess of what you normally spend in living expenses, up to your policy’s coverage limits.
Common additional coverage
Most insurance companies offer additional coverage to supplement your policy and further protect what you own. These add-ons can cover perils that aren’t generally included in your standard policy or let you increase coverage limits.
Common add-ons include:
Identity theft
Insurers may let you add identity theft protection to your renters insurance policy.
This type of coverage may help pay for the cost of restoring your identity if you fall victim of identity theft or a cyber attack.
Identity theft insurance may reimburse you for:
- The cost of re-issuing government IDs
- Legal fees
- Attorney fees
- Lost wages
- Fraud specialist expenses
- Loan reapplication fees
- Data recovery expenses
- System restorations
Some companies may even offer credit monitoring services, as part of their identity theft coverage.
Scheduled personal property and floaters
Scheduled personal property coverage is a type of endorsement (also known as a rider) that you can add to increase the liability limit for specific items or categories that might already be covered by your policy, but with coverage limits too low to fully reimburse you.
For example, your renters insurance coverage may include personal property protection for collectibles or jewelry up to $1,500 per item. But if a number of the pieces you own are worth more than that, you will need to add an endorsement in order to be fully covered.
The endorsement would allow you to raise the $1,500 sub-limit to a higher amount, so that you’re reimbursed the full cost of the items in question in case of a covered loss.
If you need to increase the coverage limit for only a single item — perhaps a watch or an autographed baseball card — you may want to consider what’s known as a scheduled floater.
A floater not only increases the policy limit for the specific item but, in most cases, also provides more comprehensive coverage, such as including accidental loss (which most policies don’t cover).
Another option when you have high-value items is to obtain umbrella insurance, a type of coverage that can cover the remainder of your expenses once existing policy limits are reached. (The umbrella coverage would also enhance your coverage for other perils you may face in your life, such as liability if you are held responsible for injuries to others in a car accident.)
What does renters insurance not cover?
Renters insurance coverage doesn’t cover all types of natural disasters and perils. It’s typically limited to a specific list of covered losses, such as the ones listed above.
This means that you may need to purchase additional insurance coverage, such as flood or earthquake insurance, to further protect your property in a rented home.
Below are some examples of what events renters insurance generally doesn’t cover.
Common exclusions
Earthquakes and floods
Renters insurance doesn’t cover losses due to
- Floods
- Earthquakes
- Volcanic eruptions
- Landslides
- Sinkholes
- Other earth movements
Still, some insurance companies such as Nationwide, Erie and State Farm offer coverage for earthquake damage as an optional add-on to their renters policies.
Additionally, while renters insurance covers water damage as a result of a storm or interior leak, it excludes damage from flooding. If you live in a flood-prone area, you could consider getting private flood insurance or looking into FEMA’s National Flood Insurance Program (NFIP).
Car accidents or theft
Renters insurance won’t cover car accidents or car theft, even if it happens in your home premises. Nor will it cover liability expenses such as medical bills or repair costs related to a car accident. These will be covered by your auto insurance policy. (For more information on car insurance, check out our guide to the Best Car Insurance.)
Roommates’ property
If you live with roommates, you should know that their property won’t be covered by your renters insurance, unless they’re listed in the policy.
If you do go in with your roomie or roomies on a policy, make sure the total coverage amount reflects the combined value of your possessions. In most cases, unless you change the coverage, adding a roommate will split the amount of coverage among each insured person in the policy.
Home business liability
Business property is generally excluded from renters insurance coverage, too, although you might be able to add an endorsement to cover it. The exclusion may include any item that’s exclusively used for business purposes, such as:
- Equipment
- Inventory
- Furniture
- Tools
- Work computers
- Other work-related electronics
Renters insurance won’t cover the liability for your business, either. So, if a customer or employee sues you because they had an accident in your premises or as a result of your product, your renters insurance liability coverage won’t protect you.
In most cases, covering your business for liability requires getting a small business insurance policy. It can cover commercial property damage, product liability and lawsuits against your business.
Pest infestations
Damage to your belongings as a result of pest infestations such as bed bugs, termites, carpenter ants and other vermin is generally not covered by renters insurance.
Some insurers, however, may offer bed bug coverage as an add-on, depending on your location. This extra may cover the expense of removing bed bugs from your place.