If your home burned to the ground and you lost every single one of your worldly possessions, how much would it cost you to replace them all?
You’d need an entirely new wardrobe, all new furniture, new electronics such as TVs and computers, new artwork and decor. New bicycles, new stereo equipment, new kitchen gadgets, cookware, utensils. For most of us, the cost to replace our belongings would easily total $10,000 or more.
In other words, not an amount you could shrug off and take in stride.
Enter: renters insurance. It’s a bit of a misnomer because this type of policy is actually personal property insurance, covering most of your belongings whether they’re inside your home or not. But insurance companies call it renters insurance to differentiate from homeowners insurance, which includes both personal property and the structure itself.
Everyone should have personal property insurance at all times. The good news is that it’s surprisingly affordable, typically costing between $5 and $20 per month depending on your coverage.
Basics of Renters Insurance
A renters insurance policy through a company like Lemonade works much like a home or auto insurance policy. You select a coverage level and a deductible, and then pay the premium, whether monthly, semiannually, or annually.
Should anything happen to your belongings, such as theft, fire, or water damage from the sprinklers, you can file a claim. The insurance company pays you to help cover the cost to replace your belongings after you pay your deductible.
Beyond replacing your personal belongings, renters insurance can also pick up the tab for other home-related costs. If someone falls on your steps and sues you for their medical bills, some renters insurance policies cover them. If you have to move out of your home after a fire, many policies cover the cost of a hotel room. Some even cover your moving expenses if you have to move permanently as a result of a disaster.
As with all insurance policies, you get what you pay for. A cut-rate renters insurance policy usually offers only minimal coverage combined with a high deductible. Still, depending on your situation, you may only need the most basic coverage.
Actual Cash Value vs. Replacement Cost
Insurance companies sell renters insurance based on either the actual cash value of your possessions or their replacement value. Both policies work the same in principle, but have very different results when it comes to paying out a claim.
- Actual Cash Value. If you file a claim on an actual cash value policy, the insurance adjuster looks at the damage to your belongings and then deducts the cost of depreciation before offering you a claim amount. For example, the laptop you bought for $1,800 five years ago is only worth $300 today due to depreciation. If a fire destroys your laptop and you file a claim for it, the insurance company compensates you only for today’s value: $300. It doesn’t matter that you’d likely have to spend another $1,800 on a new, up-to-date machine. Therefore, actual cash value policies tend to charge lower premiums than their counterpart, replacement value policies.
- Replacement Value. On a replacement value plan, the insurance company will pay you the actual cost to replace your items. In other words, if the $1,800 laptop you bought five years ago burns in the fire, the insurance company compensates you $1,800 or however much it costs to buy a similar laptop new today. This type of plan typically comes with higher premiums, but proves well worth it if you ever have to file a claim.
What Most Renters Insurance Covers
All renters insurance covers your personal property to some extent or another. That goes for property outside your home, not just items that permanently sit inside it. So if someone steals your backpack with your laptop inside while you’re out and about, it’s generally covered by renters insurance.
Renters insurance policies typically cover not just your individual belongings, but those owned by everyone in your immediate live-in family. Your spouse’s and 5-year-old kid’s clothes are covered. Your live-in girlfriend’s clothes, or stuff left by your adult child who finally moved out? Not so much.
Nearly all renters insurance policies protect against the following common threats. Make sure you understand exactly what’s included and excluded in any given policy before committing.
Fire Damage
All renters insurance policies cover fire damage. It makes up the core coverage of all property insurance.
If an electrical fire burns your home to the ground, you’re covered. The same goes for just about any accidental fire. Fires deliberately lit as arson may not be covered, however.
Most renters insurance policies cover wildfire damage as well. Not all do, however, as some insurers classify wildfires as a “natural disaster” — more on that distinction later.
Smoke Damage
Likewise, nearly all renters insurance policies include damage from smoke in their coverage. Smoke can quickly ruin clothes, linens, and fabric-covered furniture, even if the flames get nowhere near them.
Damage Caused by Discharged Water
When a fire or malfunction triggers the sprinkler system, it can ruin every item in your home in a matter of seconds.
Electronics shorted. Clothes and furniture water-stained or even moldy. Your mattress waterlogged. Few personal belongings can stand up to sustained water drenching.
In most cases, this coverage includes burst pipes or other plumbing mishaps. It does not include flood damage, however — more on that later.
“Normal Storms” as Named Perils
Renters insurance policies list out named perils as inclusions, and they usually list various types of “normal” storms among them.
That typically includes windstorms, lightning, hail, and even not-so-normal events like tornadoes and volcanic eruptions. Although if you live in a tornado alley or on the brim of an active volcano, read the fine print carefully to make sure these disaster types are included.
If a thunderstorm knocks a tree branch into your living room and crushes your TV, it’s almost always covered.
Theft
Whether a home burglary or someone stealing your smartphone out of your hand on the street, renters insurance covers theft. In the case of the latter, however, your deductible may be higher than the cost to replace your phone.
If someone steals your valuables, you’re covered.
Vandalism
The same goes for vandalism. If someone intentionally ruins your belongings, your renters insurance policy nearly always covers the damage.
Optional Extra Coverage
Beyond the basics included in most renters insurance, you can also opt for additional coverage. Not everyone needs it, but depending on your possessions and risk tolerance, you may want to include it.
Specific Valuables
The $50 necklace you bought at the department store is covered if your home burns down. Your $20,000 engagement ring? That’s another story.
Most renters insurance policies put a value limit on jewelry included by default under their coverage. For jewelry worth more than that, you typically need to buy additional coverage.
The same goes for artwork and other valuable objects. Your policy covers your belongings up to a certain limit, but if you own a famous painting worth $50,000, don’t expect your renters insurance policy to include it without specific coverage.
Temporary Living Expenses
A fire renders your apartment uninhabitable, which means you need to find somewhere else to live until your landlord can complete repairs.
Some renters insurance policies include temporary living expenses if you cannot stay in your home for a time. That could mean paying for a hotel, a hotel alternative like an Airbnb accommodation, or perhaps furnished corporate housing.
Relocation Expenses
Landlords can’t always repair damaged rental properties quickly, or at all. The building could burn to the ground, or require a complete gut and renovation.
In that case, you don’t need temporary accommodations. You need a new place to live.
Many policies include moving expenses you incur if you’re forced to find a new home after yours is destroyed.
Liability & Medical Expenses
Unfortunately, we live in a litigious society, and some people don’t hesitate to sue if they see a chance at a quick score.
Some renters insurance policies include liability coverage, often combined with medical coverage, in the event that someone gets hurt and blames you. For example, if your dog attacks the neighbor’s child, they could sue you for the medical expenses and damages. Renters insurance can cover that.
Or imagine another scenario, where you throw a party and someone gets hurt. Or you accidentally start a fire that spreads to your neighbor’s home and damages their belongings.
Note that this medical expense coverage doesn’t replace your own health insurance plan. It covers other people’s medical bills if they try to blame you.
Similarly, it doesn’t cover liability for damage caused by car accidents. That falls under your auto insurance policy.
Natural Disasters
There are thunderstorms, and then there are hurricanes. Renters insurance generally covers normal storms, but not natural disasters — at least not without additional coverage.
Natural disasters include such calamities as earthquakes, hurricanes, and sinkholes. If you worry about damage from disasters, ask your insurance provider about added coverage.
Flood Damage
Renters insurance does not cover flood damage without additional coverage.
They do cover plumbing-related water damage, such as burst pipes or triggered sprinklers. But if water enters your home via flooding, insurance doesn’t cover the damage unless you buy specific flood insurance.
Do your homework to research whether your home sits in a flood plain. You can do so at FEMA’s SmartFlood website, the official site of the National Flood Insurance Program.
Identity Protection
In today’s digitized economy, your personal financial information exists on so many websites that sooner or later, at least some of it is bound to get captured by identity thieves.
Yes, you should take identity theft prevention seriously. But you should also consider insuring against it because an incident can get very, very expensive.
You can buy standalone identity theft insurance if you like. But it’s generally cheaper to include it under your renters insurance as additional coverage.
What Renters Insurance Never Covers
Some renters discover only after disaster strikes that their insurance didn’t cover everything they thought it did.
Beyond the optional inclusions outlined above — that often aren’t included in policies by default — some items are never covered by renters insurance. Make sure you understand these before making false assumptions about your coverage.
Fixtures Owned by the Landlord
Any property fixtures owned by the landlord fall under their landlord insurance policy, not your renters insurance policy. For example, landlords typically own and provide many large appliances such as refrigerators and ovens. Likewise, they may let you use their grill in the backyard, but they may opt not to replace it after it gets stolen or destroyed. This loss would not be covered under your renters insurance.
If you brought your own appliance, however, that does typically fall under your renters insurance coverage.
Undocumented Items
You should be able to provide proof of ownership for any belongings when you make a claim. Otherwise, anyone could claim any item under the sun after a fire, hoping to pull one over on the insurance company.
Keep copies of your receipts for all valuable belongings. No, you don’t need to keep a receipt for every $15 T-shirt you buy. But that new TV you just bought for $1,500? Don’t expect your claims adjuster to take your word for it.
You can keep paper receipts in a fire-proof safe as one option. Better yet, just snap a quick photo with your phone and save it to a digital folder on your computer. Ideally, combine that with a cloud backup service, so that if your computer also perishes in the fire, you have a copy (along with all your other important documents and files).
Pet Veterinary Care
Renters insurance does not cover your pets, aside from possibly covering your liability for pet attacks.
If your pets get injured in a fire or storm, you must pay for their veterinary care out of pocket. You can buy separate pet health insurance. The same insurer may offer you both policies, but they remain distinct.
Your Roommate’s Belongings
Your renters insurance covers only your and your immediate live-in family’s possessions. It does not cover other people’s belongings — even if they live under the same roof.
That goes for housemates and for cohabitating couples. Getting legally married comes with many perks, joint insurance coverage among them.
Motorized Vehicles
Say you have $1,500 worth of personal belongings in your car, and someone steals your car. What are the insurance ramifications?
You would have to file two claims: one with your auto insurance company for the car itself, and one with your renters insurance company for the belongings inside it.
Renters insurance cannot cover motorized vehicles. Beyond cars, trucks, and motorcycles, that also extends to mopeds, electric bicycles, Segways, and motorized scooters.
Pest Damage
If mice eat through your wardrobe, chewing up every article of clothing you own, don’t expect your renters insurance to cover it.
Damage by pests falls outside your renters insurance coverage. That goes for everything from rodents to cockroaches, ants to termites and any other creepy-crawlies that find their way into your home.
Consider it extra incentive to keep your home spick and span!
Cost of Renters Insurance
As insurance goes, rental insurance is downright cheap.
According to the Insurance Information Institute, the average annual insurance premium costs only $180. That’s only $15 a month; some video streaming services cost more than that.
Some insurers, especially online insurance companies, average even lower premiums. The average entry-level renters insurance from Lemonade is only $5.70 per month, for example.
Granted, premiums vary based on both the amount of coverage and the deductible. If you want to cover $100,000 in personal property rather than $10,000, expect to pay a significantly higher premium.
Likewise, if you want a $200 deductible rather than a $1,000 deductible, prepare to pay for it.
As with every type of insurance, make sure you shop around. Some providers offer better bargains with more coverage than others, and rates change all the time. Do your homework, and find affordable coverage that meets your needs.
To get started, check out our list of the top renters insurance companies.
What You Need to Apply
Unlike many forms of insurance, you don’t need to submit much information to get a quote on renters insurance.
Most providers offer an instant quote online. Expect to submit your name, address, phone number, details about any pets you own, whether you live with roommates, and possibly characteristics of your home such as the number of smoke detectors, whether it has a security system, and so on. Insurance companies may also ask for your Social Security number.
Based on statistical data, insurance companies classify certain breeds of dogs as more dangerous than others. Pet liability coverage for these dogs may drive up your premium. Living with a roommate may also drive your premium higher, as it adds another variable.
You then select how much coverage you want, the deductible you want, and any optional inclusions you want. Then voila! You get an instant quote.
Filing a Claim
Most modern insurance companies let you file a claim online, although they also offer claims by phone. Have your policy number handy so they can identify your account.
When you file a claim, be prepared to provide documentation for any significant items you want included. Usually that means a receipt, so keep copies (digital or paper) of these in a fireproof location, ideally in cloud storage. If it costs more than $50 or $100 and you want it replaced, prepare to prove ownership.
Most companies process renters insurance claims quickly. In some cases, they pay out in a matter of days. Slower companies typically pay within a few weeks —another example of why you need an emergency fund.
Final Word
As with any type of insurance, shop around. Request a quote from several insurance companies and ask the insurance agent about available discounts and exactly what each policy covers.
Many companies offer discounts for customers who carry multiple policies, such as auto and renters. You may also score discounts if you have or agree to install a home security system, deadbolt locks, smoke detectors, and sprinkler systems in your home.
Most importantly, you don’t want to pay for coverage you don’t actually need. Check your lease to understand exactly what your landlord is responsible for repairing or replacing in your rental. Moreover, your landlord’s property insurance should already cover certain damages to the exterior and structure of the home.
When in doubt, start with entry-level coverage. You can always raise your coverage later, so start small and increase it only as needed.
Do you have renters insurance? If not, what’s stopping you?
