Insurance
How To Buy Renters Insurance
Whether you’re a first-time or seasoned renter, you should think about how to financially protect yourself if something occurs to your personal belongings or rental apartment. The easiest method to accomplish this is to get renters insurance.
This renters insurance buying guide will help you decide if and why you need it. If you decide to acquire renters insurance, the book will also show you how to select the insurance provider that best meets your needs and how to search the different plans to discover the best option for you.
What Is Renters Insurance?
Renters insurance is a low-cost policy that protects renters’ property in the event of a specified risk. Although some tenants believe their landlord’s insurance coverage would protect them, it typically only covers your landlord and the structure in which you live; your personal items and responsibility are unlikely to be protected. This requires renters insurance.
- Theft of or damage to your personal property contained in the rental unit, such as clothing, furniture, and electronics
- Personal liability if someone is injured in your unit or you accidentally damage someone else’s property
- Additional living expenses you may incur, such as hotel bills, if your unit is uninhabitable after a covered peril.
- Medical payments to others you are legally responsible for the necessary medical expenses that are incurred or medically ascertained
Renters insurance is comparable to homeowners insurance, however it excludes the residential house and additional structures such as sheds. In general, insurance experts believe that renters insurance is a good investment for protecting your property from a number of unpleasant events such as theft, fire, storms, and natural disasters.
Steps for Purchasing Renters Insurance
Although buying renters insurance may seem complicated, it’s easy to get started. This guide to buying renters insurance will walk you through each of the following steps:
- Decide what you want to cover.
- Determine how much renters insurance you need.
- Choose an insurance company.
- Choose a policy.
Do I Need Renters Insurance?
Consider if the flat or house you rent was damaged by a tragedy – perhaps a pipe burst, smoke poured in from a neighboring fire, or you returned home to discover you had been burglarized. These and similar circumstances would have you scurrying to assess the damage to your stuff or figure out what went missing totally. This might also require you to temporarily relocate and deplete your finances.
Your landlord is not financially liable for any damage or theft of your goods. That’s where a renters policy comes in: it protects your things (and you, from certain forms of legal liabilities) while you live in a rental property. According to the Insurance Information Institute (III), a group that assists customers in researching the insurance market, if damage to your personal belongings might result in a financial loss, you should consider renters insurance.
Furthermore, many renters discover that they are required to acquire renters insurance when they sign a new lease. Although renters insurance is not required by law, the III notes that landlords may ask tenants to carry it. In other words, if your lease requires renters insurance, the decision is already made for you.
Where to Buy Renters Insurance
When looking for renters insurance, insurance company websites may provide a wealth of information, such as where a firm operates and what basic and optional coverages they provide. Although renters insurance prices vary by location, several firms provide online estimation tools to help you determine what you’ll spend for any particular kind and level of coverage.
While it is vital to conduct your own research, you should also get assistance from a professional insurance agent. They can advise you on the sort of coverage to get and how much it will likely cost. An exclusive agent will only give information and quotations from one firm. Independent agents, on the other hand, have access to many firms’ quotations. Check the agent’s background to ensure they are credible. To see ratings and complaints, go to your state insurance agency’s website, as well as the National Association of Insurance Commissioners’ (NAIC) website.
Mistakes to Avoid When Buying Renters Insurance
Steven Weisbart, senior vice president and chief economist of the III, explains that the most common mistakes when buying renters insurance involve failing to purchase the right amount of insurance, not considering extra liability coverage, and not considering additional coverage like flood insurance if you live in a high-risk area.
“You want to get the right total amount of insurance, because if it’s a complete loss, you will want to replace everything that you lose,” Weisbart says. “You also need to know what the policy doesn’t cover so that you can buy additional insurance if you need it.”
Another mistake is not comparing prices from several insurance companies before buying renters insurance. Robert Hunter, director of insurance at the Consumer Federation of America, notes that this can result in paying too much.
“People often don’t compare prices but take what an agent gives them,” he says. “Agents usually represent only one or a few companies and may not have access to the best insurer for you. Also, an agent can make more money sending you to a higher priced insurer with a bigger commission. Be careful, and at least call a few insurers.”
How Much Does Renters Insurance Cost?
If you’re apprehensive about the potential cost of renters insurance, don’t be. It’s relatively affordable, and experts generally agree that the benefits of renters insurance are well worth the cost. According to a 2022 study from the NAIC, the average annual renters insurance premium in 2019 was $174.
Note that premiums vary by state. In 2019, Mississippi was the most expensive state in terms of renters insurance, with an average annual premium of $252 and North Dakota was the cheapest, with an average annual premium of $115.
There are several factors that can affect the cost of renters insurance, the most important of which are the type and amount of coverage. If you stick with your insurance company’s basic renters insurance policy, you’ll have coverage for your personal property, liability from certain types of legal incidents, compensation for additional living expenses if you have to temporarily relocate from the rental property, and medical payments to others if you are legally responsible.
You can increase your limits for all four types of coverage, which will increase how much you pay for renters insurance but will provide more compensation in the event of a loss. For example, you can:
- Increase the coverage limits for your household possessions, which is useful if you own high-end jewelry, electronics, or other expensive items.
- Get a replacement cost policy instead of an actual cash value policy because it pays to replace your damaged or lost property at its new – rather than depreciated – value.
- Add supplemental coverage (known as riders or floaters) for specific valuable possessions.
- Add supplemental coverage for specific disasters, such as flood or earthquake coverage.
- Add supplemental coverage for business inventory or assets stored on the rental property.
- Add supplemental liability coverage, such as an umbrella policy.
- Increase the limit of your additional living expense coverage.
After choosing the type and amount of coverage, decide whether you want a high or low deductible. This is the amount you must pay out of pocket before receiving compensation for your losses. For example, if you have a $500 deductible and $1,000 in losses, you’ll only receive $500 in compensation for your claim. A lower deductible generally results in higher premiums for the same coverage, while opting for a higher deductible generally lowers premiums. When you select a company and a policy, you should be able to choose deductible options.
After you decide how much insurance you need and what type of policy you want, your insurance company will determine the cost of your premiums. Be sure to ask about any available discounts, such as bundling renters and auto insurance, staying with the insurance company for a certain period of time, or equipping your rental home with specific safety equipment. With that in mind, let’s take a look at the actual costs of renters insurance from the insurance companies we’ve rated and profiled.
For example, State Farm has a sample median monthly cost of $13.04, based on our research. This is the cheapest rate among insurers in our rating. The most expensive company in our rating is American Family, which has a median monthly cost of $30.49. Keep in mind that any rates shown here are for illustrative purposes only. You should contact the insurance company or insurance agent directly for applicable quotes.
Choosing the best renters insurance company can seem like a daunting task, but we’re here to help with our Best Renters Insurance Companies of 2024 rating. Based on extensive research and an exclusive methodology, we’ve determined that these are the top renters insurance companies in the U.S.
#2 USAA
#3 Lemonade
#3 American Family
#5 Erie Insurance
#5 Allstate
#5 Liberty Mutual
#8 Farmers
#8 Progressive
#8 Nationwide
To buy a renters insurance policy, you must decide what you want to cover, determine how much insurance you need, and choose an insurance company and policy. Read on to learn more about each step.
According to the III, there are three basic types of coverage included in most renters insurance policies: personal possessions, liability, and additional living expenses.
Your personal possessions include things like furniture, clothing, electronics, appliances, kitchen equipment and utensils, home goods such as sheets and towels, and sports and hobby equipment such as bicycles and musical instruments. If these items are stolen, vandalized, or damaged due to a peril, your renters insurance policy will compensate you for your loss. You’ll need to check specific policies to see which perils are covered, but they typically include fire, smoke, lightning, vandalism, theft, explosions, windstorms, and water damage (but not floods, unless you’ve paid extra for this type of coverage).
Renters liability insurance is designed to protect you and your family against lawsuits for property damage or bodily injury caused by members of your household or your household pets. For example, if your dog bites the mail carrier, the liability part of your renters insurance policy would kick in. Your liability coverage would also compensate you if your child ruined someone else’s property (but not your own property). This part of the policy also provides no-fault medical coverage, in the event that someone other than a member of your household is injured in your rental home.
Renters insurance also provides additional living expenses if your rental home is deemed uninhabitable from fire, smoke, or some other problem, and you must relocate. This reimbursement will typically cover the difference between your regular living expenses and the increased expenses due to your temporary living situation.
Specialized coverages are usually available as add-ons to your renters insurance policy or as a separate policy. Examples include flood and earthquake insurance to protect your belongings in the event of those specific perils, floater or rider insurance to cover specific valuable possessions such as fine jewelry or artwork, umbrella or excess liability insurance to increase or supplement your maximum renters liability insurance, and business property insurance if you have a home-based business with equipment or inventory.
In short, your policy will generally cover:
- Belongings (furniture, clothing, electronics and devices, appliances, kitchen equipment, sheets and towels, sports equipment, musical instruments, etc.)
- Property damage caused by a member of your household or a pet
- Injury caused by a member of your household or a pet
- Additional living expenses caused by temporary displacement
If you live in a high-risk area or have specialized needs, consider adding:
- Flood insurance
- Earthquake insurance
- Floater or rider policies for fine jewelry, art, or collectibles
- Umbrella or excess liability insurance
- Business property insurance
Determine How Much Renters Insurance You Need
After you figure out what types of items and perils you want to cover, determine how much renters insurance you need. This will require taking an inventory of everything in your rental unit. Keep in mind that some of these items may not be fully covered under a regular renters insurance policy if they are too valuable, particularly electronics and computer equipment, expensive specialized sports equipment or musical instruments, or other hobby equipment such as camera gear. Those items may require additional renters insurance coverage. According to Weisbart of the III, the inventory should include the age of the items as well as what you originally paid. This information, if available, is especially useful for more expensive items.
Not only will this inventory help you determine the value of your belongings and be useful for filing a claim if your possessions are damaged or stolen, but it will also help you figure out if you’re better off with an actual cash value policy or a replacement cost policy.
An actual cash value policy takes depreciation into account, which is the reduction in the value of your items due to their age and the fact that they’re used. Computer equipment and communication devices are examples of possessions that may be hit particularly hard by depreciation, and an actual cash value policy probably won’t pay the entire amount needed to replace these items with new equivalents.
In other words, an actual cash value policy just provides enough compensation to replace the item that was damaged or stolen with a used one of similar age and in similar condition.
The next step is to consider the items you noted as being particularly valuable. You and your insurance company will need to agree on how much each of those belongings is worth, and the best way to do that is to get them appraised. Keep all your documentation for these items handy, as you’ll need it when discussing riders or floaters, which are additions to your renters insurance policy that provide specific dollar limit coverage for these valuables.
Choose a Renters Insurance Company
Because renters insurance policies generally offer the same general types of coverage, and because premiums tend to be competitive and affordable, these details might be less important than if you were shopping for homeowners insurance.
You also want to find a company that offers good service and makes you feel that they value your business. With that in mind, here are some considerations when choosing a renters insurance company:
- Check out different types of insurance companies, including those that use company-owned agents, those that use independent agents, and those that sell policies directly online and by phone.
- Ask for recommendations from friends and family.
- Get quotes from at least three companies.
- Remember that price isn’t the only important factor in choosing a company. You should also look at the company’s financial strength as determined by AM Best or another ratings agency because you want a company that will be financially solvent well into the future.
- Consider a company’s overall reputation, which you can determine by talking to local real estate agents and reading professional and customer reviews online.
- Make sure a company’s customer service representatives take the time to answer your questions and help you understand the policy they’re trying to sell you.
Choose a Renters Insurance Policy
When you’ve gathered renters insurance quotes, examined all the policy options, and chosen a company, it’s time to select a policy. If you’ve followed this guide, you’re already familiar with the choices, and you’ve probably already made those decisions. This is when all your careful preparation pays off. To reiterate, when it comes time to select a policy, make sure:
- You have explored all options before deciding on a policy
- The policy provides suitable coverage for all of your possessions
- You’ve weighed the cost and potential benefits of additional liability coverage and decided what makes the most sense for you
- You understand, and are comfortable with, what your policy covers and doesn’t cover
- You’ve considered adding additional coverage, particularly flood coverage, if needed
Key Takeaways:
- Renters insurance costs an average of $170 per year, protecting you and your belongings when living in a rental home.
- When shopping for renters insurance, decide how much coverage you need and whether your situation requires added protection, such as flood coverage.
- Before buying a policy, get quotes from at least three insurance companies to compare rates and coverage limits.
FAQs
Is renters insurance a good investment?
Renters insurance can be a beneficial investment, providing valuable and affordable protection for about $14 a month, on average. It covers your personal belongings, a place to stay if something happens to your rental home, and legal costs if you’re found liable for certain damages or injury to another person.
Does renters insurance cover pet damage?
It depends. Renters insurance may cover you if your pet damages someone else’s property or even bites them (depending on your pet and your policy). However, a renters insurance policy is unlikely to cover damage your pet caused to your rental home or injuries you sustained because of your own pet.
What are the best renters insurance companies?
Our analysis determined that State Farm is the best overall company for renters insurance, followed by USAA and Lemonade. You can learn more in our guide to the best renters insurance companies.
What company offers the cheapest renters insurance?
According to our research, State Farm offers the cheapest renters insurance with a sample monthly cost of $13.04, less than the national average.
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