What Type of Renters Insurance Do I Need?

Renters insurance can provide coverage for your belongings, support if you lose your home, protection from costly lawsuits and financial assistance if you’re liable for someone else’s medical or repair bills. While it generally is not required by law, your landlord may require you to purchase renters insurance.

Keep reading to learn what the different types of renters insurance are and how much coverage you may need.

Key Takeaways Renters insurance includes personal property, loss of use, personal liability and medical payments coverage, while dwelling and other structures coverage should be included in your landlord’s insurance policy instead. Your landlord may require you to purchase renters insurance even though it is not required by law. Most renters policies insure your belongings at their actual cash value but you can pay a higher premium to insure them at their replacement cost value. Renters insurance cost $173 per year on average in 2020.

What Types of Renters Insurance Are Available?

Renters insurance policies, also known as HO-4 policies, typically offer four main types of coverage: personal property, loss of use, personal liability and medical payments. In general, renters insurance provides the same kinds of coverage as a homeowners insurance policy minus dwelling and other structures coverage.

Personal Property

Personal property insurance covers items that you own like furniture, clothing, electronics and more. Your insurance company will generally pay you if any of your personal belongings are lost or destroyed due to one of the following named perils.

Fire or lightning	Theft
Windstorm or hail	Volcanic eruptions
Explosion	Falling objects
Riot or civil commotion	Weight of ice, sleet or snow
Damage by aircraft	Water/steam discharge from home systems and appliances
Damage by vehicle	Sudden/accidental tearing, cracking, burning or bulging of home systems
Smoke	Freezing of home systems
Vandalism or malicious mischief	Sudden/accidental power surges

Your renters insurance policy will likely also include off-premises coverage, which insures your possessions even if you don’t keep them in your primary residence. For example, if someone steals your car while your phone and laptop are inside, you could file a claim on your renters insurance for the lost items. However, the limit for your off-premises coverage is usually 10% of the limit for your overall personal property coverage.^[1]

Loss of Use

Loss of use coverage, also known as additional living expenses coverage, pays for temporary living costs if your house or apartment becomes uninhabitable due to a covered peril. Your insurance company may cover the costs of expenses like hotel stays and restaurant meals while you wait for your home to be repaired or rebuilt.

Insurance carriers generally don’t pay for additional living expenses up front, meaning you will have to save receipts so that you can be reimbursed for these expenses after the fact. In addition, your insurance provider will only cover the difference between these additional expenses and your normal living expenses.^[1]

For example, if you usually spend $2,000 a month on rent and groceries, then spend $3,000 at hotels and restaurants after your home is severely damaged, your loss of use coverage would provide you with $1,000.

Personal Liability

Personal liability insurance covers the costs that arise whenever you are held liable for someone’s injury or damage to their property. Below are examples of the two main categories of personal liability coverage.

Type	Explanation	Example
Property Damage	Pays to repair another person’s property if you or someone in your household is responsible for the damage	You and your child are playing catch outside when your child accidentally throws the ball through a neighbor’s window
Bodily Injury	Pays for another person’s medical bills and lost wages if they are injured on your property	A guest trips and falls down your stairs because one of the steps is uneven

Your personal liability insurance can also cover legal expenses if someone sues you due to their injury or property damage. HO-4 insurance typically provides at least $100,000 in personal liability coverage, though you may want to expand your coverage limit to $300,000 to be sufficiently protected in case of an accident.^[1]

Medical Payments

Medical payments coverage can also pay for another person’s medical bills. It differs from liability insurance in that it will kick in for anyone injured on your property regardless of whether you are held liable for the accident. For this reason, it is also known as no-fault medical coverage.

Medical payments coverage comes with a much lower coverage limit than liability insurance, usually ranging from $1,000 to $5,000.^[1] In addition, your medical payments coverage will not help you with legal expenses if the injured party takes you to court. Instead, it usually acts as a deterrent, helping prevent small claims from escalating into costly lawsuits.

What Isn’t Covered by Renters Insurance?

There are several things that your renters insurance won’t cover, either because they are already covered by someone else’s insurance or commonly excluded from standard insurance coverage. Some of the things your renters insurance likely won’t cover include:

• Dwelling and other structures: The structure of your home and other buildings on the property you rent should be covered by your landlord’s insurance.
• Your roommate’s belongings: Your roommate will generally need their own renters insurance policy to cover their possessions unless you decide to add them to your policy, which may not be an option if they are not your spouse or child.
• Floods and earthquakes: While some natural disasters are covered by renters insurance, damage from external water sources and ground movement is generally excluded. You may be able to protect your belongings by purchasing separate flood insurance and earthquake insurance.
• Pests and infestations: Renters insurance may not cover damage caused by bed bugs or termites if they get into your home due to poor maintenance or neglect on your part.
• Dog bites: Your personal liability coverage might not cover dog bites from breeds like pit bulls and rottweilers that have a reputation for being aggressive.
• Valuables: Your insurance company may impose a sub-limit on expensive items like furs, jewelry and artwork. As a result, you may need to purchase scheduled property coverage to be fully reimbursed if any of your high-value belongings are lost or destroyed.

How Do I Choose the Best Type of Renters Coverage?

When deciding which type of renters coverage is right for you, you need to choose between insuring your belongings at their actual cash value (ACV) or their replacement cost value (RCV).

If you have ACV coverage, your insurance company will reimburse your losses at their market value when considering depreciation factors like age or wear and tear.

Conversely, if you’re willing to pay a 10% higher premium, you could receive RCV coverage.^[1] This means your insurer would pay you whatever it would cost to replace the lost item with a comparable item, up to your policy limits.

If you’re interested in RCV coverage but concerned about paying a higher premium, you could offset the cost somewhat by raising your deductible, which is the minimum amount you agree to pay out of pocket toward covered losses. When you have a higher deductible, your insurance company is responsible for paying less whenever you file a claim and will typically charge you a lower premium as a result.

How Much Renters Insurance Do I Need?

How much renters insurance you need depends on how valuable your possessions are. In general, you will want to have enough personal property coverage to replace all of your belongings in the event of a total loss.

As a result, it can be helpful to keep a spreadsheet that records all of your belongings, how old they are and how much you think they are worth. For example, if you find that the value of all of your possessions adds up to around $20,000, then you will likely want to purchase a renters insurance policy with a $20,000 limit for personal property coverage.

Where Can I Buy Renters Insurance?

You can buy renters insurance from most insurance carriers including State Farm, Nationwide, Allstate and many more. Renters insurance cost $173 per year on average in 2020, although average rates vary from state to state.^[2]

Keep in mind that each insurance company uses its own formula to calculate the risk of insuring any given individual and one insurer may present you with a cheaper quote than another. Using an online insurance marketplace like SmartFinancial can help you find the renters insurance policy that best suits your needs.