Best Questions to Ask About Renters Insurance

Accidents and hazards can happen at any time, and you shouldn’t expect your landlord to reimburse you for losses when they occur. If your laptop is stolen or a fire destroys your couch, you’ll be on your own to replace those items — unless you purchase renters insurance. A renters insurance policy is relatively cheap, but going without one could be costly. It’s not just your belongings you have to worry about. If your dog bites someone or a guest is injured on your property, you could face a lawsuit, and legal fees can add up quickly. As you shop for a renters insurance policy, it’s important to understand what’s covered under different circumstances and how your insurance company will reimburse you after a claim. Asking the right questions can help you avoid confusion and gaps in coverage.

Do I Need Renters Insurance?

Landlords and apartment buildings can require renters insurance. If having a renters policy is a condition of your lease, you’ll need to purchase a policy. But even if it's not required, you should strongly consider getting renters insurance to protect yourself from potentially unaffordable costs.

What Does Renters Insurance Cover?

Renters insurance generally covers the following:

• Personal property damage: Your renters insurance company will reimburse you for damage to your belongings if it occurs due to a covered peril, which is an event listed in or not excluded from your policy.
• Personal liability: If someone becomes injured at your apartment or damage to their property occurs, they may choose to file a lawsuit against you. Renters insurance will pay for your legal defense and any judgments against you up to the policy limits.
• Additional living expenses or loss of use coverage: If a covered peril causes your apartment or rental home to be uninhabitable, your renters policy will pay for your hotel or alternative housing and your meals up to the policy limits.
• Medical payments coverage: If a guest is injured at your rental home or apartment, regardless of the cause, your insurance company will cover the cost of their medical care up to the policy limits.

What Are Covered Perils?

Your personal property damage and loss of use coverage will only kick in if a covered peril caused the damage or loss. Every policy is a little different, so it’s important to ask what the covered perils are and if any perils are specifically excluded. Most renters policies will cover damage or loss from the following:

• Fire
• Lightning
• Smoke damage
• Explosions
• Wind
• Hail
• Theft
• Vandalism
• Mold
• Volcanoes
• Falling objects
• Snow and ice collapse
• Water damage from plumbing or appliances

How Much Does Renters Insurance Cost?

The average renters insurance premium in 2018 was just $179 per year, or about $15 per month. But actual rates vary by company. Some renters insurance companies are able to offer policies for as low as $5 per month. There are also variations in average premiums by state. For example, Mississippi residents pay an average of $252 per year for renters insurance, while North Dakota residents only pay an average of $126 annually. Your renters premium will be determined by several individual factors, including the coverage limits and deductible you choose, whether you opt for an actual cash value or replacement cost policy, whether you have pets, and where your rental home or apartment is located. It’s also possible to earn a discount on your renters insurance if you bundle the policy with your auto or life insurance policy from the same insurer.

How Much Renters Insurance Do I Need?

In order to assess how much personal property coverage you need, you should create a home inventory. It’s a good idea to use a mobile app or website that allows you to capture and store pictures of your belongings. Record serial numbers for major appliances and electronics as well, and keep the receipts for any new items you buy. Don’t forget to include any items in your storage facility. Once you’ve determined how much your personal property is worth, you can choose your limits for that portion of your policy. The average two-bedroom apartment contains $30,000 worth of belongings. You’ll also want to consider the cost of living in your city when choosing the limits for your loss of use coverage. If you live in San Francisco and your apartment becomes unlivable, you may need to stay at a costly hotel. That means you’ll need higher limits on your policy than the average renter. Depending on the insurance provider, you may choose a flat amount or a percentage of your personal property coverage. Most renters insurance policies come with liability policy limits starting at $100,000. While the lower limit will be sufficient for most people, you should determine your net worth when choosing your personal limit, so that your assets will be protected in the event of a lawsuit.

Does My Policy Include Cash Value or Replacement Coverage?

It’s important to understand how your insurance company will reimburse you after a claim. You can typically choose between an actual cash value (ACV) policy and a replacement cost value (RCV) policy. An ACV policy will only cover the current value of your belongings after depreciation. If you bought a TV five years ago, it’s not going to be worth what you paid for it. An ACV policy will only pay what the TV is worth today. That could leave you without enough money to purchase a new one. An RCV policy, on the other hand, will pay the cost to replace the damaged or stolen item. If your 3-year-old, $1,000 mattress gets destroyed in a fire, the insurance company would cover the expense of purchasing the same mattress brand new. If it’s no longer available, your insurer would pay for you to buy a different model at a similar price. However, be aware that certain valuables have lower coverage limits. These include things like jewelry, musical instruments, electronics, sports equipment, and fine art. Ask about any sub-limits on your policy for these items. You may have a $30,000 limit for personal property damage, but that doesn’t mean your $30,000 jewelry collection will be covered — you may only be reimbursed for up to $1,000 for that particular category of belongings.

What Does Renters Insurance Not Cover?

Renters insurance typically does not cover the following hazards:

• Bed bugs or pests, which is a maintenance cost your landlord would cover
• Property damage to the dwelling, which is covered under your landlord’s policy
• Earthquakes, sinkholes, or flood damage, unless you purchase an add-on to your policy
• Damage or theft of your vehicle, which is covered under your car insurance policy
• Undocumented items that you can’t prove were in the apartment

Will Renters Insurance Cover My Roommate?

Your renters insurance won’t cover your roommate’s belongings unless they are listed on the policy. Ask your insurance agent what it would cost to add your roommate to the policy. You may be able to save money by sharing a policy with your roommate when compared to purchasing two separate policies.

Will My Pets Be Covered?

Most renters insurance policies will cover you under the personal liability section of your coverage if your dog or cat injures someone or damages their property, even if it happens outside of your apartment. You’ll need to disclose that you have a dog when you sign up for the policy. However, dog breeds that are known to be more dangerous are often excluded from renters policies. Commonly excluded breeds include pit bulls, rottweilers, dobermans, german shepherds, boxers, and mastiffs. Your renters insurance policy also won’t cover damage that your pet causes to your own property, so if your cat pees on your sofa or your dog chews up your favorite pair of shoes, your renters policy won’t reimburse you. However, some companies offer a pet damage rider that will cover damage to the property beyond what your security deposit covers.

Does Renters Insurance Cover My Belongings Outside of My Apartment?

Yes. Renters insurance policies cover your belongings when you’re traveling and any time your belongings are outside of your rental. So if your bike is stolen or your laptop is taken from your vehicle, your renters insurance company would reimburse you up to your policy limits, minus your deductible.

What Is a Renters Insurance Deductible?

A renters insurance deductible represents your share of the financial responsibility after a covered peril. So if you have a $500 deductible and a fire destroys $10,000 worth of belongings, your insurance company will only pay out $9,500, and you’ll be responsible for covering the rest. It’s important to choose a deductible you can afford to cover out of your emergency savings.

Do I Need to Purchase Riders?

You may need to purchase riders if you want coverage for certain valuables. You can get a scheduled property rider for items like musical instruments or jewelry if you have expensive belongings and low sub-limits for those categories. If you have home office equipment and earn money from a business, you may also need to purchase an at-home business rider, since your regular renters insurance policy won’t cover those items. You might also consider a pet damage rider if you think your pet might damage the property and an earthquake or flood coverage rider if you live in an area prone to natural disasters. Many insurance companies also offer an identity theft rider that helps cover you in the case of identity fraud.

How Do I Choose a Renters Insurance Company?

Different renters insurance companies may offer you different premiums for the same coverage, so it’s important to compare quotes from multiple insurance providers. Most insurance companies have online quote tools you can use to estimate your price. However, you shouldn’t necessarily opt for the cheapest renters insurance company available — you should do your research and select a company with good ratings and reviews. When comparing insurance companies, identify each company’s financial strength rating from independent rating agencies such as A.M. Best. This will help you assess a company’s financial standing and their ability to pay claims far into the future. You should also look at J.D. Power ratings for renters insurance and research customer reviews on third-party websites. You might also want to investigate whether the company has complaints with the National Association of Insurance Commissioners (NAIC) or the Better Business Bureau (BBB). If you’re most comfortable transacting online, choose a company that has a quick online claims process and other policy management tools. Some companies even have a live chat feature that can be helpful if you have questions. On the other hand, if you prefer to speak with an agent, choose a company with 24/7 customer service hours. Make sure you understand what tools will be available to you when it comes time to file a claim. Finally, ensure the company you choose can provide the coverage you need. If you have a commonly-excluded breed of dog, for example, that may limit your choices. And if you want to purchase riders for specific categories of belongings or for natural disasters, you should check to see if each company you’re comparing offers those add-ons.