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Renting a home? Here’s what you need to know about renters insurance.

All renters should purchase insurance for protection of their possessions and for personal liability coverage. (Taylor Glascock for The Washington Post)
7 min

While lenders usually require home buyers to purchase homeowner’s insurance, landlords don’t always demand that renters obtain their own coverage.

Since many financial advisers recommend that renters purchase insurance, we asked some experts for insight into what renters need to know before buying a policy: Madison McGlinchey, a media communications specialist in Boston for Insurify, an insurance quotes platform; Bill Gatewood, a corporate senior vice president and national personal insurance practice leader for Burns & Wilcox in Detroit; and Bedford, N.H.-based Dan Karr, founder and CEO of ValChoice, an insurance ratings and analytics company.

All responded by email, and their responses were edited.

Do all renters need to buy a renters insurance policy?

Gatewood: All renters should purchase an insurance policy for two reasons. First, you need protection for all your personal property in the event of a fire, water damage or other cause of loss. Second, you should have personal liability coverage to protect yourself if sued or found to be negligent in damaging the property of others or creating bodily injury to another person on the property.

Karr: Most people need to buy renters insurance for the following reasons:

· The landlord requires purchasing renters insurance.

· You have personal items such as furniture, collectibles, clothing, etc. for which you wish to be financially protected against damage or destruction.

· In the event someone is injured at your residence, you wish to have protection against legal liability created by the injury.

· If you were forced to temporarily live somewhere else, it would be a financial burden. Therefore, you wish to have your living expenses covered in the event your residence becomes uninhabitable.

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What does renters insurance cover?

McGlinchey: A renters insurance policy protects you and the belongings in your rented property and protects you from liability claims. If an unexpected loss occurs on your property, renters insurance can protect you financially. This loss could be from theft, vandalism, a fire or any other damaging incident caused by an outside force.

Karr: Renters insurance policies generally cover personal property up to the value of the item or the limit of the policy, whichever is less. They also provide legal liability coverage which protects the renter from someone holding them financially responsible for costs associated with an injury to them. These costs can include both medical bills as well as loss of income on the part of the injured person. Loss of use coverage protects the renter against the financial costs of needing to find another place to live when the residence becomes uninhabitable. The protection can include housing costs, moving costs and living expenses.

What does renters insurance not cover?

McGlinchey: In many cases, “acts of God,” such as damage from an earthquake or sewage backup, are not covered in a standard renters insurance policy. Certain special items, like artwork and antiques, are also not covered and may require additional insurance. And, of course, damage to your property caused by your own negligence or carried out intentionally is not covered by renters insurance.

Gatewood: If you are a renter living in a flood-prone area, you can expect your policy to not include flood coverage. In general, a renters policy will contain the same exclusions as a standard homeowners policy.

Karr: Renters insurance covers costs based on a “peril.” For example, some policies will exclude dog bites from liability claims. Not all rental insurance policies are the same so renters need to take care to look for “covered perils” and “excluded perils.” Other items not covered include damage to personal property due to pests or a roommate’s property.

For items that are covered, renters need to be sure to understand both deductibles and claim limits. Deductibles require the renter to pay some of the cost of the damaged items. For example, if a renter has a $5,000 claim and a $1,000 deductible, the insurance policy will pay $4,000. Claim limits are a maximum amount that will be paid for specific types of claims. For example, if the renter has $3,000 worth of jewelry, but the policy has a limit of $2,000 for jewelry, the insurance company would cover a limit of $2,000, minus the deductible amount.

How do you calculate how much renters insurance to buy?

Gatewood: You want enough coverage to replace all of your personally owned belongings. This not only includes large items like furniture and wardrobe, but all other items you own like pots and pans, dishes, linens and electronic equipment. It adds up quickly and most people underestimate the amount of money it would take to replace everything they own. You want to have enough liability insurance to protect your assets against a judgment. It is standard to carry $100,000 in coverage, but you can purchase options of $300,000 and $500,000. Liability insurance is inexpensive — we recommend purchasing the largest amount you can afford.

McGlinchey: Understanding your unique living situation — roommates, pets, location — will also help you determine your renters insurance needs.

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How much does renters insurance cost on average?

McGlinchey: The national average for renters insurance is $15 per month. These prices can vary based on your living arrangement and the insurance company.

Karr: Significant items affecting rates include safety, with high crime areas costing more; the age of the building, with renters insurance costing more in old building; and the distance from the nearest fire station, with a higher rate for a greater distance.

How can renters save money on their insurance?

McGlinchey: Renters may qualify for certain renters insurance discounts, which will lower their monthly rate. For instance, a tenant may equip their apartment with deadbolts, lowering the likelihood of filing an insurance claim due to a burglary. Furthermore, most insurers will provide a discount if they bundle their renters insurance with another one of the insurer’s policies, such as auto insurance.

Gatewood: Find an insurance professional to help you with this process and shop around, because rates vary by company. Take the highest deductible you can afford, because you’re less likely to make claims. You do not want to risk losing your insurance by turning in smaller claims. You also end up saving money with a higher deductible. Pay your bills on time. Most insurance companies will check your insurance score, which is greatly impacted by your credit history. The better insurance score you have, the lower your rates will be.

Any other tips?

McGlinchey: Insurers vary in how they assess your risk profile, so renters should consider comparing quotes from a few providers and compare their offerings and prices before buying a policy.

Gatewood: Renters insurance is one of the most under-purchased forms of coverage — many studies show more than 50 percent of renters do not have insurance. Carefully read your lease agreement as your landlord may require renters insurance.

Karr: Insurance isn’t all about price. If a company won’t pay a valid claim, it doesn’t matter how cheap the insurance was, it was a waste of money. To get a value measurement (claims handling, service and price) on any insurance company, click this link and get a free report on that company. The report will say it’s for homeowners’ insurance. That’s fine. Renters insurance is just a slimmed down version of home insurance.