How Does Renters Insurance Work
If you experience a covered loss in your rented space, renters insurance can help to cover the associated costs. The amount covered will depend on the type of loss that occurred and the amount of coverage you have.
There are two types of coverage options under a typical renters policy: Actual Cash Value coverage and Replacement Cost coverage. Heres the difference between the two:
- Actual Cash Value coverage will reimburse you for the value of the items at the time of the damage or loss.
- Replacement Cost coverage covers the cost it takes to replace the items lost or damaged.
Renters Insurance Coverage Guide
Renters insurance covers most of the same things as a home insurance policy, with the exception of the building itself. It will protect your personal property anywhere in the world and protect you from personal liability claims.
Many tenants assume a landlord’s insurance policy will cover their belongings if theres a fire, a burglary or any other loss. In truth, your landlord isnt responsible for anything you own. Their policy covers the building itself and things like the appliances, but your personal property isnt covered at all. Thats why buying renters insurance is important.
A renters insurance policy, also called tenant insurance, is a home insurance policy specifically designed to protect people who rent. It protects your personal property from a long list of perils. Renters insurance coverage also includes liability protection in case youre responsible for injuries to someone else or damage to their property, and it will pay for living expenses if you are forced out of your home due to a covered peril.
Read on to get the details on what renters insurance covers, how to get renters insurance and what you can expect to pay for coverage.
Is Renters Insurance Required
Most states require drivers to carry car insurance, and mortgage lenders require borrowers to obtain homeowners insurance but what about renters insurance?
Although renters insurance is not required by state or federal law, it may be required by the terms of your lease. Many landlords require their tenants to get renters insurance. This requirement can help landlords and their tenants avoid costly disputes when a renters belongings are lost, stolen, damaged or destroyed.
Most of all, having renters insurance protects you, the tenant. Even if your landlord has insurance, you will be responsible for your own belongings. Your landlords insurance is meant to cover the building itself and items that belong to the landlord. It may also include liability protection for accidents that occur on the property. However, it will not cover your personal items.
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What Is A Home Inventory
An account of all of your possessions that your renters insurance policy could protect is known as a home inventory. This is useful when claiming since some insurers could ask for evidence of possession of a particular item.
You may take pictures of goods and enter data about them directly from your smartphone using a variety of home inventory applications.
Other Things Covered By Renters Insurance
In addition to the four primary coverages, renters insurance provides supplementary coverages.
- Debris removal: Renters insurance will often help cover some of the costs of debris removal after a covered loss. This is covered under personal property limits.
- Building additions or alterations: If you’ve funded upgrades or alterations to your rental unit at your own expense, renters insurance may cover damage to it from a covered event. Coverage for building additions will generally be limited to a certain percentage of your personal property coverage limits, such as 15%.
- Renters insurance may cover losses to the policyholder resulting from the theft and fraudulent use of credit cards or forgery of checks. Coverage is usually up to a limited amount, such as $1,000.
- Food spoilage: If a power failure in your apartment results in refrigerated food loss due to spoilage, renters insurance policies will often cover you under personal property limits.
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Assess Your Insurance Needs
When you apply for renters insurance, it’s a good idea to photograph or digitally video everything you own. For expensive items, make sure to write down any serial numbers that could help verify your claim.
You can even take it a step further and enter the items into a spreadsheet along with an estimate of each items value. Although these steps take some extra effort, you should do them for two reasons.
Add Living Expenses Coverage
Additional Living Expenses coverage pays your temporary living costs if a disaster makes your rental property uninhabitable. Note the word additional meaning that you will be reimbursed for the additional daily living expenses of temporary housing beyond your normal living expenses. ALE typically covers the additional cost difference for a hotel, temporary rentals, restaurant meals, and other expenses you incur while your rental home is being repaired or rebuilt. Coverage is typically a percentage, i.e., 30%, of your personal property coverage. It also often has a time limitin other words, one year.
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Additional Living Expenses Coverage
Additional living expenses coverage is also called loss of use. If your residence is not currently livable due to a covered claim, ALE coverage will pay for you to stay somewhere else. If its only a few days, it might pay for the cost of a hotel room. However, if its a large claim , it will pay for you to get a temporary rental elsewhere.
Depending on where you live, it can be costly to rent a hotel room or temporary housing. Check your renters insurance policy to see how much coverage you have for additional living expenses or loss of use, as insurance company limits can vary.
Additional living expense coverage under your renters insurance policy only applies if your apartment or residence is uninhabitable due to a covered peril.
Why Should I Get Renters Insurance
Renters insurance can save you money in the wake of an accident, robbery or natural disaster. Here are a few reasons to consider renters insurance:
- Its surprisingly affordable. Compared to other policies, such as homeowners insurance, renters insurance is a bargain. Lemonade offers some of the cheapest renters insurance policies with prices as low as $5 per month depending on your location, the age of the property and other factors.
- It costs less than replacing your belongings. The cost to replace your belongings after an accident, disaster or theft will cost far more than you would spend on renters insurance.
- It can pay medical and legal bills. The liability insurance included in your renters policy will help pay the medical and legal bills you might face after someone else is injured on your property.
- It can help you save on car insurance. Most insurance companies offer a multi-policy discount for those who bundle their auto insurance with renters insurance.
- It often pays for itself. Thanks to generous multi-policy discounts, you may be able to add renters insurance without seeing a change in your insurance premium.
- It protects your savings. After a covered event, your renters insurance policy will help pay for expenses that might otherwise drain your savings account.
- It may be required by your landlord. Some landlords require their tenants to purchase a renters insurance policy as a condition of their lease agreements.
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How Much Is Renters Insurance
For as low as $5 a month, renters insurance from Liberty Mutual is a surprisingly cheap and affordable way to keep the things you love safe and protected.
However, how much you pay depends on a number of things, including where you live, the value of your belongings, and how much coverage you want. Renters insurance shouldnt be one-size-fits-all, thats why its so important your personal needs are accounted for. When you get a renters quote with Liberty Mutual, well make it easy to understand the coverage thats right for you, so you only pay for what you need.
Does Renters Insurance Cover Roommates
If you have a renters policy, your roommates things are not automatically covered unless theyre actually listed on the policy. However, its important to note that insurance laws vary by state, which means that some insurance companies can allow multiple roommates names to be listed on one insurance policy, where other states dont.
There are some exceptions of course, so its always a good idea to talk with your agent to get all the rules on your specific policy. Get the 411 on roommates and renters insurance.
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Who Needs Renters Insurance
Anyone who rents their home or apartment needs renters insurance. If you care about your belongings and cant afford to replace them if theyre damaged, you should consider renters insurance. Similarly, if you cant afford a lawsuit if your dogs leash trips your neighbor, or a hotel room for a month if your home burns down in a fire, you need renters insurance.
Your landlord may even require you to get a renters insurance policy as part of your lease. While your building is covered by your landlords policy, they have no responsibility to replace your belongings if the entire complex is destroyed. Renters insurance can protect you.
What Renters Insurance Doesnt Cover
So what does renters insurance not cover? Quite a few disasters aren’t covered by standard renters insurance policies, including:
- Earth movement and flooding: Unless you add endorsements to your policy, natural incidents of flooding, earthquakes, and sinkholes are likely to be excluded by your renters insurance.
- Pest damage: Incidents of bed bugs or damage caused by rodents or other vermin are typically excluded by your renters insurance also. Insect infestation and removal are not typically covered by renters insurance.
- Car theft or damage: Incidents of vehicle theft or damage to your car are covered under your car insurance policy and therefore excluded by renters insurance.
- Roommates possessions: Often excluding a spouse or partner, your roommate’s possessions are typically excluded by renters insurance unless this person is specifically listed on your policy.
What is not covered by renters insurance is typically standard across most policies, but your coverage may vary. That’s why it’s helpful to review your coverage with your independent insurance agent from the beginning, so you’ll be prepared if an incident isn’t covered.
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How Renters Insurance Is Priced
These factors and more can impact your cost for renters insurance:
- Location: A safer area with less crime generally means a lower cost.
- Coverage limits: Selecting the lowest limits that accurately cover the value of your belongings and assets can help lower your cost.
- Number of units in your building: More units often means a lower price.
Renters Insurance Covers Costs When Your Apartment Isn’t Livable
If your apartment were to become unlivable, your renters insurance will help pay for the increased costs of living out of home through additional living expenses coverage. Like personal property coverage, ALE only applies if your dwelling becomes unlivable due to a covered lossâin other words, one of the perils covered by your renters insurance policy. This coverage is called loss of use.
If your apartment in San Francisco or Manhattan burned down, it would be costly to live in a hotel in one of those cities. Eating out every night would add to the bill as well. If you have renters insurance, these expenses are covered up to the limits of your policy. If you live in an expensive city, it may be prudent to increase the limit on this part of your policy.
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How To Save Some Money On Renters Insurance
There are strategies to save some money even though renters insurance cost is considerably less than home insurance.
Here are a few simple methods to save expenses and medical payments, but keep in mind that its crucial to consider a companys other qualities in addition to pricing, such as customer support or claims management:
Does Renters Insurance Cover Storage Units
Whether your items are covered if they are damaged, stolen, or destroyed while in your storage unit depends on the specifics of your renters policy.
Some insurance companies do not cover personal items in a self-storage unit, while other companies will extend limited coverage. You can buy additional insurance coverage through the storage facility if it is offered, or through your insurance company.
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Other Events Covered By Renters Insurance
Renters insurance also has some additional coverages that could come in handy. Credit card and check forgery coverage provides protection if someone forges a check or uses your credit or debit card. If there is a power failure or mechanical breakdown that causes perishable food to spoil, there could be some coverage to reimburse you for the food loss. If debris has to be removed after a covered claim, there may be some coverage in your renters insurance policy. If youve made changes to the building that are damaged due to a covered loss, you may be able to get reimbursed for what you paid for additions or alterations.
MoneyGeek broke down all the details on the perils and property types that may or may not be covered by renters insurance:
- Bed bugs or other pests
- Damage to or theft of car
- Damage to or theft of your roommate’s possessions
If you live in a place where floods are common, you can get a separate flood insurance policy to cover your personal property.
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Whats The Main Difference Between Homeowner And Renters Insurance
With one big exception, homeowners insurance and renters insurance secure your valuables, and the property itself is also covered by homeowners insurance. On the other hand, renters insurance only covers the valuables you own, not the home itself.
You often receive liability insurance, but the policy does not cover the flat.
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What Doesnt Renters Insurance Cover
Just like with homeowners insurance, a standard renters insurance policy wont cover everything. Here are some things your renters insurance policy wont cover:
- Flooding Flood insurance is excluded from standard coverage. If you live in an area prone to floods or hurricanes, you should strongly consider getting flood insurance, especially if you have a ground-floor unit where water damage is likely.
- Earthquakes Earthquake coverage is excluded from standard renters insurance policies. You can typically add it on as a rider to your existing policy or get a separate policy if you live in an area where theres a higher chance of earthquakes.
- The physical structure of your rental Your rental unit itself isnt covered by your renters insurance. If your roof collapses, your landlords insurance should cover your unit, not your renters insurance policy.
- A home that you own If youre a renter who also owns a home elsewhere, your renters insurance policy wont cover the home you own. Youll need to have a homeowners insurance policy in place for the home in addition to a renters insurance policy for the place you rent.
What Does Renters Insurance Cover
A renters insurance policy offers you coverage for the loss or destruction of your personal belongings in the event of a covered peril such as:
- Impact by a vehicle
Renters insurance may also cover you if:
- You are forced to temporarily move out of your home: In the event your home becomes unlivable due to damage caused by a covered instance such as a fire or vandalism, renters insurance can help cover the cost of alternative living arrangements while your home is repaired or rebuilt.
- A person is injured on your property and requires medical attention: Personal liability coverage is designed to protect you, as well as other individuals who visit your home, if an accident were to occur. This type of coverage will help pay for medical costs and legal fees that you could end up incurring.
- Items you keep inside your car are damaged or lost: Depending on your renters insurance policy, you may be covered for belongings that you keep inside your car. Note that this coverage does not include equipment or systems installed in the car.
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