dcsimg
Call our licensed agents toll free 844.855.0163 Se habla espanol

Renters insurance: What you need to know

By Karen Aho Posted : 08/13/2015

Renters insurance

Let Insurance.com help you find affordable home insurance now.

Congratulations! You're reading up on renters insurance, widely considered a best buy for the money.

Many tenants assume a landlord's insurance will cover their belongings after a catastrophe, but that's incorrect. Renters insurance typically covers not only your belongings but your liability in many cases, plus things like living expenses if you're homeless after a fire.

Here are more common questions about renters insurance.

Why do I need renters insurance?

Because bad days happen. Sometimes they're your fault. Sometimes they just come at you.

Renters insurance is much like homeowner's insurance. It pays for your personal property that's damaged or stolen. And it provides liability protection for any damage or injuries caused by you, your household family members or your pets, either in or outside the apartment..

Sometimes called apartment insurance, it will also help pay hotel expenses if your unit is temporarily unlivable, say due to fire or water damage.

It differs from homeowners insurance in that it does not cover structural damage. This is also why it's much cheaper.

"Everything that you brought on to the structure is your responsibility," says Mike Barry of the Insurance Information Institute (III). "The landlord's responsibility, when it comes to insurance, is limited primarily to the structure."

How much does renters insurance cost?

Not much. Basic policies can cost the equivalent of one or two six-packs a month. Surveys show that most renters think it costs more than it does.

"I think a lot of people, they look at how cheap it is and they think I'm just trying to add $15 a month to the bill, like it's not important," says Ryan Scruggs, a Farmers Insurance agent in the Phoenix area.

Scruggs sells basic apartment policies for $12 to $20 a month, and home rental policies for $20 to $30 a month. That covers $25,000 in personal property, $5,000 for loss of use, $100,000 of liability, and $1,000 for guest medical.

Rates vary based on coverage amounts, the renter’s credit history, and where he or she lives. Arizona's prices are about average. Mississippi's are the highest, according to a 2012 survey by the III, at $244 a year. South Dakota's are the lowest, at $118.

The national average is $187, or $15.58 per month. Homeowner's insurance, by comparison, averages $1,034.

You may need to pay extra to add flood or earthquake coverage, or to add expensive items that exceed individual limits, such as for jewelry or antiques. These endorsements typically add a few dollars per month.

Will renters insurance cover my laptop in my car?

Yes. Renters insurance covers your personal property even if it's in transit, like in a moving van, or just parked outside the gym.

The catch is that the limit for loss outside the home is typically just 10 percent of the total personal property limit. So if you have $2,500 in personal property coverage, you'll only be reimbursed up to $2,500 for items stolen from your car.

That still beats what your auto insurer would pay: nothing. Car insurance covers only vehicle components -- a built-in GPS or CD player -- not a bike or laptop you've put inside.

How do I buy renters insurance?

Could you, right now, name your possessions and the cost to replace each? Agents say this is what most stymies tenants and it's Step 1 before purchasing a policy: calculating how much insurance you need.

"I think a lot of people, if they stood back to take an inventory of their property, would be surprised by the value," says Charles Caruso, president of the Professional Insurance Agents of New Jersey.

The III’s free KnowYourStuff app can help you create a home inventory and store it online.

Once you know how much you need -- in property and liability -- you can compare policies. Be careful to consider what each covers. Don't just go by the base rate. Some companies advertise policies for as little as $50 a year with a multiple-policy discount, but they provide low medical limits.

Will the insurer cover damage by your pet? Your $10,000 engagement ring? Your roommate's things, too? Damage due to flood insurance? New York City tenants lost a lot when Hurricane Sandy flooded basement storage units.

Your current car insurance company is a good place to start, as most of them also sell renters insurance and offer some kind of a bundling discount.

What isn't covered by renters insurance?

Most of these items usually aren’t covered by standard policy, but you can almost always buy an endorsement. Typical exclusions include:

  • Roommates, unless they're named on the policy. Family and guests are covered, people you're in a business relationship with -- a subletter, an AirBnB guest -- are not.
  • Expensive jewelry, antiques, collectibles, furs or other high-ticket items might be subject to individual limit. A few bucks more can buy you additional coverage.
  • Business equipment beyond a small, set amount. Renters insurance limits coverage for business equipment inside the home, sometimes to as little as $2,500.
  • Certain dogs. Some insurers exclude entire breeds. Others may only include liability for a dog that's passed a behavioral test.
  • Floods, in most areas. Standard policies cover accidental water damage in the building -- a broken water line or overflowing tub - but not the result of heavy rain and flooding. Check about buying a flood endorsement.
  • Criminal behavior. Although insurance covers negligent acts that may result in criminal fines, insurance does not cover intentional criminal acts.
  • Your own medical bills. Liability protection pays other people's medical bills. Trip over your own rug and it's your health insurance that'll pay to stitch up your head.
  • The difference between what your stuff was worth and the cost to buy a new version, unless you ponied up a bit extra for "replacement cost" insurance. Otherwise you'll be reimbursed only for the depreciated "actual cost value," what that 10-year-old, used, leather jacket would have fetched on the market today. Otherwise known as: a lot less.
  • Back rent. Renters insurance will not reimburse you for any rent you may owe the landlord.

Will renters insurance get me a discount on my car insurance?

Buy renters insurance from your auto insurance carrier and, yes, they'll likely cut you a break on the auto. Not because you're suddenly a better driver, but because now you're more likely to stick around, maybe long enough to buy more insurance later, too.

"Insurers know that a customer who has multiple policies with them is less likely to leave to go to a competing insurer," says Chris Hackett, director of personal lines policy for the Property Casualty Insurers Association of America. The multiple-policy discount is a very common means to "reward customers for being loyal, and to try to retain them."

Farmers, for example, will slash 10 percent off both policies, an additional 5 percent if you add life insurance, too. Nationwide will lop 20 percent off the auto, to name a couple.

"If your premium on auto was substantial," Hackett says, "that companion policy discount could be pretty substantial."

Of course, discounts will vary by company and by state.

Based on a survey of rates from six major carriers in every state, commissioned by Insurance.com, the average discount for bundling a renters policy with auto coverage was:

State

Discount

State

Discount

Alabama

4.4%

Montana

2.8%

Alaska

6.6%

Nebraska

2.9%

Arizona

5.4%

Nevada

4.5%

Arkansas

3.4%

New Hampshire

4.1%

California

6.9%

New Jersey

3.6%

Colorado

4.3%

New Mexico

4.6%

Connecticut

5.5%

New York

6.5%

Delaware

4.5%

North Carolina

2.9%

District of Columbia

2.7%

North Dakota

7.6%

Florida

6.6%

Ohio

4.2%

Georgia

7.1%

Oklahoma

3.5%

Hawaii

1.2%

Oregon

6.1%

Idaho

4.2%

Pennsylvania

4.1%

Illinois

4.3%

Rhode Island

1.6%

Indiana

6.5%

South Carolina

3.2%

Iowa

10.2%

South Dakota

3.9%

Kansas

5.9%

Tennessee

6.9%

Kentucky

5.9%

Texas

3.3%

Louisiana

3.9%

Utah

5.4%

Maine

6.5%

Vermont

8.8%

Maryland

5.0%

Virginia

4.8%

Massachusetts

4.7%

Washington

5.5%

Michigan

4.0%

West Virginia

3.7%

Minnesota

7.7%

Wisconsin

5.2%

Mississippi

5.2%

Wyoming

2.8%

Missouri

5.9%

Your landlord may require renters insurance

Many landlords lay down the law and require tenants to purchase renters insurance as a condition of the lease. If you plan to rent, you simply might have to buy insurance, like it or not. Some rental companies go even further and purchase a policy in your name if you don't do it yourself, then bill you for it.

Related Articles on Insurance.com

Quote & Compare

Want to bundle home and auto insurance for potential discounts?

Thanks,
you're all set.

One of our newsletters
should arrive in your inbox
soon - keep an eye out for it!