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RENTERS Insurance
RENTERS INSURANCE INSIGHTS

This renters insurance guide explains how to choose and use renters insurance, how to find the best renters insurance, and how to get the lowest renter insurance rates.

When you look for a place to rent, you have a lot on your mind – location, amenities, lifestyle, monthly payment, moving, buying furniture. Renters insurance is probably not high on the list. But it should be – many landlords require tenants to carry renters insurance, and it is a good idea even if they don’t.

Renters insurance offers a relatively inexpensive way to protect your worldly goods, at home and away. Renters insurance doesn’t just protect your possessions – its liability coverage may protect your future earnings as well.

This guide explains how to choose and use renters insurance, how to find the best renters insurance, and how to get the lowest renter insurance rates. We'll cover the following topics and answer these questions:

  • Average cost of renters insurance
  • What is renters insurance?
  • What is the difference between renters insurance for the “full replacement cost” vs renters insurance for the “cash value”?
  • Renters insurance exclusions
  • Renters insurance liability
  • Renters insurance by life stage
  • How to file a renters insurance claim
  • State renters insurance requirements
  • Cost of renters insurance by state
  • How do I buy renters insurance?
  • Landlord renters insurance resources
  • How much renters insurance should a landlord require?
  • How much renters insurance should you buy?

What is the average cost of renters insurance?

The average cost of renters insurance is $326 a year, or about $27 a month. That’s the national average renters insurance cost for a policy with recommended coverage levels of $40,000 for personal property, with a $1,000 deductible and $100,000 of liability protection, according to an Insurance.com renters cost analysis.

Overall, you can expect renters insurance cost per month to range between $20 and $30, depending on the location and size of the rental unit, and how many possessions you have.

Whatever the price, renters insurance is a bargain. For example, the average cost of a renters policy pales compared to the average premium of $2,305 for homeowners insurance.

Several years ago, the Insurance Information Institute estimated that only 37% of renters had renters insurance, while 97% of homeowners had homeowners insurance. Many tenants appear to skip the coverage because they falsely believe that their belongings are protected by their landlord's property and liability insurer.

What is renters insurance?

Renters insurance is a policy that can make you whole when something goes awry and you suffer damages, or you are responsible for damages to someone else or their property. The policy can be broken down into three main types of coverage:

  • Personal property. This covers any damages that occur to your personal belongings due to fire, theft, some types of water damage and many other causes.  
  • Liability. This covers damages that occur to others and that are your fault, such as damage to another person’s property or physical well-being. The latter might include your dog biting and injuring a friend, or a neighbor slipping and breaking a leg due to water on your kitchen floor.
  • Additional living expenses. This provides reimbursement in the event that your rental unit is so damaged by an event – such as a fire or tornado – that you need to live somewhere else while the rental is being repaired.

The type of renters insurance policy you purchase will determine the extent of your coverage. For example, some policies offer broad form coverage, with protects  personal belongings against a host of specific, named events. Most people purchase this type of policy, according to the National Association of Insurance Commissioners (NAIC).

By contrast, comprehensive form coverage protects you from most events unless they are specifically excluded by the policy. This type of coverage tends to be more expensive.

What is the difference between renters insurance for the “full replacement cost” vs renters insurance for the “cash value”?

When you purchase a renters insurance policy, you have two choices for how you want to be reimbursed when you file a personal property claim:

  • Full replacement cost. This type of coverage reimburses you with a check in an amount that allows you to replace a stolen or damaged item with a brand-new version of that item. For example, if fire destroys your 5-year-old TV, you will get a check for the amount that it will cost you to buy a brand-new equivalent TV at today’s prices.
  • Cash value. This type of coverage – often called “actual cash value” -- reimburses you for the depreciated value of the item that is lost or damaged. So, that same 5-year-old TV will still get you a check for a new TV, but minus the depreciated value of your original TV. Since an older TV will not be worth as much as a brand-new TV, you will get a much smaller check than you would with full replacement cost coverage. That means you may have a harder time replacing that lost TV with the funds from your insurance payout. The advantage of this policy, however, is that it is about 10% cheaper than full replacement cost coverage, according to the Insurance Information Institute (III).

Renters insurance exclusions

Renters insurance policies don't cover everything that can happen, or everything you own, but they do take care of the most common mishaps. Here are perils not covered by standard policies:

  • Flood damage
  • Earthquakes
  • War
  • Nuclear hazards
  • Government action
  • Losses from intentional acts (by the insured) or neglect
  • Mold and rust

In addition to exclusions, renters insurance policies also limit coverage for specific categories of possessions – lost or stolen jewelry coverage, for instance, may be capped at $2,500, and protection for computers and electronics may also be subject to limits. Artwork may not be covered at all.

If you have valuable items with no coverage or limited coverage, you’ll have to purchase a special rider or endorsement to protect yourself from these losses. “Scheduled” personal property refers to items with limited coverage under a standard policy; you establish a “schedule” -- a list of items and the amounts that will be paid if they are lost or damaged -- as an addendum to your policy.

In addition, most renters insurance policies offer cash value reimbursement. If you want full replacement value, that’s extra.

Finally, if you do any sort of business out of your home – Etsy sales, baby-sitting, etc., consider purchasing additional protection, such as incidental business liability and business merchandise coverage.

More on renters liability insurance

Perhaps the most underrated benefit of renters insurance is its liability coverage. Even if you don’t have costly possessions, an expensive lawsuit could drain your finances for years. Your liability coverage protects you from lawsuits -- both the cost of your legal defense and for judgments or settlements up to your policy limit.

The low end of the liability coverage is about $100,000, and many experts recommend purchasing at least $300,000 in protection. If you have a high income, you might want to extend this coverage with an umbrella policy -- $1 million of extra protection costs about $200 to $350 per year.

Your policy also likely provides $1,000 to $5,000 of no-fault medical coverage.  So, if a visitor is injured on your premises, you can submit the medical bills directly to your insurer for payment.

Renters insurance by life stage

Whether you're a student, young family, established careerist or retiree, renters insurance can protect your belongings and your current and future income. However, varying life stages require that you structure your coverage differently.

Renters insurance 2

For example, a typical student whose belongings consist of extremely used clothing and a four-year-old laptop has little to lose and is an unlikely target for lawsuits. According to Consumer Reports, there are companies that specialize in renters insurance for students, featuring policies with lower rates, coverage limits and deductibles.

Children in the home increase the risk for accidents, and young families should make sure they have plenty of liability coverage.

Careerists often have expensive possessions and significant income to protect. When your net worth and income improve rapidly, you should re-evaluate your renters insurance coverage every year to make sure your protection keeps pace with your wealth. Once your income reaches a comfortable level, and you’ve achieved significant net worth, you’ll likely want more coverage than most renters insurance can provide – policies usually max out at $300,000. For excess liability, you’ll need an umbrella policy – liability protection that kicks in once your renters or auto insurance protection is exhausted.

Retirees are the group most likely to have acquired costly possessions. If you’ve accumulated expensive furniture, high-end jewelry or unique collections over time, make sure your property is covered with higher limits and applicable special endorsements or riders. In addition, if your net worth is $300,000 or more, it’s time to consider an umbrella policy for excess liability coverage. (Many experts recommend liability coverage of two-to-five times your net worth.)

How to file a renters insurance claim

If you experience a liability or a loss, you’ll want to file your claim promptly, fill it out completely, and get reimbursed as quickly as possible. Here are the steps you’ll take to make that happen.

  1. Report the incident to your landlord. It’s almost certainly mandated by your policy, and may also be required by state law.
  2. Report the incident, if required, to the police or other authorities. If the damage or loss is the result of illegal activity, such as theft or vandalism, you’ll need to file a police report.
  3. Document damages with video, photos, lists of lost or damaged property, receipts, appraisals or valuations of property. Keep damaged property until a claims adjuster sees it.
  4. Contact your insurer. Most policies give you just 48 to 72 hours to file a claim, so time is of the essence. Have your policy number and a description of the incident and damages when you call.
  5. Complete your claim forms, and submit them so your insurer can start its investigation. The amount of time to get your claim paid depends on the extent of the damages and the complexity of the incident. Some claims may only take a few hours while others can take longer. Your agent should be able to give you an estimated claim processing time.

 

State renters insurance requirements

Unlike auto liability coverage, required in nearly all states, renters insurance is not mandated anywhere. The government does not mandate that you protect yourself from theft, property damage or liability, even if it’s a good idea.

Landlords, however, often require renters to buy insurance. It’s a common misconception among tenants that landlord’s property insurance protects their property. When they discover their mistake, some unhappy renters take legal action to try to force their landlord to pay for damage.

To prevent these lawsuits, landlords can demand that tenants carry their own insurance protection. In fact, landlords are only held responsible for losses when it’s their fault – for example, if the property itself was unsafe, causing an injury, or if it was unsecured, inviting theft.

Cost of renters insurance by state

The state in which you live has a big impact on how you'll pay. While the U.S. average renter rates ranges from about $230 to $440 depending on the amount of coverage, according to an Insurance.com 2020 rate analysis, some states are subject to more expensive perils, such as hurricanes and blizzards, while others have historically experience fewer natural disasters. 

Here are average rental insurance costs by state, so you have an idea what you'll pay. Enter your state in the search field to get your results. Rates are for common coverage levels of $20,000, $40,000 and $60,000 in personal property coverage, with liability limits of $100,000 and $300,000, all with a $1,000 deductible.

State $20,000/ $100,000 40,000/ $100,000 $40,000/ $300,000 $60,000/ $300,000
Vermont$121$160$169$218
Wyoming$136$165$183$218
North Dakota$133$190$207$258
Alaska$142$195$218$266
Hawaii$148$198$220$281
Washington$158$206$223$281
South Dakota$144$214$231$305
Utah$245$330$244$296
New Hampshire$154$227$247$324
Iowa$224$322$249$321
Oregon$174$232$249$314
Wisconsin$176$252$268$349
Maryland$179$252$269$351
Montana$180$259$280$367
California$205$260$281$338
Pennsylvania$179$261$286$380
Colorado$203$272$292$358
North Carolina$157$288$297$419
DC$209$283$300$395
Idaho$214$287$307$404
Nebraska$214$293$307$399
Florida$192$295$313$410
Maine$191$299$316$429
Virginia$202$302$321$428
Indiana$221$306$324$415
Minnesota$349$312$324$421
New York$209$304$328$430
West Virginia$227$314$328$406
Illinois$230$313$330$417
Arizona$229$308$336$428
New Jersey$223$322$350$451
Tennessee$219$325$350$465
Nevada$242$338$355$449
Connecticut$222$334$359$486
New Mexico$243$338$359$458
South Carolina$245$359$381$495
Delaware$252$371$383$496
Missouri$263$369$386$484
Kentucky$274$367$388$473
Rhode Island$248$377$392$515
Texas$237$379$396$545
Kansas$262$391$404$543
Ohio$262$384$405$522
Arkansas$295$410$428$544
Massachusetts$255$425$443$613
Michigan$334$506$525$678
Georgia$330$511$536$706
Alabama$359$523$542$693
Oklahoma$361$543$561$632
Louisiana$388$571$600$672
Mississippi$374$579$600$800
National average$228$326$341$438

*Methodology: Insurance.com commissioned Quadrant Information Systems to provide renters insurance rates for nearly every ZIP code in the country from up to six major insurers. The applicant profile is of a married, 35-year-old who has filed no claims in five years. Coverage includes medical payments coverage of $5,000, contents replacement and loss of use.

How do I buy renters insurance?

Knowing how much coverage you need and comparison shopping are the keys that will help you find the right renters insurance policy at the best price.

To discover how much personal property coverage you need, many experts suggest compiling a written inventory of your belongings and how much it would cost to replace them. This should help you zero in on the amount of coverage you need.

In additions, many experts suggest you get at least $100,000 in liability coverage – typically, the minimum offered by most policies. Other experts suggest getting $300,000 in coverage.

There is no “one size fits all” answer when it comes to liability protection. So, think about your assets and how much you can afford to lose. If someone were badly injured – or worse, killed – due to your own negligence and you were sued, you could be liable for a settlement of hundreds of thousands of dollars, or even $1 million or more.

With that in mind, even $300,000 might not be enough coverage. You might consider purchasing an umbrella policy that will offer an extra $1 million of coverage or more.  

Once you know how much coverage you need, begin comparison shopping through a renters quote comparison site, such as the one at Insurance.com. Comparing insurance quotes is the best way to save money when purchasing renters insurance.

Another way to find a good insurance company is to ask family and friends to recommend the insurer they have used.

Landlord’s renters insurance resource

Landlords can reduce the risk of tenant-initiated lawsuits by requiring renters to purchase their own insurance. If your tenant has no other way of recovering from  losses -- even if property damage was the tenant's fault -- experts say he or she is more likely to sue you for damages.

Additional living expenses (ALE) coverage allows tenants to stay in a hotel if the premises become uninhabitable, which can help you retain a good renter. Without ALE coverage, a temporarily-displaced tenant could move away. With it, your renter has a place to live until the home or unit is habitable again. This makes him or her less likely to move out.

Finally, tenants without liability coverage can get their landlord dragged into lawsuits. If the tenant’s carelessness causes an injury – for instance, her dog bites her guest, or his visitor trips over his skateboard – the landlord can be targeted by the accident victim if the tenant is uninsured. Requiring tenants to carry liability coverage lets landlords avoid claims on their own insurance policies, keeping rates lower.

What insurance should landlords carry? Landlord insurance coverage has three categories.

  1. Dwelling coverage for the structure in case of weather-related and other perils, such as mold, fire or vandalism.
  2. Personal property coverage for damage to items left on the premises for tenant use, such as appliances and furniture, or for maintenance, such as garden equipment and snow blowers.
  3. Liability coverage for injuries occur on the rental property, caused by your negligence.

Standard policies reimburse you for the actual cash value of lost or damaged property. If you want to receive the full replacement cost, you’ll have to pay extra. Guaranteed replacement cost coverage allows you to repair or rebuild even if the cost of doing so exceeds the item’s original cost. Other coverage you might want to add includes:

  • Water damage protection for the building or anything inside it – applies to sewer backups, flooding and other natural disasters not normally included in basic policies.
  • An umbrella policy, especially for landlords with multiple properties or high net worth. Umbrella policies provide millions of dollars in liability protection quite cheaply. This coverage kicks in only after your standard landlord policy benefits are exhausted.
  • Renter default protection reimburses you for lost rental income if your tenant fails to pay the rent, is evicted with a court order or dies unexpectedly.

How much renters insurance should a landlord require?

Many landlords insist that renters purchase a renters insurance policy before moving into their unit. This can be wise.

On a practical level, it means that tenants who suffer loses will be reimbursed for the loss. That makes it more likely the renter will be able to continue to pay rent -- always a good thing for landlords.

In addition, requiring tenants to get insurance can eliminate other potential headaches, such as the possibility of disputes that could arise if a tenant's belongings are damaged, or they are involved in a liability claim. 

Many landlords insist that their tenants carry at least the minimum in liability coverage, usually $100,000. But some landlords will require more, such as $300,000. The amount you require will depend on your appetite for risk. The more coverage a tenant has, the less likely you are to become involved in a lawsuit if someone suffers serious damages as a result of the tenant's negligence.

It’s important to note that in some states, the maximum you might be allowed to require is $100,000.

State Farm says the average person has more than $35,000 worth of belongings. So, that may be a good gauge for how much personal property coverage a renter should have.

But ultimately, tenants will decide how much insurance they wish to take on to cover their possessions.

How much renters insurance should you buy?

How much coverage to buy depends on the value  personal items you own and if you have a lot of savings and financial assets. Renters insurance is primarily comprised of personal property coverage and liability coverage. You should have enough property coverage to replace your possessions and at least $100,000 in liability insurance, though most experts recommend $300,000 if you have  a lot of assets.

For scheduled personal property, such as jewelry, plan on paying about $15 a year for every $1,000 in protection.

Personal finance experts recommend that you take an inventory of your personal property and estimate its value.

Note the total values that exceed standard renters insurance limits – things like collectibles, artwork, jewelry and electronics. Use a checklist like the example below to pinpoint holes in standard coverage, and decide if you want to purchase additional insurance.

Decide if you want replacement value coverage, or if cash value is sufficient. Finally, determine your need for liability coverage. Experts recommend covering two-to-five times your net worth, adjusting up or down depending on your risk profile (Aggressive dog? Home-based business? Swimming pool?) and your income.

Renters, like homeowners, have possessions as well as income to protect from damage, theft or liability. Fortunately, renters insurance and umbrella policies provide a lot of coverage at a relatively low cost.