Do I Need Renters Insurance? And How Much Should I Get?

You'll only need renters insurance if your landlord or your building requires it. While not required otherwise, anyone renting any type of residence long-term—be it an apartment or single-family home—should strongly consider purchasing a renters insurance policy. For most tenants, renters insurance is an invaluable tool to protect against potentially devastating financial consequences. But wealthy tenants also have a need for renters insurance as a way to to mitigate the financial cost of damaging, unexpected events.

When Is Renters Insurance Required?

You will only be required to get renters insurance if your landlord or property management company requires that tenants have it. Landlords might make renters insurance mandatory to limit the risk that tenants will come after them for personal property damages or liability costs. It's not uncommon for a landlord to require renters insurance, but fortunately, the best renters insurance companies make it easy to compare quotes online and purchase a policy.

My Landlord Doesn't Require Renters Insurance, Is It Worth It?

While an increasing number of landlords and building management companies require tenants to have renters insurance, most people are not required to purchase it and decide to forgo buying a policy. But even if renters insurance isn't necessary in your apartment, we think that anyone who rents the home they live in should shop for a renters insurance policy. The personal property, liability and loss of use coverages the policy provides are valuable for reducing the financial impact of sudden or unexpected events that damage your personal belongings or leave you legally liable.

Renters insurance policies cover...

  • Personal property damage: If your personal belongings are damaged are destroyed by an event covered by your renters insurance, your insurer will cover the cost of the damage up to your policy's limits.
  • Personal liability: Protects you against the legal liability of an accident in your residence, such as your responsibility for medical bills and lost wages if someone is seriously injured as a guest at your place.
  • Loss of use: If your residence becomes uninhabitable due to a covered event, your renters insurance policy will cover expenses exceeding your normal living expenses.
  • Medical protection: Pays for reasonable medical expenses for someone injured in your residence.

Arguably, the lower someone’s income, the more they might need renters insurance—especially the liability and loss of use coverages. Liability damages, especially, could be a crippling financial burden for someone who does not have enough savings to cover the costs. But incidents or events that lead to those types of losses can happen to anyone. No matter how much someone earns, they could be found liable for whatever the cost of damages might be and in some cases, those costs can be quite high. Below are some examples showing how renters insurance is generally a useful purchase and worth the investment, no matter who you are.

Renters with a pet: Consider a tenant without renters insurance whose dog bites someone. Typically, a policy’s liability coverage would cover any damages (including medical bills) associated with a dog bite. But without it, they would have to pay for those out of pocket. The average cost per dog bite claim in the U.S. is approximately $35,000 an amount that could be financially crippling for many renters and a huge cost for most.

Wealthy tenants: Even wealthy tenants with significant savings can take advantage of the benefits of renters insurance. Wealthy renters might be able to afford paying liability claims and minor property damage out of pocket, but in extreme events tenants could be uninsured for extensive damage costs to their personal belongings. These costs could be covered with a comparatively cheap renters insurance policy. For example, the cost of a dog bite claim (mentioned above) might not scare a wealthy tenant, but the possibility of a fire destroying hundreds of thousands of dollars in personal property should. Without renters insurance, any belongings damaged or destroyed for any reason would have to be replaced out of pocket. The purpose of renters insurance is not just to prevent financial ruin but also to save you money from unexpected disasters. If a wealthy tenant purchases renters insurance with an appropriately high limit to cover the damages, their only additional expense will be the cost of their deductible when making a claim.

Renters forced out of their homes: A renters insurance policy can also help tenants who are unprepared for a calamity that renders their home uninhabitable. In the event your apartment or home is deemed uninhabitable due to a covered event—smoke damage, for example—you would be stuck paying out of pocket for any living expenses exceeding their typical spending levels if they didn’t have renters insurance. With renters insurance you will have loss of use coverage, which covers the costs of living exceeding your normal expenses—such as hotel stay, food and special transportation—you need to continue to live until you return home or find a new permanent residence.

College students living off-campus: Many college students should also consider buying renters insurance. Anyone living in a college or university dormitory is likely covered under their parents homeowners or renters insurance policy. But every college student that lives off-campus needs their own policy.

How Much Renters Insurance Do I Need?

When deciding how much renters insurance is enough, the main decision you will be making is setting the limits of your personal property coverage and your liability coverage. We recommend getting enough personal property coverage to cover the value of your belongings and at least $100,000 in personal liability coverage. These two features cover tenants' largest financial exposures and will generally be the main drivers of the cost of their policies.

How Much Personal Property Coverage Do I Need?

You will want to buy a renters insurance coverage with personal property coverage limits close to or greater than the value of your belongings. Getting this level of coverage will protect you in a worst-case scenario event where all your property is destroyed. If you are willing to take the risk and want to save some money on the cost of your policy, you can choose to purchase coverage limits lower than the value of what you own. However, you should be aware that the policy will only cover you up to those limits in an extreme event.

Insurers will often give you the choice of property coverage limits ranging anywhere from as little as $5,000 to hundreds of thousands of dollars. Before you buy a policy, you should make a personal inventory of the value of your possessions to determine how much renters insurance is enough to cover your cost of replacing them. Take note that policies will often have sub-limits, also called category limits, for particularly high-value items. For instance, a policy might have a sub-limit for jewelry of $2,500, meaning that any jewelry stolen or destroyed will only be covered up to that number. You will generally have the option to increase these sub-limits, but you'll pay a higher premium in exchange.

How Much Personal Liability Coverage Do I Need?

A standard renters insurance policy will include $100,000 of liability coverage, which is likely enough to cover most tenants for standard liability exposure. However, renters who are wary of the risks of a low-probability, high-cost lawsuit should consider purchasing even more coverage. For example, if your air conditioning unit fell out of your window due to your negligence and seriously injured a passerby, you could be on the hook for damages well in excess of $100,000. Your choice of liability coverage limits will depend upon your tolerance for risk, but you should note that additional liability coverage upwards of $300,000 to $500,000 can usually be added to a renters insurance policy for only a few dollars per month, which may be worth the investment for your peace of mind.

Misconceptions About Who Needs Renters Insurance

There are a number of common misconceptions about renters insurance that might keep tenants from purchasing a policy. We’ve listed and dispelled some of those below.

Misconception: My landlord insures my personal property

Despite what many renters think, their landlord or management company does not insure them or their personal property. Generally, a landlord’s insurance only covers the building or unit you live in. Renters are solely responsible for insuring their personal property, liability and expenses related to loss of use.

Misconception: My possessions aren't valuable enough to warrant renters insurance property coverage

Failing to purchase a renters insurance policy because you don’t own many valuables is a mistake for two reasons: Almost everyone’s personal belongings are worth more than they estimate, and it disregards the value provided by liability and loss of use coverage. The average value of possessions is approximately $30,000 for a standard two-room apartment, according to Allstate. When you calculate the value of your belongings, you may be surprised at how much it's actually worth. However, even if a renter has no personal property, the other coverage features make renters insurance worthwhile.

Misconception: I don't need liability coverage

No matter how careful a tenant thinks they are, they should strongly consider the protection provided by liability insurance. Too many renters think they don’t need liability protection because they rarely have guests or they believe the likelihood of someone injuring themselves at their place is almost nonexistent. This form of self-assurance is dangerous. Accidents happen—your dog could bite a guest or a visitor might slip and fall on your stairwell—and it’s best to be prepared for anything.

Misconception: Renters insurance is expensive

While homeowners, earthquake and flood insurance can be expensive, renters insurance is comparatively cheap. The average annual renters insurance premium in the U.S. is $187, well below the average homeowners insurance policy cost of $1,083 per year. Prices will vary, but a standard renters insurance policy with $30,000 in personal property coverage and at least $100,000 in liability protection (in addition to loss of use and medical payments coverage) can easily be found for $20 per month or less.

Overlooked Benefits of Renters Insurance

Beyond the obvious coverages and benefits of renters insurance, there are some lesser-known perks that might convince tenants it’s a valuable purchase.

Coverage add-ons: Like homeowners insurance, renters insurance policies can add endorsements and floaters to bolster their coverage of personal property. Common endorsements and floaters are for jewelry, furs, electronics, collections (such as baseball cards or stamps) and earthquake protection. Without a renters insurance policy to attach endorsements and floaters to, a tenant would have to have a specialty policy underwritten for any specific item, which would likely be far more expensive.

Your coverage applies outside your residence: Coverage for personal property and liability also travels with a renter, so they can relax with their belongings no matter where they're hauling them. The limits of a renters insurance policy still apply, but the coverage is certainly better than nothing. It’s easy to misplace a necklace or watch while traveling and those items might also be more susceptible to being stolen (and thefts are covered by renters insurance).

Renters insurance protects you for short-term rentals: Renters insurance also protects a policyholder and their personal property from damages related to short-term renters, such as Airbnb guests. Home-sharing is a good way to make some extra money and, as long as a renter is within the rules of their policy, renters insurance offers a layer of protection in the event something were to happen to their guests or belongings.

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