Renters Insurance

How Does Renters Insurance Work?

How Does Renters Insurance Work?

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Renters insurance protects you from life's unexpected mishaps. In exchange for a monthly premium, your renters insurance company will reimburse you for financial losses you experience. This includes things like accidents, fires and theft. Renters insurance also provides liability coverage, which pays for financial losses others experience that you've caused.

It's affordable, too — often less than $20 per month. Anyone who doesn't own the home they live in should consider buying renters insurance, whether they've signed a lease or are staying rent-free with friends or family.

What's renters insurance? What does it offer?

If you're paying for renters insurance every month, you and your insurance company have agreed that it will reimburse you in case your apartment or the things you have inside it are damaged, destroyed or stolen. You'll also be protected by liability coverage, which will pay if you accidentally hurt someone else or cause damage to their property.

Renters insurance covers your belongings

Renters insurance protects all of your personal property, as long as you usually keep it in your home. This includes things like furniture, cookware, clothing and more. For example, if your apartment is broken into and a thief takes your laptop, you would be reimbursed.

But renters insurance doesn't cover everything. For starters, it only covers things you own yourself. Your policy won't include anything owned by your landlord, like the structure of the building or your stove. It also doesn't protect anything owned by your roommates — your roommate's belongings should go on their own policy.

Property protected by renters insurance
Property not protected by renters insurance
FurnitureStructure of your apartment/house
ClothingPermanent fixtures (e.g., stove and refrigerator)
Appliances and electronics you ownYour car
Art and jewelry (subject to coverage limits)Anything you keep outside your home
Sporting goods (e.g., bicycles)Anything not owned by you (e.g., your roommates or landlord)
Any other property you keep in your home

Renters insurance only covers your belongings from certain causes of damage

Renters insurance will pay for your belongings in many situations, but it won't cover you for everything — just covered perils.

For example, renters insurance will cover you if your apartment is broken into, as well as if anything you usually keep at home (say, your laptop) is stolen elsewhere, like a coffee shop. You're also protected against fire, wind damage and vandalism.

One case in which you won't be covered is accidental loss. If you misplace your smartphone, that's not covered. And some natural disasters, including earthquakes and flooding, aren't typically covered either.

Perils covered by renters insurance
Perils not typically covered by renters insurance
Fire and smokeAccidental loss
TheftEarthquakes
Vandalism and riotsFlooding
Damage from vehiclesWar
WindBedbugs and other pests
Water damage (such as from a burst pipe)

Liability protection against lawsuits

Another key protection you'll get from renter insurance is liability coverage. If you cause harm to another person or their property, renters liability coverage can pay for the damages. For example, if you have a party and someone slips while on your property, your liability coverage could pay for costs related to their injury.

Liability coverage protects you outside your home, too. If you and your dog go over to your neighbor's house and she shreds the neighbor's shoes while you are there, your liability coverage would pay for the damage.

The main time liability coverage doesn't cover you is if the damage is intentional. If you damage someone else's property on purpose, you won't be able to count on liability protection to pay for your legal fees.

How buying renters insurance works

There are three steps to buying renters insurance coverage: determining how much coverage you need, shopping around for quotes and actually buying the policy.

How much renters insurance do I need?

The level of renters insurance coverage you need will depend in part on the value of your belongings. The best way to do this is to create an inventory of your stuff. It sounds like a chore, but it's relatively simple, and having a record of your belongings will make filing a claim much easier.

Start by making a video walkthrough tour of your apartment, capturing everything you own. A tip: do one room at a time, covering each room systematically from top to bottom. That way, you won't miss anything and you can take a break in between rooms.

Once your video is complete, make a paper or digital list of your highest-value items. The more of your belongings you add, the better, but it's most important to focus on your most valuable possessions. This includes:

  • Electronics
  • Furniture
  • Jewelry
  • Cash
  • Art
  • Major appliances (e.g., microwave)

For each item on the list, record the exact name of the product you own, the date you bought it and what you paid. If possible, you should also include an image of the receipt or other notes about where you got it, like if it was a gift. It's especially important to include things that may not be covered in full by a standard renters insurance policy, like jewelry, cash, art or high-end sporting equipment. For example, Lemonade renters insurance covers a maximum of $2,500 per item. That way, you can decide whether you'll need to add an endorsement.

Example of inventory of possessions

Item
Date purchased
Value (new)
Notes
2015 Dell Inspiron Laptop05/01/2015$599Gift from mom
Apple iPhone 8 64 GB - Black11/10/2017$649Bought at Apple store
IKEA KIVIK sofa - Blue06/20/2018$599Receipt in email
Zales engagement ring01/17/2019$3,999

Now, add up the total value of your property to estimate how much renters insurance you need. Most renters insurance companies sell policies with limit increments of $5,000 to $10,000, so you don't need to be exact. And your most expensive items will likely make up the bulk of the cost of your possessions, so you can simply estimate the remainder.

From there, weigh how much liability coverage you need. There's no set amount you should get — renters insurance policies commonly start at $100,000 of coverage. But people who partake in a lot of high-liability activities (like if you host a lot of parties or own a dog) or have a lot of at-risk assets (like stocks or cash savings) should buy a higher amount than someone who is at a lower risk. Furthermore, additional liability coverage only costs an extra dollar or two per month, so it is not a significant additional expense.

Finally, choose your deductible. Most renters insurance policies have a range of deductible options, from around $100 to $1,000 or more. A higher deductible means you'll pay less per month, but more in case of a claim — and a lower deductible results in the opposite.

Save money by getting multiple quotes

Renters insurance is generally affordable — between $10 and $30 per month. But it's still worth getting quotes from a few different renters insurance companies to find the best rates, as one company might offer you a significantly cheaper rate than another. You can buy renters insurance online or work with an independent agent to find the lowest price.

Once you've found the best renters insurance company for you, go ahead and buy. Your coverage starts immediately once you've been billed — there's no additional work for you to do.

How renters insurance claims and payouts work

If you're in a situation where you'll need to make a renters insurance claim, your first priority should always be your own safety. Get away from any possible danger and call 911 if necessary. Once it's safe, begin the claims process by documenting the damage. Take photos and write down everything you can about the incident.

There are several different methods renters insurance companies may offer to let you make a claim. It's likely you'll even have multiple options to choose from; pick whichever feels most appropriate.

Ways to make a renters insurance claim

  • In person: Some renters insurance companies will send an agent or adjuster to your home to survey the damage and help you file a claim. In this case, you'll work with the adjuster to describe what happened and document the loss.
  • Through your insurer's website or app: An increasingly common way for renters insurance companies to collect information about a claim is directly through their website or app. It'll ask you questions about what happened, and ask you to upload photos and/or videos of what happened to provide proof.
  • Over the phone or email: Most insurance companies also allow you to file a claim over the phone or through email.

Having receipts or other proof of purchase can help expedite the process, but you can usually still make a claim without receipts.

Once you've filed a claim with your insurance company, someone from the company will look at the amount of damage caused and your record of property, and determine the appropriate claim payout. If the claim is for your personal property, you'll typically receive either a check in the mail or a direct deposit to your bank account.

If your claim is denied, you're usually entitled to an explanation and more information about your options. Contact your insurance company to see if you can resolve the issue and get what you need.

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