If you're a tenant, purchasing a renters insurance policy is almost always worth it, even if it's not required by your landlord. For an affordable price, renters insurance protects you against catastrophic damage to your property and potential legal liabilities.
The alternative — counting on your own savings to cover you in an emergency — may be possible, but having a renters insurance policy could still save you considerable money in the event of a disaster.
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Why is renters insurance worth it?
Renters insurance is worth buying because it protects you against unexpected catastrophes for an affordable price. With a renters insurance policy, you pay a reasonable cost now — around $18 a month, on average — to protect yourself from potentially large and unpredictable expenses in the future.
The benefits of having renters insurance come from its wide-ranging coverage, which insures you against the following:
- Personal property damage: The average renter has possessions ranging in value from $20,000 to $30,000. If your personal property is stolen or damaged by an event like fire, vandalism or theft, renters insurance covers the loss up to your selected limits.
- Personal liability: Renters insurance covers costs if you're held liable for injuring someone or damaging their property.
- Additional living expenses: If your rental home or apartment becomes uninhabitable due to a covered peril, a renters insurance policy covers you for costs above your normal expenses. This ensures that your budget stays the same while you temporarily live elsewhere.
- Medical expenses: This covers medical costs for guests injured on your property, usually up to a limit of several thousand dollars.
All of these features provide coverage that far outweighs the amount you pay for a policy each year. For example, a typical renters insurance policy covers $30,000 in personal property damage and $100,000 in liability costs, and these limits can be adjusted depending on your needs. Your coverage levels are thus much higher than the average cost of a renters insurance policy, which is about $215 per year.
The purpose of renters insurance is to cover you in a variety of unlikely scenarios. We recommend you purchase a policy even if your landlord does not require renters insurance.
Why get renters insurance over the alternative?
Purchasing renters insurance is a good idea, whether you can afford to cover unexpected expenses or not. If you're low on savings, you'll need renters insurance as a way to cover the risk of these events for an affordable price. Even if you have enough savings to cover the cost of a disaster in full, the price of renters insurance is minor compared to the amount a policy would cover for property repair, property replacement and liability expenses after a major disaster.
Renters insurance is an affordable way to cover unexpected expenses
Even if you have the necessary savings to replace all of your possessions or pay the uncertain costs of legal liabilities, renters insurance is a smart way to protect yourself from those unexpected expenses. In the event of a major disaster, a renters insurance claim covers you for damage far in excess of the cost of your annual policy, even if you've been paying for coverage for years.
For example, say your dog bites someone, and you are found legally liable for the injury. The average cost of a dog bite claim in the U.S. is about $44,000. Without a renters insurance policy covering your liability costs, you could be on the hook for the full expense.
But if you pay $215 per year for a renters insurance policy with $100,000 in legal liability coverage, the full cost of a dog bite claim should easily be covered.
In buying renters insurance, you may consider that you are paying a fee to cover the cost of events that are unlikely to happen, and you're paying for a service you're unlikely to use. This is technically true, of course: insurance companies have to collect more in premiums than they pay in claims, or their businesses wouldn't be able to function.
However, if you do need to file a claim, renters insurance covers you for property damage and legal liability far in excess of your premium payments over the years. For instance, if you have to pay the equivalent of an average dog bite claim, you would have to pay $216 per year for 204 years for the cost of your policy to equal the reimbursement — $44,000 — you would receive for the average dog bite claim. And this is just one scenario. Tenants could face a variety of unforeseen property damage costs and liabilities over their rental terms.
Insurance claim scenario
Estimated claim cost
Time to recoup vs. insurance
|Dog bite liability||$44,000||204 years|
|A fire destroys your possessions||$30,000||139 years|
|A water leak from a neighboring tenant destroys all your electronics||$10,000||46 years|
|Your television and laptop are stolen||$3,000||14 years|
These examples illustrate how just one unlikely event can compensate for dozens or even hundreds of years of paying renters insurance premiums. So even if you have the savings to replace your possessions or cover your legal liabilities, it would only take one claim for renters insurance to be worth the investment.
Renters insurance covers you for expenses you can't afford
If your household can't afford to pay for costly, unexpected damage, renters insurance is even more important. It pays for sudden expenses related to property damage or legal liability at a limited additional cost. In the event of a catastrophic fire or legal liability for damages — such as a guest being injured in a fall — emergency expenses could be far in excess of your savings. Renters insurance is worth purchasing for the peace of mind in knowing you'll be covered for these events, and that a random disaster won't force you to repurchase your possessions or live without them.
How to make renters insurance worth it for you
If you're still wary of adding renters insurance costs to your monthly budget, there are a variety of things you can do to find a lower price for a renters insurance policy. These include shopping around, picking appropriate coverage limits, adjusting your deductible and taking advantage of insurer discounts.
Always shop around for your renters insurance policy
When you're looking for a policy, not all renters insurance companies offer you the same prices or features. It's always a good idea to get quotes from several carriers, as one may offer you a better quote for almost identical coverage.
Your renters insurance quote depends on a variety of factors, including your location and insurance claims history, but not all insurers calculate their rates in the same fashion. Spending a few minutes to shop around could save you several dollars a month. Our top picks for renters insurance are Lemonade and State Farm, as they have consistently cheap rates, good coverage options and well-rated service.
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Pick appropriate coverage limits
It's not always straightforward to estimate how much your property is worth. Considering that personal property coverage is one of the main drivers of the cost of a renters insurance policy, try to choose the right coverage limits. This ensures that you're not overpaying for too much coverage, or underpaying and leaving yourself exposed. For personal liability, most tenants are sufficiently covered by standard coverage limits, though there are exceptions.
You should buy enough personal property coverage to replace all of your belongings — with a little extra buffer.
Underestimating the value of your possessions may lead you to choose lower personal property coverage limits than you should. Your policy may be more affordable, but it won't fully cover you in a worst-case scenario. Or you may overestimate the value of your possessions, meaning you'll overpay for unnecessary coverage. The best way to determine your coverage is to add up the value of everything you own, also called taking a personal inventory. This can help you estimate how much property coverage is enough for you.
It's prudent to get at least $100,000 in personal liability coverage, which comes standard with most policies. This is likely enough to cover the liability exposure of most tenants. However, you can typically increase your limit when purchasing a policy to $300,000 or $500,000, and it usually only costs a few extra dollars per month. This might be a consideration for people with a higher-liability lifestyle, such as those who own certain dog breeds.
Adjust your renters insurance deductible
A renters insurance deductible is the amount of money you pay out of pocket when making a claim. Choosing a higher deductible lowers the cost of your policy. For example, a policy with a $1,000 deductible is significantly cheaper than an identical policy with a $250 deductible. If you want to save money now, rather than when you make a claim, it might be worth choosing a higher deductible to lower your renters insurance premium.
Take advantage of renters insurance discounts
Many insurers offer a variety of discounts on renters insurance policies. If these savings apply to you, you should take advantage of them to get the best value possible. Larger insurers with multiple policy options may offer an auto and renters insurance bundle, allowing you to save anywhere from 3% to 5%. Most insurers also offer discounts for safety features in your apartment, such as central burglary and fire alarm systems. Be sure to investigate whether an insurer provides these discounts to get the best bang for your buck.
All quotes are averages based on our nationwide survey of the average cost of renters insurance. We collected hundreds of renters insurance quotes from across the United States to find the average cost overall. We gathered quotes from 12 top companies, though not all insurers operate in every state.
Quotes are for a single 25-year-old man with no pets and $30,000 in personal property coverage.
|Guest medical protection||$1,000|