Your Renters Insurance Guide
April 7, 2021
If you rent a house or apartment and experience a fire or other disaster, your landlord’s insurance will only cover the costs of repairing the building. To financially protect yourself you will need to buy renters or tenants insurance.
Like homeowners insurance, renters insurance includes three key types of financial protection:
- Coverage for personal possessions (YOUR property, like furniture and computers)
- Liability protection
- Additional living expenses (ALE)
The big difference is that renters insurance doesn’t cover the building or structure of the apartment—that’s typically the landlord’s responsibility. Consider the following when looking to choose the right renter’s insurance coverage:
- How much insurance should I buy? Make sure you have enough insurance to replace all of your personal possessions in the event of a burglary, fire, or other covered disaster.
- Should I choose replacement cost or actual cash value coverage? Actual cash value (ACV) policies include a deduction for depreciation (that is, the idea that items lose value over time), think of this as value based on what an item is worth today, often less than what you paid for it. Replacement cost coverage (RC) is pricier but can be well worth the extra expense if your belongings are damaged or destroyed. Replacement Cost coverage will typically pay to replace the lost property, and is based on market values for new items.
- What disasters are—and are not—covered? Renters insurance covers you against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage. Like standard homeowners’ policies, most renters insurance policies do not cover floods or earthquakes.
- What is my deductible, and how does it work? A deductible is an amount of money you are responsible for paying before your insurance coverage. For example, if you have a $500 deductible and a fire destroys $5,000 worth of furniture, the first $500 is your responsibility and your insurance company will cover $4,500.
- What is liability insurance? Renters insurance provides liability protection that covers you against lawsuits for bodily injury or property damage done by you, your family members and even your pets. This coverage pays for the cost of defending you in court, up to the limit of your policy. Your renters policy should also include no-fault medical coverage as part of the liability protection. Medical payments coverage allows someone who gets injured on your property to simply submit his or her medical bills directly to your insurance company so the bills can be paid without resorting to a lawsuit. Make sure the amount of liability coverage provided by your policy is sufficient to protect your financial and other material assets in the event of a lawsuit.
- Do I need an umbrella liability policy? If you need a larger amount of liability protection, consider purchasing a personal umbrella liability policy. An umbrella policy kicks in when you reach the limit on the underlying liability coverage provided by your renters or auto policy. It will also cover you for things such as libel and slander.
- What does ALE cover? The additional living expenses portion of your rental insurance policy pays for hotel bills, temporary rentals, restaurant meals, and other expenses you incur while your rental home is being repaired or rebuilt. Essentially, it covers the expenses you would not have to incur if you had your usual roof over your head.
- What types of discounts are offered on renters insurance? Insurance companies often offer discounts on renters insurance if you have another policy with them—for example, car insurance or business insurance. You may also get a discount if you: Have a security system, use smoke detectors, have good credit, stay with the same insurer, or are over 55 years old.