Renter's Insurance Buyer’s Guide: Coverage, Types & Cost

Investing in renter’s insurance can feel like a monumental task. That’s why we’ve created a guide to what renter’s insurance is, what it covers, and more.
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What Is Renter’s Insurance?

Definition: Coverage that protects home or apartment renters and their belongings in the occurrence of a loss or damage. In situations such as theft, fire, or flood damage, renter’s insurance can provide support for lost or damaged items.

There are two types of renter’s insurance available: actual cash value payment or replacement cost payment. If you choose actual cash payment, your insurance agency will pay you the value of your belongings at the time of the claim as opposed to what you paid for them at the initial purchase. Replacement cost insurance means that your insurance agency will cover the cost to replace the item with the same or similarly priced product.

Now that you know the answer to, “What is renter’s insurance?”, we’ll discuss what exactly this type of insurance covers.

What Does Renter’s Insurance Cover?

You may be asking, “What does renter’s insurance cover?”. This is a common question for many renters moving to a new location. There are quite a few coverage options for a renter’s insurance plan. Most comprehensive plans will include coverage for:

  • Personal property damage. This coverage includes loss or damage to your personal property from any of the following sources:
    • Natural disasters (hail, windstorm, lightning, fire)
    • Crime (theft or vandalism)
    • Water damage from failed plumbing
    • Explosions
  • Personal liability. If someone is injured on your rental property or if you accidentally damage another individual’s property, personal liability coverage can help cover the costs of repair or medical bills.
  • Loss of use. This includes additional costs that may occur if your home becomes inhabitable from covered peril, such as hotel costs while you are unable to live in your rental space.

What Does Renter’s Insurance Not Cover?

You now know the answer to the question “What does renter’s insurance cover?”, but what does renter’s insurance not cover? There are a few situations in which you may need to invest in supplementary insurance.

Every insurance plan typically has a maximum limit it will cover. If personal property damages or liability protection reaches that maximum, any additional coverage you need will not be given from your chosen insurance company. Discuss the limitations of your insurance plan with an agent to ensure that you are covered to the maximum extent.

In addition to maximum limits, there are natural disasters that may not be covered by your renter’s insurance. These include floods and earthquakes. Often, insurance companies will offer flood insurance plans for those concerned about flood damage.

Lastly, damage to the structure of your building will not be covered by your renter’s insurance plan. This is primarily because your landlord will be responsible for these damages. While tenants should be covered for their personal belongings and the interior of the home, landlords should have their own insurance plans to cover structural issues.

Do I Need Renter’s Insurance?

Natural disasters or personal accidents can happen to anyone. It’s best to be prepared for these situations, even if you feel they may never occur. Below are a few situations in which renter’s insurance is highly suggested.

  • Financial or safety situation. Renters who typically bring in a low to medium income or live in an area with a lower safety rating may particularly benefit from renter’s insurance. Instead of having to pay out of pocket for any unexpected damages, your insurance can protect your assets more affordably.
  • Frequent guests. Additionally, those who frequently have visitors may also benefit from renter’s insurance. As careful as you may be, your guests may end up injured in your home. Your personal liability coverage can assist in paying any medical bills that may arise from this injury.
  • College students. Though college students often are covered by their university if they live on-campus, those living off-campus may want to consider investing in renter’s insurance as well. Some apartment complexes may offer renter’s insurance as part of your rent or you’ll want to search for the best plan that fits your budget.

Overall, having renter’s insurance never hurts. With plans at affordable costs, you’ll thank yourself later for making this investment if natural disasters strike, someone is injured in your home, or your space becomes temporarily inhabitable.

Is It Okay to Not Have Renter’s Insurance?

Renter’s insurance is not always required. Before you make this investment, verify with your landlord if renter’s insurance is required in your lease. If it is not, you have the option to not invest in this type of insurance.

There are a few situations where you may not need renter’s insurance, and that’s okay. You may learn that your landlord is able to cover damage or that your roommate’s insurance can cover anyone in the household. Maybe you’ve decided that you’ll be able to comfortably fund any replacements or repairs needed in the case of a disaster. If you feel that renter’s insurance is not a beneficial decision and you are not required by your landlord, you may choose not to purchase renter’s insurance.

what does renters insurance cover

Renter’s Insurance Cost

If you’re wondering “How much is renter’s insurance?”, you’ve come to the right place. Though your renter’s insurance may vary depending on your state, there is a general average that you can use as a starting base when estimating the cost.

How Much Is Renter’s Insurance?

According to the Insurance Information Institute, the average cost of renter’s insurance is $14.90/month. However, there are a few factors that influence the overall cost of your renter’s insurance. These include:

  • Credit history. Insurance companies may check your credit score to determine the cost of renter’s insurance. A higher credit score may lower your insurance premium.
  • Building history. If you’re renting an apartment, an insurance agency may use the building history to determine costs. A newer building with more safety features may help reduce your cost.
  • Rental location. As mentioned above, states have varying prices for their rental insurance. Additionally, if you live in a generally safer area or in an area with fewer natural disasters, you may see a reduction in your insurance cost.
  • Coverage level. The more coverage you add on, the higher your rates will be. If you plan to add additional coverage, such as personal property coverage, you’ll likely be paying a bit more for your renter’s insurance.
  • Insurance deductible. A deductible is an amount you’ll pay out of pocket before your coverage sets in. The price of your deductible can affect your premium. Higher deductibles typically come with lower premiums.
  • Cash value vs. replacement cost. Depending on the type of insurance plan you’ve chosen, your premium may vary. Cash value insurance often costs less as it typically covers less at the time of claim.
  • Discounts. Some insurance companies may offer discounts if you take extra preventative measures. This includes installing or owning working fire alarms, purchasing carbon monoxide detectors, or keeping a fire extinguisher on hand.

Discuss these factors with your chosen insurance agency to determine the general monthly cost of your renter’s insurance.

How Does It Work?

There is an abundance of insurance companies that you can choose from when you’re ready to purchase renter’s insurance. You’ll have the option to receive quotes from these companies and choose the one that best fits your coverage and budget needs.

Insurance companies may offer their products in a variety of formats. These include:

  • Independent agencies. Independent agencies are able to represent multiple companies and find the best quotes for their customers.
  • Exclusive agencies. Exclusive agencies are contracted to one company and sell that specific company’s products to their customers.
  • Direct market sales. Telephone, mail, or internet contact is used to sell products.

Once you’ve chosen an insurance agency, your responsibilities will be clearly outlined in your contract. Get the most out of your renter’s insurance policy with the following tips:

  • Maximize coverage. Understand the maximum coverage you can get with replacement cost insurance vs. a cash value insurance. Start with a basic plan and add additional coverage for high-value items to ensure you get the most out of your coverage when you file a claim.
  • Lower premium. If your insurance agency offers discounts, learn what steps you can take to access these discounts.
  • On-time payments. Making on-time payments or early payments can build trust with your insurer and lead to a potential decrease in your premium rate.
  • Organized record. Keep a clear record of your insurance paperwork, including contracts, receipts, and claims. If an issue arises later on, you’ll be able to quickly find your paperwork and ensure it is corrected.
  • Utilize benefits. Read through all of the benefits that your plan offers and don’t be afraid to use them.

What to Look For in Renter’s Insurance

There are two primary options that you’ll be faced with when choosing insurance. These are replacement cost insurance and cash value insurance. When choosing between the two, you’ll want to evaluate the cost vs. claim values.

Before you begin searching for insurance, take a look at your home or apartment’s claim history. You can do this by requesting a report from the Comprehensive Loss Underwriting Exchange (CLUE). If your home or apartment building has a low number of claims, you may be eligible for a lower insurance rate. Compare quotes and determine which is the most reasonable based on claims. If you likely won’t be making an overabundance of claims, you won’t want to overpay for your insurance plan.

You’ll also want to look for plans that offer discounts for extra safety precautions, lower deductibles, or higher coverage levels for an affordable price. This can be easily determined by receiving quotes from multiple companies and researching average policy benefits in your area. From there, you’ll be ready to compare your options.

what does renters insurance cover

How to Compare Renter’s Insurance

With so many insurance companies out there, it can be overwhelming trying to decide which one to choose. Start by receiving quotes from a few different companies. Make sure that you keep your coverage level consistent across each company to have an accurate quote comparison.

Where to Look

The first place to look when you’re planning to compare renter’s insurance is your state department. Many departments publish updated reports on current insurance carrier claim handling rates. These documents can provide you with a clear picture of what you’ll likely be paying for renter’s insurance.

Insurance companies may also provide comparisons right on their website. They’ll offer convenient charts that break down their rates compared to their highest competitors. When using this resource, be mindful that not all of the information may be presented on the page. You’ll still want to conduct further research for a more accurate comparison.

What to Look For

As you research insurance companies, you’ll want to consider the following information to determine which is best.

  • Customer reviews. Reviews can give you insight into how an insurance company treats its customers. If you notice a trend in recent negative reviews, it may be a sign that you should seek another company.
  • Financial standing. Insurance companies should have the financial resources to handle the claims they receive. Companies often post their financial rating on their websites, but you may also be able to find this information elsewhere.
  • Current discounts. Some insurance companies may offer unique discounts. This may be bundling insurance plans or taking additional safety precautions in your home.  Research what these discounts are and how you can qualify for them.

How to Buy Renter’s Insurance

As you begin your journey to buying renter’s insurance, there are a few essential steps you’ll want to take to ensure your experience is as seamless as possible.

1. Inventory Your Belongings

You’ll need to know the rough value of your personal belongings. This will help you determine how much coverage you’ll need from your insurance plan. During this step, you’ll also want to look into your home or apartment to gain a better understanding of claim history.

2. Determine Coverage Level

Once you have an estimate of your belongings, you can figure out how much coverage you’ll need. Look into different plans and what coverage levels are commonly offered. If you’re unsure exactly how much coverage you’ll need, you may want to consider overestimating until you can speak with an insurance agent.

3. Request Quotes

You’ll be able to request more precise quotes if you know the average coverage level you’ll need. Keep this level consistent with every company so you can more accurately compare companies. If you’re still unsure, you may want to choose two coverage options until you narrow down what you need.

4. Compare Insurance Companies

Spend some time comparing quotes and looking into each company in-depth. Compare costs to your budget and select the best fit for both budget and cost. Review their customer service reviews, financial standing, discounts, and more.

5. Sign Your Contract

The last step to buying renter’s insurance is to meet with an agent at your chosen company, select a plan, and sign your contract. You’ll have a chance to ask questions, compare internal policies, and review all documents.

what does renters insurance cover

Insurist Recommends

While Insurist works with a variety of insurance companies to determine the best plan for our customers, there are a few companies that stand out amongst the rest.

When it comes to comparing renter’s insurance, it can be beneficial to simply start with the largest insurance companies out there. These include State Farm, Allstate, Liberty Mutual, and Travelers.

For renters looking for the lowest rates, Nationwide may be the way to go. With an average monthly cost of $13.43 and an A+ AM Best rating, Nationwide offers comprehensive plans at an affordable rate.

Customer reviews are another essential factor in your renter’s insurance search. The winner of the most popular insurance agency across customers is Erie Insurance. There’s no questioning this insurance company’s A+ AM Best rating. With plans that include worldwide personal property coverage, loss of use, injury liability, and more, they offer comprehensive coverage that will protect you everywhere you go.

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About the author
Brian Greenberg author
Brian Greenberg
Founder and CEO
Brian is licensed to sell life, health, annuities, and property and casualty insurance in all 50 U.S. states. He is the author of The Salesman Who Doesn't Sell and is a member of the Million Dollar Round Table, an organization that consists of the top 1% of financial advisors worldwide.