Renter’s Insurance 101

July 26, 2023

What would happen if your rental burned down or someone broke in and stole everything?

You probably shudder at the thought of losing everything. Not only is it emotional, but it’s financially draining to replace everything you own. For some, it might even be impossible.

That’s why renter’s insurance is such a key factor for renters. It ensures coverage against unexpected losses that would otherwise result in financial strain.

Here’s what you must know about insurance for renters and how it works.


What is Renter’s Insurance?

When you rent property, the landlord typically insures the structure with the homeowner’s insurance policy, but it doesn’t protect your personal belongings.

That’s the renter’s insurance.

Tenants purchase renter’s insurance to protect themselves financially from a loss of personal belongings or liability claims. Renter’s insurance might cover you if there is a fire, storm damage, or theft. The list of covered perils is long, and it can even cover your costs if you cause damage to someone else’s property away from your home.


How Does Renter’s Insurance Work?

Renter’s insurance covers tenants’ belongings from a covered peril. For example, if the apartment burned to the ground and you lost your personal belongings, your renter’s insurance would protect you financially. In contrast, the landlord’s homeowner’s insurance would cover the cost of rebuilding the home.

Like any insurance, you pay premiums for renter’s insurance even if you don’t use it. You actually hope you never have to use it, but it will be the best money spent because it protects you financially should there be a loss.

If you experience a covered loss, you submit a claim to your rental insurance company, and they determine the value of what you lost, reimbursing you for the amount lost. 

Renter’s insurance may also cover you from liability claims. These could be claims if someone is hurt on your property (but not due to the home’s structure) or if you damage a person or property and are held liable. Since property or personal damage could cost thousands of dollars, it’s important to have adequate coverage.


What are the Three Major Parts of a Renter’s Insurance Policy?

There are three major parts to a renter’s insurance policy: personal property, liability, and additional living expenses.


1. Personal Property

Most rental insurance policies protect against loss of personal belongings due to the following:

  • Fire
  • Storms
  • Theft
  • Vandalism
  • Water
  • Other natural disasters

Like homeowner’s insurance policies, floods and earthquake damage aren’t included, but you may purchase a separate insurance policy if the home is in a high-risk area for these occurrences.

When deciding how much rental insurance to purchase, you must consider the value of your belongings. Anything besides the four walls, including furniture, clothing, appliances, electronics, and any other personal belongings, can be considered.

Your rental insurance policy should be enough to replace everything you own should you have a total loss. However, some policies limit high-cost items, such as jewelry or antiques. Be sure you know the value, and purchase appropriate coverage if necessary. 


2. Liability

Most renter’s insurance policies include financial protection against liability suits or responsibilities due to damage caused to people or property. This includes issues that occur outside of your home, causing liability.

Each policy is different, so always read the fine print and ensure you have adequate coverage. For example, most policies have low liability limits. Standard policies start at $100,000 limits, but you may be able to pay for more coverage. If the extended coverage isn’t enough, you may consider an umbrella policy that offers up to $1 million in liability. 


3. Additional Living Expenses

If your home has a total disaster and is unlivable, you can get reimbursed for living elsewhere. Your insurance will pay the difference between your normal living expenses and the higher cost of living in a hotel, eating out, or replacing certain items.


What Doesn’t Renter’s Insurance Cover?

There are many things renter’s insurance covers, but there are many incidents they don’t cover, including the following:

  • Any rare but major weather events like sinkholes, earthquakes, and floods
  • Pest infestation, including bed bugs or structural pest infestation
  • Possessions of anyone not named on the policy
  • Theft or damage to your car (only covers the items inside your car)


The Average Cost of Renter’s Insurance

You might be pleasantly surprised to learn that renter’s insurance is relatively inexpensive. On average, renters pay $148 a year or $12 monthly for renter’s insurance. This almost makes it a no-brainer to protect yourself financially. 

This average is based on renters with $30,000 in personal property and $100,000 liability coverage, paying a $500 deductible. The premiums may increase or decrease by area and type or level of coverage.


How Much Renter’s Insurance Do You Need?

As you look at the cost of renter’s insurance, you might wonder how much renter’s insurance you need.

The amount required depends on the amount of belongings you have. Based on the Nerdwallet study above, they assume the average person has $30,000 in belongings; however, you can use this estimator to determine how much your personal belongings are worth.

To further determine how much you need, do the following:

  • Complete a home inventory – Your home inventory should list all your belongings, age, purchase price, and estimated current value. Here’s a breakdown of how to create a home inventory to guide you.
  • Decide on your deductible – Remember, you’re responsible for the deductible if you have a loss, so choose one you can afford. Since renter’s insurance is affordable, you may consider taking a lower deductible to reduce the risk of financial strain should you have a loss.
  • Inquire about discounts – Some insurance companies provide bundled discounts, or discounts for auto payment, e-statements, or paying the premium in full. Ask your agent how to lower your premiums to ensure you can afford them.


How Does Renter’s Insurance Work With Roommates?

Each insurance company operates differently. Some allow roommates to be on a renter’s insurance policy together; others require roommates to have separate policies.

No matter what you decide, if your roommate isn’t named on the insurance policy and there is a total loss, only your personal belongings will be covered, not your roommate’s.

If your state and insurance company allow you to have an insurance policy with a non-relative, keep these factors in mind:

  • If your roommate makes a claim, it falls on your insurance. While you have insurance to make claims, it may also increase your premiums in the future. If your roommate habitually files claims, it could hurt you.
  • You must change your insurance policy if you change roommates. It’s not the end of the world, and it may just be an administrative change, but it’s necessary each time the situation changes.
  • If you and your roommate disagree, it could cause problems with your insurance filing and/or handling of the claim funds.


9 Reasons to Have Renter’s Insurance

Now that you know what renter’s insurance is and how it works, here are nine reasons to have it.


1. Landlord Insurance Doesn’t Cover Renters

Even if your landlord has insurance (which he should), it doesn’t protect your personal belongings or you personally if you’re subjected to a lawsuit. Landlord’s insurance covers the landlord’s investment in the property, namely the structure. For example, if the house burnt down, the landlord’s insurance would cover the cost of rebuilding the home, but it wouldn’t cover the loss of your personal items.


2. It’s Cheap

Renter’s insurance is incredibly affordable compared to homeowner’s insurance. Even if you have expensive belongings and need addendums, your cost will be well below what landlords pay to cover the home. Of course, your premiums depend on the type and amount of coverage and where you live, but on average, they are affordable.


3. Peace of Mind

You have personal belongings because you want or need them. If you experienced a total loss, you’d likely have financial trouble trying to replace everything. Purchasing renter’s insurance gives you peace of mind that if something happens to your belongings and is a covered event, you’ll have the financial backing to replace what was lost.


4. You May Own More Than you Think

Many people don’t realize the value of what they own until they run a house inventory. Finding out the values of the items you own and adding them up can be surprising. Knowing the total value of your belongings may make you much more likely to consider renter’s insurance.


5. Your Landlord May Require It

Some landlords require partners to carry renter’s insurance, much like mortgage companies require homeowners to have proper coverage.

If your landlord requires renter’s insurance and you cannot provide proof of coverage, they could decline your application to rent their property. 


6. Liability Coverage Protects you if Someone Gets Injured

If someone or something gets injured or damaged because of you, serious financial liabilities could fall on your shoulders. Accidents happen constantly, and no one can predict what might occur. 

If your dog bit someone or your child caused damage at someone’s home, your renter’s insurance may cover the damages.


7. Your Belongings are Covered Away from Home

Renter’s insurance may cover your personal belongings even when you’re away from home, whether local, such as at work or traveling. For example, if you have valuables in your car and they get stolen, your renter’s insurance may cover the cost of the lost items.


8. You’ll Have Help if you Must Live Elsewhere

Being rehomed is never a good feeling, especially when it’s unexpected. The onset of higher costs for rent, food, and replacement items can be overwhelming, but the renter’s insurance may cover your costs, making it more feasible to live elsewhere while the home is repaired or rebuilt.


9. You Live in Close Proximity to Neighbors

You can be as careful as you want, but you never know what your neighbors are doing or what might happen to them. If you live in an apartment and one starts on fire, chances are it will spread to other units, putting your items in harm’s way. Renter’s insurance can protect you even if the fire or other incident didn’t start in your unit.



If you rent, you should give serious thought to renter’s insurance. Here are some common questions renters have about covering themselves.


Is renter’s insurance required?

Some landlords require renter’s insurance, but not all do. No state requires renter’s insurance, but it helps protect your belongings and your finances from a lawsuit. Since it’s quite affordable, any renter must protect their belongings and personal finances with a policy.


Can a landlord require renter’s insurance?

A landlord can require renter’s insurance. Landlords set the terms for rentals, and some want the peace of mind that a renter has coverage for any lost belongings. Without renter’s insurance, you might face such financial strain that you can’t fulfill the remaining terms of your lease, leaving the landlord stranded without tenants. 


Does the renter’s insurance cover pets?

Every insurance policy differs when it comes to pets. Some automatically include pets in the coverage, protecting against damages your pet caused to someone or something. However, not all policies include it, and if they do, they may have exclusions on the size or breed that might require you to have a separate policy.


Why is it bad to not have renter’s insurance?

Being caught without a renter’s insurance is not a good idea. Life is unpredictable, and anything could happen. Renter’s insurance protects you from the unexpected financially, allowing you to deal with the mess that happened without worrying about your finances.


Final Thoughts

Renter’s insurance is crucial for all renters. Whether your landlord requires it or not, it’s great financial protection for you and your belongings. There are only a few exclusions similar to homeowner’s insurance exclusions, such as flood and earthquake damage, but many other perils fall under the coverage.

If you’re going to rent, consider renter’s insurance a part of your expenses. Determine what deductible you can afford if you have a covered event, and get protection for the rest, with at least enough coverage to cover your belongings and $100,000 in liability.