Renters insurance is a smart purchase that protects yourself from the costs of unforeseen property damage, legal liability, or theft if you don’t own the property you live in. Typically, renters insurance covers events called “perils,” which are common damaging events outlined in your policy.
Depending on the extent and type of coverage you purchase, perils cover a range of things that could happen to your property, possessions, or people in your residence. These events can go from fire, lightning damage, wind damage, hail damage and smoke damage to damage from vehicles or aircraft, damage caused by freezing water, theft, vandalism, and more.
If you rent a house, apartment, or another type of residence, it’s highly recommended that you purchase renters insurance as a way to provide yourself a financial cushion in case you encounter an unexpected event. This ensures you won’t have to pay the full price out of pocket if important or expensive possessions are destroyed or if someone gets hurt and needs medical attention.
Renters Insurance Misconceptions
When it comes to renters insurance, there are a few common myths floating around out there; allow us to dispel them.
(1) Renters insurance is expensive.
Renters insurance is actually significantly less expensive than homeowners insurance. Many policies cost less than what you may spend at the coffee shop every week. Some providers may even have discounts you qualify for.
(2) I don’t have many valuable things, so I don’t need renters insurance.
Even if you don’t have an expensive collection of jewelry or baseball cards and your entire apartment consists of hand-me-down furniture, it’s important to pause and think about how much it would cost to replace everything. From your couch and your TV to your kitchen table, chairs, microwave, rugs, bed, and decorations, the expenses can add up quickly. If something happened, would you have the money socked away to replace it all? Not many of us do — and this is where renters insurance takes the worry out of the equation for just a few extra dollars a month.
(3) My landlord’s insurance will cover damage to my belongings.
If you’re renting a property, it’s important to note that your landlord’s insurance only covers the building itself, not the things inside. Therefore, if there’s a fire, storm, theft, or other event, you’ll have to pay out of pocket to recoup your damaged or stolen belongings.
(4) My roommate’s renters insurance will cover my things.
Unfortunately, even if your roommate has a renters insurance policy, it only provides coverage for his or her possessions, not yours. You should do your homework to find the best coverage options for your situation.
Four coverage Types
Personal Property Damage
An HO-4 policy is a renter-specific insurance policy that covers the cost of replacing any property that’s stolen or damaged by any event that falls under an umbrella known as the “16 perils.” For example, if there’s a fire and you lose your clothes, laptop, or other belongings, these would likely be covered under personal property damage. The Insurance Information Institute lists the 16 perils as follows:
- Lightning or fire
- Hail or wind/windstorm damage
- Damage caused by riots or other forms of civil unrest
- Damage sustained by aircraft
- Damage sustained by motor vehicles
- Smoke damage
- Damage sustained due to volcanic eruption
- Damage sustained by a falling object
- Damage caused by the weight of snow, sleet, or ice
- Accidental water damage sustained via overflow of water from a heating, air conditioning, plumbing, fire sprinkler system, or other household appliance
- Accidental and unexpected damage sustained because of the malfunctioning, tearing apart, bulging, cracking, or burning of steam from a hot water heating system, fire-protective system, or air conditioning system
- Damage caused by freezing pipes, heating, fire-protective sprinkler systems, air conditioning, or other household appliance
- Unexpected damage from artificially generated electric currents (with the exception of the loss to a tube, transistor, or similar electronic units or components)
An HO-4 also covers legal expenses if someone is injured in the space you rent (or if a visitor’s property/belongings are damaged while they’re in the space you rent). For example, if a shelf falls on a party guest, you could be liable for any resulting damages. With personal liability insurance, you would not be responsible for paying the legal costs or for any other damages, even if you’re found to be the responsible party.
Additional Living Expenses
An HO-4 covers temporary living expenses if your space becomes uninhabitable due to a covered incident, such as fire or smoke damage. This coverage provides you with finances to maintain your regular lifestyle while comping you for the cost of living elsewhere until your dwelling is repaired, or until you meet the cap for additional living expenses set by your provider.
HO-4 policies also cover any medical bills if you’re found responsible for a visitor’s injury. For example, if a guest falls down the stairs in your rented dwelling, your renters insurance covers the cost of medical bills incurred up to the limits of that coverage.
Other Coverage Types
- Credit card/bank forgery: If there’s a theft in your apartment and your credit card and checkbook are stolen, some policies cover resulting damages (e.g., the thief went on a shopping spree with your credit card). However, this perk isn’t universal among all policies, so make sure to check with your provider to see if this type of event is covered.
- Other people’s property: If you borrow a friend’s video game console and it’s stolen during an apartment robbery, many providers cover the cost of replacement. Again, this perk isn’t universal among all policies, so check with your provider to confirm it’s covered.
- Items stored elsewhere: If you have items stored in your vehicle and they’re stolen or damaged, many policies cover the cost of replacement. As always, check with your provider to ensure this coverage is available.
- Food spoilage: If there’s a power outage that lasts several hours or even days that causes the food in your refrigerator and freezer to spoil, some renters insurance policies provide money to cover the cost of replacing the food. This only applies, however, if the damaging event falls under the 16 perils or any extra coverage you’ve purchased with your policy.
What Does Renters Insurance Not Cover?
It’s important to know that there are some things that renters insurance doesn’t cover, so make sure to review your policy carefully. For instance, mudslides aren’t covered under any insurance policies, according to the Insurance Information Institute.
The Insurance Information Institute also points out that the many renters insurance policies don’t cover earthquake damage or damage from land tremors, mudflow, landslides, or other earth movement events. This is regardless of whether or not it is caused by or causes a volcanic eruption.
Additionally, renters insurance doesn’t cover the physical house, apartment, condo, or “dwelling” where you live. Coverage for the building is your landlord’s responsibility, and he or she likely has landlords insurance that covers damages to the structure.
Just like you probably wouldn’t purchase the first car you test drove when shopping for a new vehicle, it’s important to shop around for a renters insurance policy that’s the right fit for your situation. A great first step is to do your research on the best renters insurance companies.
By browsing through the policies and coverage options of the industry’s most trusted companies, you’ll get a better sense of what each offers and which provider has the best options for your needs and budget. Once you narrow down your list of top choices, you can reach out to each provider directly to get a quote and get more details about its prices, policy coverage, and more.