The Ultimate Guide to Renters Insurance

While nearly all homeowners have home insurance, only 37% of renters have the same coverage. Leaseholders may not own a home, but they do have personal property and financial assets to protect. Those items could be lost in an instant if you do not have renters insurance.

Whether you've just signed a lease or have been at your current address for years, having the best renters insurance is a must. Policies can be purchased in a matter of minutes and often for less than a dollar per day.

CompareInsurance is here to help you understand everything you need to know about finding the best renters insurance.

What does renters insurance cover?

Renters insurance, unlike homeowners insurance, does not cover the physical unit you are occupying.

It does, however, cover its contents as well as these additional areas, which can be extremely useful in unexpected scenarios.

Personal property: While your landlord's homeowners insurance covers the structure of your rental, it does not cover your personal belongings. If these items are damaged or stolen, personal property coverage will assist you in replacing them.
Additional living expenses: If your unit sustains serious damage and becomes temporarily unlivable, a renters insurance policy can cover costs such as hotels and meals while you are displaced.
Liability protection: Under the law, you can be held financially liable if you injure or damage another person's property, even if it is unintentional. If you are sued, liability coverage will pay for your court costs and any judgments awarded to the other party, even if the incident did not occur at your home.
Medical payments: You may be able to add medical payments coverage to your renters insurance quote. Guests who visit your property and are injured may have their medical bills covered by this type of coverage, but it does not apply to you or anyone else who lives there.

Each of these areas will be covered by the best renters insurance policy.

What to know when buying renters insurance

There are a few aspects of your policy that you should be aware of when purchasing renters insurance. Each type of coverage has a different limit, which is the most money the insurance company will pay if you file a claim. If you choose a limit that is too low, it may not be enough to cover all of your damages; if you choose a limit that is too high, you will overpay for coverage that you do not require.

Check that your liability limit is large enough to cover your net worth, which is the total value of everything you own – including cash, investments, and property – less any debts. Your personal property limit should only be high enough to replace all of your belongings. A home inventory may be useful in calculating this amount.

How to create a home inventory

Keeping a home inventory is a good idea for a variety of reasons. For starters, it gives you an idea of how much your belongings are worth so you can select the appropriate personal property limit when purchasing renters insurance.

It can also save your life in the event of a fire or other disaster that destroys your home. You'd be forced to list every item in your home from memory if you didn't have a home inventory.

Here's how you can make one:

Grab your smartphone. You'll need your phone's camera as well as a note-taking app. (A digital camera and a piece of paper or a laptop will also suffice!)
Go through each room in your house and take pictures of everything inside. Take a picture or video of every item that costs more than $10.
Make a written record alongside your visual record. Make a note of the name of each item in as much detail as possible. When it comes to high-value items like electronics, make a note of the make, model, serial number, and approximate purchase date.
Make several copies of your home inventory and keep them in different locations. For example, you could keep one copy in the cloud and another in a safe deposit box on an external hard drive.
At least once a year, the list should be updated. It's a good idea to go over it right before you renew your renters insurance policy. This way, you'll know if you need to buy more coverage for valuables that exceed your policy limit.

Who needs renters insurance?

To begin with, no state requires renters insurance by law — but that doesn't mean your landlord won't ask for it. Many landlords require renters insurance by including it as a clause in the lease.

Even if your landlord does not require renters insurance, having a policy in place to protect your assets is a good idea. The greater your net worth, the more at stake. It is simply not worth the risk of losing your hard-earned savings as a result of a lack of protection from damage, theft, and liability.

What will I need to buy renters insurance?

In order to purchase a policy, most renters insurance companies require similar documentation. Here is a sample State Farm checklist for obtaining a renters insurance quote:

Your personal information, such as your name, date of birth, and contact information.
Your apartment's address.
Your move-in date, or the date you want coverage to begin.
Names and contact information for anyone else living in the apartment.
Any information pertaining to any business conducted in your unit.
The total value of your personal property.

What is a renters insurance deductible?

If you file a claim, your renters insurance deductible is the amount you must pay out of pocket.

Assume someone enters your apartment and steals $2,000 in electronics. If you have a $500 deductible, you will be responsible for paying this amount to replace it. The remaining $1,500 will be covered by your renters insurance.

It is important to note that if you want a lower deductible, you will have to pay more in premiums. However, don't choose an unaffordably high deductible simply to save money on renters insurance. Always keep enough money in your emergency fund to cover your deductible.

What is the difference between actual cost value and replacement cost?

When purchasing renters insurance, you may have to choose between coverage that reimburses at actual cash value or coverage that reimburses at replacement cost value. This is the amount that the insurance company will pay if your personal property is damaged or stolen.

Actual cost value is an estimate of the fair market value of your belongings at the time of your claim. The insurance company computes this by taking the cost of each item when new and subtracting depreciation based on the item's age.

Pro: Your renters insurance premiums will be lower.
Con: If you file a claim, the insurance company will pay less.

The replacement cost value is the amount you would have to pay to buy each item brand new. You will receive the full amount you paid when you purchased the item brand new, with no deductions for depreciation.

Pro: If your belongings are damaged or stolen, you can replace them with brand new ones.
Con: You’ll have to pay higher insurance premiums.

How much does renters insurance cost?

Renters insurance is becoming less expensive, according to the Insurance Information Institute. In 2019, the average annual premium was only $180, a decrease of more than 5% from 2014. This comes to only $15 per month for renters insurance, depending on whether you choose a policy with one of the cheap renters insurance companies.

While many factors, such as your car, credit score, and driving history, go into calculating your renters insurance quote, your location is a major one. The price of renters insurance varies greatly depending on where you live. Premiums in Minnesota, for example, average only $140 per year, whereas coverage in Mississippi costs nearly twice as much, at $258. When you buy cheap renters insurance online, many insurance companies will also give you a discount.

Money-saving tips

Even though renters insurance is relatively inexpensive, there is no harm in taking precautions to reduce costs. Here are a few money-saving tips:

Combine renters insurance with a car insurance policy from the same company.
Choose a higher deductible (but not one that you cannot afford).
Install a security system in your home.
Inquire about discounts.
Rates from various companies should be compared.

Is renters insurance worth it?

If you're watching your spending, you may wonder whether it’s really worth renters insurance premiums every month Even though coverage costs are generally low, it all depends on how much renters insurance coverage you need. Regardless, it's just another expense deducted from your paycheck.

But the real question is whether you can afford to be without insurance. Would you have enough cash on hand to replace your belongings if someone broke in or there was a fire? What would happen if you were sued for liability if you did? Do you have any assets that a court could seize to compensate you for your losses?

Renters insurance can provide protection in all of these scenarios, protecting you from unaffordable costs and securing what you have. Renters insurance is a worthwhile investment no matter how many zeroes you have in your bank account.

How to file a renters insurance claim

Contact the police first if your claim involves theft or vandalism. Take notes on any officers you speak with and request a copy of the police report. When you file a claim, your insurer will ask for this information.
Contact your insurance company. Inquire about the time limit for filing a claim and what information the company will require to process it.
Prepare your claim paperwork. If your claim involves personal property, you must provide a detailed list of all items that were lost or damaged. Keep receipts for any covered expenses associated with your claim, such as living expenses if you need to relocate temporarily.
File a claim. Depending on the insurer, this may be done online or by completing a paper claim form. Please include all documentation that you have gathered. Inquire how long you can expect to wait for processing, and don't be afraid to request updates on a regular basis.