What Is Renters Insurance and Why Do You Need It?

Even if you rent rather than own your place, having insurance is still a good idea. Here’s what renters’ policies cover, what they can cost and why you should consider getting one.

Written by Lindsey Danis / January 11, 2022

Quick Bites

  • Some landlords require renters insurance.
  • A policy protects you in case your belongings get damaged or are stolen.
  • If you’re a dependent, your parents’ homeowners insurance policy may offer you some protection too as a renter.
  • Depending on where you live, you may be able to add roommates to your renters insurance policy.

What would you do if your apartment had water or smoke damage, or if your belongings were stolen? If you’re like most renters, you’d have to pay to replace your items out of your own pocket. 

If you had renters insurance, however, you’d be able to get your belongings replaced or repaired, less a deductible. Pretty good deal, right? Yet only 41% of renters have this coverage, according to the Rental Housing Journal.[1]

To help you decide whether renters insurance is right for you, we show you the ins and outs of what’s covered, and answer crucial questions like whether you can share a plan with roommates.

Inside this article

  1. What is renters insurance?
  2. Types of renters insurance
  3. Coverage amounts
  4. How much insurance do you need?
  5. How to file a claim
  6. Who needs renters insurance?
  7. What does it typically cost?
  8. How to get renters insurance
  9. Renters vs. personal liability

What is renters insurance?

According to the National Association of Insurance Commissioners (NAIC), renters insurance offers several important protections for renters, like: 

  • Personal property coverage so you can repair or replace your possessions if they’re damaged or stolen

  • Liability insurance in case someone’s hurt at your place

  • Liability insurance if someone else’s property is damaged at your place[2]

Renters insurance helps protect you in case your stuff is damaged by natural or human-caused disasters, such as fires, floods or break-ins. It pays for repair or replacement after loss due to damage or theft, and covers your liability for things like property damage or personal injury, according to State Farm.[3]

Your landlord insures the property against damage and theft, but that insurance doesn’t cover your personal possessions. Nor would it cover you for things like legal liability if someone were injured while visiting your apartment. 

Types of renters insurance

There are two general types of renters insurance policies, according to NAIC. 

Broad Form Renters Insurance 

These policies cover against specific named events, like theft, fire, smoke or water damage. With this kind of policy, you’d be able to replace items damaged after a wildfire, a burst pipe, flooding in the basement or a break-and-enter, to give a few common examples. 

Comprehensive Insurance 

These policies cost more and provide more coverage. These policies tend to offer protection in a wider range of circumstances. If your community experiences natural disasters that aren’t covered by broad form renters insurance, like hurricanes, you’ll probably want to pay more for the extra protection.

Individual policies can have exclusions, or circumstances that aren’t covered. Understand what a policy covers and what it leaves out, so you can determine which type of coverage is appropriate for you.

Coverage amounts

Renters insurance policies differ in how they determine the replacement cost for items. Some policies use the actual cash value of an item. Others process claims using what’s known as replacement cost coverage, which is how much it would cost you to replace the item.

Here’s how they differ. Say you bought a sofa for $1,000, and it was ruined in a fire. 

With replacement cost coverage, you would be able to buy a similar sofa and get the expense fully covered. 

With actual cash value, the value of the claim depends on the value of your sofa at the time of the claim. Your $1,000 sofa may have lost value, depending on its age and condition. So you’d probably walk away with less money to cover your new sofa.

How much renters insurance do you need?

When you contact insurers for a quote for rental insurance, you’ll typically be given some baseline figures. As with other types of insurance, you can adjust your coverage limits to buy more protection. 

You might want to pay more for coverage if you have expensive technology, jewelry, electronics or other possessions. Baseline coverage amounts aren’t likely to cover the costs to replace these items.

You might also want to tack on additional coverage for things left out of renters insurance policies. Insurance companies refer to this extra coverage as a “rider.” 

For example, let’s say you live in a flood zone but flooding isn’t covered under the broad or comprehensive coverage levels. The insurer could let you tack on flood coverage for an extra fee.

Tip: So you have an expensive item like a diamond necklace? You might need to pay extra to insure it against theft or damage. This may require an appraisal, where a qualified third party provides a valuation of the necklace’s worth.

How to file a claim

To give you an idea of how to file a claim and what happens once you do, we asked The New Jersey Manufacturers Casualty Insurance Company (NJM) to explain what happens when a policy holder files a claim with them.[4] 

The first step you’ll need to take is to call the insurance company or file a claim on its website. There’s usually a time limit for filing claims, like 48 hours after an incident. Your policy will make this clear. 

Your insurance company will ask you for information, such as: 

  • Photos 

  • Videos 

  • An inventory of damaged items

  • An estimate to repair an item

Once you provide the proof the company requests, your claim gets processed. During this stage, someone might come out to verify the extent of the damage. 

Once the insurer has checked everything, it’ll process the claim payment, minus a deductible. 

“Deductible” is a term you might know from auto insurance or health insurance. It’s the portion that you have to pay out of pocket before insurance coverage kicks in. A typical deductible for renters insurance might be $500. 

Tip: Always check the deductible in your policy before you file a claim, because there might be times when filing a claim isn’t worth it. If an item that was stolen or damaged costs less than your deductible, for example, the insurance company won’t pay out for it because you have to meet your deductible first.

Who needs renters insurance?

Do you need renters insurance, or is it a nice-to-have if you’ve got extra cash? Honestly, it depends. 

Your landlord might require you to buy renters insurance. That would be stated in your lease or the apartment listing. You’ll know upfront that you’ve got to purchase coverage, and you can crunch the numbers to figure out whether you can swing the added expense. 

It might seem odd that your landlord could require you to buy insurance, but consider it from their perspective. 

If your friend falls on the back deck, or your puppy bites a neighbor, or something goes missing from your apartment, your landlord doesn’t want to be left holding the bag, so to speak. Requiring you to have renters insurance covers them against claims like these. 

Even if your landlord doesn’t require renters insurance, it might be a good idea to protect your own finances. 

There are some times, however, when you might not need this coverage.

If you’re a dependent—say you’re in college and renting off-campus—you could be covered under a parent or guardian’s home insurance policy if they’re homeowners. It’s not uncommon for these policies to allocate a portion of the coverage, say 10%, to dependents. The best way to find out whether this affects you is to have your parents or guardians check their home insurance policy.

Renters insurance usually covers one individual, not you and your roommates. But in some states, you can add your roommate to your policy if they’re on the lease with you. You’ll probably want to up the coverage limits if you do this, so there’s enough to cover everyone’s stuff.[5]

What does renters insurance typically cost?

Renters insurance can cost from $15 to $30 per month, according to the National Association of Insurance Commissioners. 

Costs depend on factors like the size of your apartment, the location and what you own. If you have nice things, it’ll cost more to insure them than if you shop IKEA or tag sales, for example.

How to get renters insurance

It’s easy to get quotes from insurance companies online. If you already pay for another type of insurance, like auto insurance, you may get a special discount for buying a renters insurance policy from the same company. 

With any type of insurance, including renters insurance, comparison shopping is key. Get three or more quotes from insurers. Compare the policy premiums, coverage and exclusions, deductibles and personal liability insurance, and pick the policy that meets your needs.

Renters insurance vs. personal liability insurance for renters: what’s the difference?

Renters insurance and personal liability insurance offer different coverage for different purposes. Renters insurance covers damage or theft of personal property while you’re renting. Personal liability insurance coverage is included in a typical renters insurance policy, but serves a distinct purpose.

Personal liability coverage specifically pays for things like: 

  • Someone’s medical bills if they’re hurt while visiting your place

  • Property damage if something is damaged at your place

  • Legal expenses if you’re sued over something that happens at your place

“Liability” in the coverage name helps you remember the difference between these two. Anytime you could be potentially liable or at fault for something, the personal liability coverage would kick in. Renters insurance covers loss or damage in other cases. 

Article Sources
  1. Rental Housing Journal, “Only 41 Percent Of Renters Carry Renters Insurance,” https://rentalhousingjournal.com/only-41-percent-of-renters-carry-renters-insurance.
  2. National Association of Insurance Commissioners, “For Rent: Protecting Your Belongings With Renters Insurance,” https://www.naic.org/documents/protecting_your_belongings_with_renters_insurance.htm.
  3. State Farm. “Do I Really Need Renters Insurance Coverage?” https://www.statefarm.com/insurance/home-and-property/renters/coverage-options.
  4. New Jersey Manufacturers Casualty Insurance Company. “How Does a Renters Insurance Claim Work?” https://www.njm.com/ask/how-does-a-renters-insurance-claim-work.
  5. American Family Insurance, “Does My Renters Insurance Cover My Roommates?” https://www.amfam.com/resources/articles/at-home/renters-insurance-and-roomies.

About the Author

Lindsey Danis

Lindsey Danis

Lindsey Danis is a writer covering food, travel and personal finance. She's written about personal finance for Business Insider, NextAdvisor, The Penny Hoarder, and elsewhere.

Full bio

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