According to data published by the National Multi Housing Council, more than 94 million Americans (nearly one-third of the country’s total population) live in a rental house, apartment, or condominium. However, a 2012 report by the Insurance Information Institute found that only 31% of current tenants have obtained any sort of renters insurance to protect their belongings from damage, loss, or theft.

The issue for most is not affordability (policyholders typically pay no more than $300 per year), but lack of information about coverage options for renters. This article will discuss what is and isn’t covered by a renters insurance policy, the best ways to obtain renters coverage, and a few money-saving tips to help keep your premiums as low as possible.

What Does Renters Insurance Cover?

Although individual plans will vary in their coverage, renters insurance typically covers damage or property losses the policyholder is not liable for; these losses tend to involve certain weather-related events, human intruders, or structural problems. According to MSN Money, renters may cover:

  • Fires, explosions, or lightning
  • Volcanic eruptions
  • Wind or hail storms
  • Riots or civil disturbances
  • Damage caused by aircraft or passing vehicles
  • Smoke
  • Vandalism, theft, or malicious mischief
  • Falling objects
  • Damage caused by the weight of ice, snow, or sleet
  • Damage stemming from sprinkler systems, household appliances, faulty plumbing, heating, or air-conditioning fixtures
  • Damage from artificially generated electrical current that is not caused by missing tubes, transistors, or other electronic components

Most plans do not account for damages or losses caused by earthquakes, floods, or other “catastrophic” weather events. Renters may be able to purchase flood coverage through the National Flood Insurance Program.

In addition, renters insurance will cover additional living expenses (ALE) when one of the aforementioned events leaves your residence uninhabitable. Here’s what to keep in mind with ALE concerns:

  • These expenses include hotel accommodations, vehicle rentals, and meals
  • Most plans will cover these costs at a rate between 30% and 50% of the total policy
    • So based on that rate, if your renters policy is valued at $200,000, then your “additional living expenses” will probably fall between $60,000 and $100,000
  • The insurance provider covers these expenses while your property is rebuilt, but in some cases, these expenses will no longer be covered after a year has passed.

Finally, renters insurance provides what is known as ‘liability protection’:

  • This covers the costs incurred if an individual is injured at your residence and then decides to sue you for medical expenses
  • This coverage also protects against damages to someone else’s personal property that occur at your residence
  • Liability protection includes legal fees and awards to the plaintiff up to a certain amount predetermined by the insurance provider

John Capuano, an associate insurance examiner with the New York State Department of Financial Services, tells The New York Times that many renters incorrectly assume their belongings will be covered under their landlord’s property insurance policy. However, he notes that tenants must obtain renters insurance coverage for all belongings kept within their rental unit. The landlord will only be held liable if damages or losses occur as a result of faulty maintenance or structural damage the landlord has failed to address.

What Types of Coverage Are Available?

Before you begin contacting insurance providers and comparing different policies, it’s important to identify your coverage needs. According to the Insurance Information Institute, this means a thorough inventory of your belongings. Here are a number of things to consider when putting that list together:

  • Begin with your most expensive possessions, such as:
    • Jewelry
    • Artwork
    • Fine china, crystal or silverware
    • Electronics
    • Custom-built furniture
  • But also be sure to cover more common property. The Oregon state website has an excellent homeowner’s and renter’s inventory list, broken down by rooms of the house. Print this list out and fill it out as you move through the property creating your inventory.

Once you’ve created a somewhat exhaustive inventory that includes receipts and invoices, then you can accurately calculate the total value of all your belongings. You’ll also want to take photos of everything so that you have a log of all items in their current condition, and as with car insurance, the more angles, the more thorough the pictures, the better your records will be. Many experts recommend keeping these documents in a safety deposit box or a secure offsite location to ensure they are not destroyed in the event of a disaster. Check out this government guide to storing family and household records to learn more.

ACV Coverage vs. Replacement Cost Coverage

Renters insurance policies offer one of two types of coverage. Actual cost value (ACV) awards beneficiaries with a monetary amount that reflects the value of your items and property just prior to loss, damage, or theft. Replacement cost coverage, on the other hand, awards the beneficiary an amount that will cover the costs of purchasing new items.

The majority of providers offer plans with ACV coverage, and this option typically charges lower premiums. On the other hand, premiums for replacement cost coverage tend to be roughly 10% higher, but beneficiaries stand to earn a larger payout for their belongings than policyholders who have ACV coverage.

Deductibles, Liability, and Additional Coverages

The Renters Deductible

Once the type of coverage has been chosen, you can determine your policy’s deductible, or the amount of money you’ll be required to pay out-of-pocket until the coverage kicks in. Whether you choose ACV or replacement cost coverage, you will not receive any insurance money until costs related to the claim have surpassed the amount of the deductible. The deductible for most renters falls between $500 and $2,000. The higher the deductible, the lower your monthly premium will be.

A renters insurance policy will only cover your belongings up to a certain amount. For this reason, renters are advised to obtain a ‘floater,’ or separate insurance policy that covers individual items, like diamond rings, furs, original artwork, and other expensive pieces of property. For each possession that warrants a floater policy, you’ll be required to provide a receipt of purchase and, if necessary, a certification of recent appraisal. The figures you submit will determine both the monthly premium you’ll pay for the floater policy and the payout you’ll receive if a claim is filed for the item.

Renters Liability Protection

The amount of liability protection you stand to receive is yet another important part of choosing a renters insurance policy. Liability protection will cover you, the members of your family, and your pets in the event that someone files a lawsuit for bodily injury or property damage that occurs at your rental unit. Standard policies usually provide between $100,000 and $300,000 for legal fees and, in the event of a successful lawsuit, the financial payout.

If you’re concerned your liability protection will not provide sufficient coverage in the event of a lawsuit, you can purchase what is known as an ‘umbrella policy’ that kicks in when the initial protection has been exceeded. According to the III, umbrella policies usually cost an additional $150 to $300 per year in exchange for $1 million in supplemental liability protection; if you wish to increase the amount of your umbrella policy even further, the typical rate is $50 to $75 for every additional installment of $1 million.

Visitors and No-Fault Medical Coverage

It’s important to note that most renters policies include no-fault medical coverage for anyone who visits your home and is not included in your plan. If someone is injured on your property, they may receive medical treatment and bill your insurance company for all expenses, which could help negate the need for a formal lawsuit. In most cases, insurance providers cap no-fault medical coverage at $5,000.

Other Things to Keep in Mind

Some policyholders will have additional considerations. For example, policies generally provide a maximum of $2,500 for damaged or lost business equipment. Individuals who work from home may require additional protection to replace these items and cover the costs of lost income.

Individuals who travel frequently and keep their valuables in a storage unit should also seek out additional coverage. Most plans will protect against damaged or lost items that belong to the policyholder but aren’t kept on their property; this is known as off-premises coverage. However, some insurance companies will limit the amount of coverage for off-premises items to as low as 10% of the total policy. For this reason, frequent travelers are encouraged to choose a policy that will provide adequate coverage for all stored valuables; an even less expensive option might be to forego the insurance coverage and store your valuables in a safe deposit box.

Once you’ve carefully considered all of the variables that specifically apply to you, your family members, your pets, and your property, then you will be able to make an informed choice about policy.

Who Should Obtain Renters Insurance?

Generally speaking, anyone who lives on leased property should purchase renters insurance. However, the conditions ― and the costs ― will vary for each policyholder, depending on factors like age and income.

College Students

Many young Americans become tenants for the first time while enrolled in a college, university, or vocational school. Students who live in dormitories or other on-campus residences are covered under their school’s insurance plan, but those who choose to live in off-campus rental units, including sororities and fraternities, should consider obtaining renters insurance.

According to CNN Money, renters insurance will only cover the policyholder’s damaged or lost property; not items belonging to any roommates. However, people who share a residence are often able to purchase joint plans. Since the average college student does not own a lot of valuable or expensive items, basic policies that cost as little as 50 cents per day will typically provide adequate coverage.

Apartment Renter Income Distribution 2011

Apartment Renter Households (000)
  • 2,000
  • 1,800
  • 1,600
  • 1,400
  • 1,200
  • 1,000
  • 800
  • 600
  • 400
  • 200
  • 0
1190
1600
1720
1580
1440
1300
1210
1150
990
700
690
500
580
420
400
320
320
280
190
190
170
180
100
80
70
170
50
30
30
50
20
430
  • $0K
  • $50K
  • $100K

Adult Professionals

Due in large part to the weak economy of the past six years, a large number of today’s adults are choosing to rent, rather than purchase, their home. Others are forced to relocate to a rental unit due to foreclosure. In either case, renters insurance is a wise investment for any working adult who plans to lease property on a longterm basis.

According to Main Street, the premium you’re initially quoted will reflect your current inventory. As you, your spouse, your children, and other people living in your rental unit accumulate furniture, clothing, and more of everything else, you’ll need to revisit your policy and, most likely, increase the amount of coverage.

Elderly People

Due to reasons like a persistent medical condition or the death of a spouse, many men and women over the age of 65 will, at some point, sell their home and move into a rental unit. Many policies will provide a discount to elderly individuals (as well as their spouses, if applicable) who have retired and only work a limited number of hours per week.

Most nursing homes and assisted living facilities do not cover expenses covered by renters insurance, including liability protection. These establishments are protected under their own insurance plans, but coverage does not usually apply to liability protection for individual residents. According to InsureMe, two insurance companies, Asset Guard Endorsement and the Hanover Insurance Group, are among the providers that offer liability protection to seniors residing in these communal facilities.

Money-Saving Tips and Finding a Provider

In September 2013 State Farm agent Tim LaCasse estimated that renters insurance would cost an individual $185 a year – again, this works out to be just over 50 cents a day. Given those figures, it’s reasonable to believe most employed American adults can afford a standard renters insurance policy. But if a decent plan is still out of your budget, there are ways to lower your monthly premiums even more.

Year Homeowners 1 Percent change Renters 2 Percent change
Source: The National Association of Insurance Commissioners via the Insurance Information Institute
2002 $593 10.6% $186 4.5%
2003 668 12.6 192 3.2
2004 729 9.1 195 1.6
2005 764 4.8 193 -1.0
2006 804 5.2 189 -2.1
2007 822 2.2 182 -3.7
2008 830 1.0 182 (3)
2009 880 6.0 184 1.1
2010 909 3.3 185 0.5

Like homeowners insurance, renters often reflects the perceived safety of one’s residence. By installing features in your rental unit that help protect against damage or theft, you could potentially reduce your premium by a considerable amount. According to the National Association of Insurance Commissioners, features that stand to save you money on renters insurance include fire extinguishers and smoke detectors, sprinkler systems, anti-theft alarms, and deadbolt locks. Be sure to notify your landlord or property manager before installing any additional safety features in your rental unit.

Another way of saving money is to bundle your renters coverage with your auto insurance plan. Providers like Allstate and Hartford state that by combining renters with auto you can save between 20% and 35% on renters specifically. However, this option is typically only available to individuals who seek renters and auto coverage from the same provider.

On the other hand, some factors cause renters premiums to increase:

  • People who own certain dog breeds as pets, such as pit bulls and German shepherds, may pay more due to the perceived aggressiveness of these animals.
  • Renters who smoke indoors also face higher premiums due to the large number of rental property fires caused by cigarettes.
    • According to Minnesota’s Smoke-Free Apartments effort, “Although only 19.8% of all residential fires occur in multi-family buildings, 26.4% of all residential smoking fires occur in multi-family buildings.”
    • Furthermore, “The fatality rate due to smoking-related fires is nearly 4 times higher than the overall residential fire rate.”
      What Type of Structure Do Renter Households Live In?
      Structure Type Households (000) Percent Residents (000) Percent
      SOURCE: The National Multi Housing Council
      Single-Family 13,323 33% 39,181 40%
      2 to 4 Units 7,621 19% 18,753 19%
      5 or More Units 17,816 44% 36,562 37%
      Mobile Homes 1.309 3% 3.664 4%
      Other 166 0% 294 0%
      Total 40,235 100% 98,454 100%

How and when you pay your premiums will also make a difference in the overall amount you spend on renters insurance. Policyholders who pay an annual premium save money by avoiding certain fees and added charges often tacked on to monthly premiums. But if you do choose to pay on a monthly basis, consider opting for a payment plan that automatically draws funds out of your bank account or credit card. Some providers will offer a discount for policyholders who choose this option, while others will downright require auto-draft payments.

Finally, it’s important for policyholders to limit the number of renters insurance claims they file. Every time you file an individual claim, your provider will most likely charge you a higher premium ― if not for a temporary window, then indefinitely. Like any other type of insurance, the key to keeping your premium low is only filing a claim when it’s absolutely necessary.

Choosing a Provider

The key to obtaining proper insurance coverage (of any kind) at a reasonable price is finding an honest provider that puts your best interests first.

Seeking out an insurer’s web presence is a great way to evaluate their offerings and the reviews of past and present customers; it also allows you to efficiently compare different insurers. Ask yourself the following when reviewing a site:

  • Does the site feature an aggregator that allows you to compare multiple quotes at once?
  • Is their a customer or landlord presence on the site. How do reviews onsite and on third party sites compare?
  • Does the page urge visitors to obtain a policy immediately, or offer discounts for those who are willing to sign up online without directly speaking to an agent?
  • Are the pages easy to navigate, or is crucial coverage information buried on the site?

Once you’ve found a few promising candidates, schedule one-on-one meetings with agents. Depending on the company’s communication options, these meetings could take place in-person, over the phone or in a real-time online chat. Go into these armed with knowledge about the company’s available policy options, and make sure to ask questions if you need clarification. When meeting with the agent, note the following:

  • Does the agent listen to your questions and provide meaningful answers, or are their replies riddled with confusing ‘business-speak’?
  • Does the agent have extensive experience with renters insurance in particular?
  • Are they knowledgeable about liability protection, bundling options, and other variables as they specifically apply to renters insurance?
  • Is the agent hesitant to provide an accurate premium quote on the spot?
  • Does the agent put any sort of pressure on you to obtain a policy that day?

All of these factors should aid you as you decide on a renters insurance provider.

Filing a Claim

However, the true test of your relationship with your insurance agent will come if and when you decide to file a claim. According to SF Gate contributor Abaigeal Quinn, renters claims should be filed as quickly as possible; expediency ensures that the insurance company can quickly make lodging arrangements for your family and address any ongoing issues at your residence (such as structural damage). Renters who wish to file a claim must provide the following information to their insurance company:

  • Policy number
  • Home address
  • Time and date of damage/loss
  • Details about the nature and (if known) cause of the occurrence
  • Type and amount of damage/loss you’ve incurred; refer to your inventory to determine monetary value of all affected property

If the claim stems from vandalism or theft, you’ll also be required to submit a police report and send your provider an official copy. Once these matters have been attended to, then you may submit receipts, invoices, and other documents from your inventory to the insurance provider. This will establish the value of all destroyed property, and increase your chances of receiving a fair payout. Any photographs of your property prior to the event will also help your insurance company calculate the amount of total damage.

Policyholders who maintain a thorough inventory, file insurance claims in a timely manner, and provide detailed information to their carrier are much more likely to receive a fair payout from their policy.

The Bottom Line

The fact is, most of us can’t afford going without renters insurance. The cost of replacing virtually everything you own or financing the medical treatment for someone who sustains an injury in your rental unit can easily exceed $1 million, while a standard renters insurance policy will cost you less than one dollar per day. As you explore renters insurance options, it’s important to keep the following in mind:

  • Your policy should provide adequate coverage for replacing damaged or lost items, liability protection, and (if needed) relocation expenses.
  • The number of items you want to insure and their total value should determine whether you choose ACV or replacement cost coverage, and if any floater policies are warranted.
  • Maintaining a detailed inventory and promptly filing insurance claims will ensure the highest possible payout.
  • Coverage options will vary based on your age, income, and type of rental
  • Installing safety features, paying an annual premium, and filing a limited number of claims are all effective ways to lower your renters insurance costs.
  • Most importantly, everyone who rents a house, apartment, or condominium should obtain some type of renters insurance coverage.