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Renters insurance is a great deal for most people and is almost always worth getting. Most policies are inexpensive and insure you in a variety of situations. Plus, many landlords require the people who occupy their properties to purchase renters insurance.
On this page:
- How renters insurance works & what it protects you against
- How to get a cost-effective renters insurance policy
- Where to find renters insurance
How renters insurance works & what it protects you against
Renters insurance works very similarly to other insurance policies. You start by purchasing a policy from an insurer of your choice. You can customize many aspects of the policy, such as the amount of protection and the types of events for which you want protection.
For example, you can get insurance for the things that you keep in your home and purchase liability coverage for things that happen to visitors inside your apartment.
You pay for the policy, either upfront annually or on a monthly basis, and receive protection as long as your payments are current. If something happens, you can file a claim with your insurer and the insurer will reimburse you for the expense you incur, up to policy limits.
Some things that renters insurance commonly covers include:
- Weather-related damage
- Falling objects
- Smoke damage
- Liability for injuries to visitors
Renters insurance policies frequently exclude things like:
- Motor vehicles
- Undocumented items (things you can’t prove you own/owned)
- Items belonging to uninsured roommates
- Pest control and damages caused by pests
Generally speaking, renters insurance is a great deal for most people. The average policy costs just $16 per month and offers thousands of dollars worth of protection, among the following coverage types:
- Property—Renters insurance protects your property, even if it isn’t in your apartment. If someone breaks into your home and steals your laptop or if someone steals it from you at the library, renters insurance has you covered.
- Personal liability—If someone visits your home and gets hurt, renters insurance protects you if you’re found liable for the injury. This can help you pay for the other person’s medical bills and associated costs.
- Additional living expenses—If your home is damaged to the point where it isn’t habitable, this coverage can help you find another place to live temporarily. It covers costs like hotel rooms, restaurant bills, and pet boarding costs.
- Medical payments—If someone is injured on your property, this coverage can pay their medical bills, even if you aren’t found to be liable for the injury.
How to get a cost-effective renters insurance policy
One thing to remember about renters insurance is that policies are highly customizable. You can choose the exact coverage that you want or need, which helps you customize the cost of your insurance. Knowing what coverages are important can help you get cost-effective insurance.
Choose the right coverage
Coverage limits are one of the biggest factors in determining the cost of your insurance policy. Think about the value of what you own and how much it would cost to replace it. Aim to have a property coverage limit of roughly this amount.
If you only own $20,000 worth of property, there’s no reason to have $200,000 of property coverage. Adjust other coverages, like liability and additional living expenses, similarly.
Also, check your insurer’s exclusions and riders. Excluding more events from coverage can make the policy cheaper. Adding riders to cover more things, like floods or earthquakes, increases the cost.
Many insurers also offer discounts. You might save money if you’re part of alumni programs, work for certain companies, or bundle your coverage with different types of insurance. If you own a car, you may be able to save money by bundling your renters and car insurance.
Change what happens when you file a claim
Consider whether you want to use actual cost coverage, which reimburses you for the current value of the things that are damaged or stolen, or replacement cost coverage. Replacement cost is more expensive because it pays for the cost of replacing damaged goods with new items.
Adjusting your deductible can also change your policy cost. Higher deductibles mean you’ll pay more out of pocket when you make a claim, but pay less on your insurance premiums. If you can handle that higher cost out of pocket, it can be worth choosing a higher deductible.
Renters insurance vs self-insuring
If you’re not sure if renters insurance is right for you, another option is to self-insure. Self-insuring means making sure you have enough money set aside in an emergency fund to recover from something like damage to your home or theft.
Self-insuring is a fine option for people with large emergency funds, but it has a number of drawbacks. One is that it usually costs a lot more than you’d think. You probably underestimate how much it would cost to replace all your clothes, electronics, and other belongings if your house were to burn down.
Another is that it’s incredibly difficult to build an emergency fund sufficient to self-insure. Even if you do build that emergency fund, you’ll have to deplete it if something does happen, leaving you vulnerable to other emergencies, like a medical emergency or car breakdown.
Comparing paying for renters insurance vs self-insuring
Self-insuring is an option for some people, but it’s important to understand the cost of self-insuring compared to purchasing a renters insurance policy. Typically, renters insurance is cheap enough that even people with savings can benefit from renters insurance.
The table below describes a few incidents that renters insurance covers, the amount you’d have to pay for renters insurance to cover that scenario, and the cost you’d pay out of pocket if you didn’t have renters insurance.
In addition, it outlines how many years you’d have to go without insurance to save money compared to buying a renters policy.
We used a quote from Nationwide to estimate the cost for someone who needs the following coverage:
- $30,000 personal property
- Replacement cost
- Inflation protection
- $100,000 personal liability
- $100,000 personal injury liability
- $1,000 medical payments to others
- $500 deductible
Note: Adjusting the coverage and deductible can increase or decrease the cost.
|Situation||Renters Insurance Cost||Self-insuring Cost||Break Even|
|Stolen laptop||$251.76/year + $500 deductible||$1,000||1.33 years|
|An injury to a guest that you aren’t liable for||$251.76/year + $500 deductible||$3,000||3.99 years|
|Your apartment burns down, and you need to replace your things and live in a hotel for a few months||$251.76/year + $500 deductible||$40,000||53.21 years|
|An injury to a guest that you are liable for||$251.76/ year + $500 deductible||$75,000||99.76 years|
In many cases, you only save money by self-insuring if the event in question never happens in your entire life, or even multiple lifetimes. Given the low cost of renters insurance, it’s worth paying the small amount for the peace of mind it offers.
Where to find renters insurance
Renters insurance is very common, so there are a lot of insurers that offer coverage. You should shop around with multiple providers to find one that offers the protection you need at the best possible cost.
A good place to start comparing providers is our list of the best renters insurance companies.
Author: TJ Porter