What Is Renters' Insurance and What Does It Cover?

As a landlord, it’s wise to have insurance to protect your investment when you rent out an apartment or a home. But that type of insurance policy won’t safeguard your possessions as a tenant. In the event of a fire, theft, or another type of disaster you need your own insurance—renters’ insurance—to cover your personal belongings.

Of course, no one likes to add an additional expense to their household budget. But paying for renters’ insurance is typically a worthwhile purchase thanks to the protection it provides.

Below you’ll find more information about how renters’ insurance works. This guide will also help you learn about the types of losses that are and are not covered by renters’ insurance along with the average cost of this type of insurance policy.

How does renters’ insurance work?

Renters’ insurance is a type of insurance policy that can protect you from covered losses when you rent an apartment, condo, or home. Although renters’ insurance won’t cover the dwelling where you live, it could help pay for the replacement of personal possessions such as furniture, electronics, appliances, and other items you keep in your apartment or rental home.^[1]

When a covered loss takes place at your rental property (see below), you can file a claim with your insurance company. Filing a claim allows you to ask for reimbursement or compensation from your insurance provider when a covered incident occurs—up to the policy limit.

Keep in mind that you may only have a few days to submit a claim to your insurance company after the damage or loss takes place, depending on the terms of your insurance policy. And in some situations you may need to notify your landlord and perhaps the police as well.^[2]

Once you file a renters’ insurance claim, an insurance adjuster will review the situation and may request more details. (Tip: It’s wise to keep a detailed inventory of your personal belongings in case you ever need to file a claim.)^[1]

If the adjuster approves your claim, you’ll receive a payout—minus any deductible you owe. Yet there’s also a chance that the adjuster could deny your claim. So it’s helpful to understand the types of losses renters’ insurance does and does not typically cover in advance.

What is covered by renters’ insurance?

The protection you receive from a renters’ insurance agreement, also known as tenants’ insurance, can vary based upon the terms of your policy. Yet in general, renters’ insurance might provide you with financial protection if your personal property is damaged by any of the following issues.

• Theft
• Vandalism
• Fire
• Hail
• Lightning
• Windstorm
• Frozen plumbing system
• Impact by vehicle ^[3]

Renters’ insurance may also include coverage for additional living expenses if the home or apartment you’re leasing is damaged by a covered peril. For example, if there’s a fire in your rental home, you may face temporary expenses while you’re searching for a new place to live or waiting for repairs to take place. If your renters’ insurance provides coverage for additional living expenses it might cover hotel expenses, meals at restaurants, and other costs during this period.^[1]

What isn’t covered by renters’ insurance?

Whether you’re a homeowner or you rent, no insurance policy will cover every type of loss. So, even if you take out a renters’ insurance agreement to protect yourself, it’s wise to look over your policy in detail and understand its limitations.

In general, renters’ insurance does not cover the following.

• Business possessions: There are more than 33 million small businesses in the United States, many of which people operate directly out of their homes. Yet if you keep business equipment (even electronic equipment like a laptop) in your apartment or rental home and a fire or some other covered peril causes damage to that equipment, your renters’ insurance policy may not cover that type of loss.^{[4] [3]}
• Valuables: Some types of personal property, like jewelry or expensive collectibles, may have limited to no coverage under a renters’ insurance policy. But there’s a potential workaround for this issue. If you want to protect specific items in the event of loss, like a wedding ring or a baseball card collection, you can talk to your insurance provider about paying more for additional scheduled personal property coverage.^[5]
• Floods or earthquakes: If a flood or an earthquake causes damage to your personal belongings, renters’ insurance won’t help you cover those losses. So, you may want to consider purchasing additional insurance protection if you rent in an area that’s subject to either of these types of natural disasters on a frequent basis.^[1]

What is renters’ liability insurance?

It’s also common for renters’ insurance to provide liability coverage for tenants. This type of protection could be useful in the event that you or any household members whom you list on your insurance policy are named in any lawsuits relating to property damage or injury to others.

Here’s an example of how liability coverage for tenants might protect you. Imagine that your child accidentally damages a neighbor’s fence and the neighbor sues you to pay for the repairs. A renters’ insurance policy might protect you in this situation.^[1]

Another scenario where renters’ liability coverage might be useful could be in the case of injury. If a guest visits your home and falls down the stairs in your apartment or rental home, this type of insurance protection might cover the cost of related medical bills.^[5]

It’s also worth pointing out that some landlord policies may include medical liability protection for the premises as well. If your landlord carries this type of protection, it might make you feel more comfortable about carrying less liability coverage yourself. But keep in mind that carrying less liability protection as a renter is always a risk, since you don’t have control over changes your landlord might decide to make to their insurance policy without notifying you.^[6]

Of course, if you’re interested in purchasing liability protection, you should confirm that any renters’ insurance policy you’re considering includes it. You’ll also want to review policy limits and restrictions that different providers offer. Taking these steps can help you make sure you have the coverage you need in case you’re ever involved in a lawsuit.

The average cost of renters’ insurance

According to Forbes Advisor, the average cost of renters’ insurance is around $13 per month ($157 per year) for $15,000 worth of personal property coverage. If you want a higher coverage limit—around $30,000—the average premium increases to $199 per year. Meanwhile, for a $50,000 renters’ insurance policy, the average annual insurance rate is $260 per year.

Of course, it’s important to understand that insurance companies consider a variety of factors when setting the price for renters’ insurance premiums. So, the price you pay for renters’ insurance could vary compared to another tenant’s insurance rate.^[7]

Some of the details that may impact your renters’ insurance rate may include the following.

• Location: Certain cities and states enjoy more affordable insurance rates than others. If you’re renting in an area that has a high crime rate, for example, your premium is likely to be more expensive than it would be elsewhere. Zip codes that experience severe weather on a frequent basis may also pay higher insurance rates compared to other locations.^[8]
• Desired amount of coverage: Insurance policies feature limits—the maximum amount of money an insurance company will pay out in the event of a covered loss. The more protection you desire, the more an insurer will charge you.
• Insurance provider: With any type of insurance (e.g., renters’ insurance, homeowners insurance, car insurance, etc.), the company you choose to purchase coverage from can have a big impact on the price you pay for coverage. Therefore, it’s important to shop around and compare rates from several insurance companies. Not only should you compare multiple insurance providers before you take out renters’ insurance, it’s also wise to rate shop before your policy renews each year as well to make sure you’re still getting the best deal available.
• Deductible: A deductible is the amount you pay upfront, out of your own pocket when you file a claim that’s covered by your insurance policy. If you choose a larger deductible on your renters’ insurance policy, it could help you save money on your premium. But you should probably only consider this option if you have a sizable emergency savings fund to rely on if something goes wrong.^[9]
• Claims history: If you’ve filed claims in the recent past, you’ll likely pay higher insurance premiums than you would otherwise. When you file a claim, your insurance company may believe there’s a higher risk you’ll do so again in the future. And since claims cost insurers money, they’ll often charge you a higher rate to offset the possibility of a potential payout.
• Credit score: Some insurance companies may check your credit-based insurance score when setting your rates. These types of insurance scores may help insurers predict the likelihood that you’ll file a claim. A good credit score could work to your advantage and might help you save money. But bad credit could cost you.^[10]
• Pet ownership: Owning a pet is a big financial commitment. As a renter, one cost you might not anticipate as a pet owner is the fact that your furry friend could make your renters’ insurance more expensive. When you have a pet, you may need to purchase additional liability coverage in case your dog bites another person. Limitations may apply as well. And unfortunately, insurance providers may exclude some pets or specific breeds from coverage altogether.^[11]

Insurance companies consider the factors above and others to assess your risk as a potential customer. The lower your risk, the lower your insurance rate should be. But if details in your insurance application indicate that you’re more likely to file a claim that could cost the insurance company money, the insurer is likely to charge you a higher premium in order to offset that risk.

Do I need renters’ insurance to rent an apartment?

Most states don’t require you to purchase renters’ insurance to lease an apartment or a home. But some landlords could have different rules for their tenants.

If you’re interested in a specific home or apartment, one of the questions you should ask before leasing is if you need to agree to maintain a current renters’ insurance policy. Landlords may require a current renters’ insurance policy to avoid potential disputes in cases where there’s damage to the tenant’s personal property.^[12]

Next steps

Whether you’re a long-term renter or you’re renting while you prepare your credit to buy a house, it’s important to protect yourself from potential financial loss. Yet you can try to find the most affordable renters’ insurance available by taking the time to compare options from multiple insurance providers.

Remember that you may be eligible for discounts or better rates from some insurance companies if you have good credit. So, finding ways to build credit might work in your favor if you’re looking for opportunities to save money.

Your rent payments themselves are a potential way to build credit for the future. Rent reporting may help you establish credit with one or more of the three credit bureaus. The good news is that some third-party rent reporting services, like Self, give you the ability to add rental payment data to your credit reports for free.

Sources

1. Insurance Information Institute (iii.org). “Renters Insurance.” https://www.iii.org/article/renters-insurance
2. Nolo.com. “Renters’ Insurance Claims for Damaged or Stolen Property.” https://www.nolo.com/legal-encyclopedia/renters-insurance-claims-damaged-stolen-property.html
3. Nationwide.com. “What is renters insurance?” https://www.nationwide.com/lc/resources/home/articles/what-is-renters-insurance
4. USChamber.com. “The State of Small Business Now.” https://www.uschamber.com/small-business/state-of-small-business-now
5. Allstate.com. “What is renters insurance?” https://www.allstate.com/resources/renters-insurance/what-does-renters-insurance-cover
6. Allstate.com. “What does landlord insurance cover?” https://www.allstate.com/landlord-insurance/coverage-policies
7. Forbes.com/advisor. “Average Renters Insurance Cost For 2024.” https://www.forbes.com/advisor/renters-insurance/how-much-is-renters-insurance/
8. Experian.com. “7 Factors That Impact Your Renters Insurance Cost.” https://www.experian.com/blogs/ask-experian/factors-that-impact-renters-insurance-cost/
9. Progressive.com. “What are home and renters insurance deductibles?” https://www.progressive.com/answers/home-renters-insurance-deductible/
10. Experian.com. “Does Renters Insurance Require a Credit Check?” https://www.experian.com/blogs/ask-experian/does-renters-insurance-require-a-credit-check/
11. Progressive.com. “Does renters insurance cover pets?” https://www.progressive.com/answers/does-renters-insurance-cover-pets/
12. Allstate.com. “Is renters insurance required?” https://www.allstate.com/resources/renters-insurance/is-renters-insurance-required

About the author

Michelle Lambright Black is a nationally recognized credit expert with two decades of experience. She is the founder of CreditWriter.com, an online credit education resource and community that helps busy moms learn how to build good credit and a strong financial plan that they can leverage to their advantage. Michelle's work has been published thousands of times by FICO, Experian, Forbes, Bankrate, MarketWatch, Parents, U.S. News & World Report, and many other outlets. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).

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