How Renters Insurance Works

Young couple reviewing renters insurance options
Photo: Milaton Brown/Caiaimage/GettyImages

For renters, insurance isn't always a top priority. For some people, it may rank up there with getting alien abduction insurance—an extra cost that doesn't make a lot of sense. However, a renters insurance policy is an important way to protect your financial security, and landlords often require tenants to have one. To help you understand whether you need it, let's look at what renters insurance is, what it covers, and what it typically costs.

How Does Renters Insurance Work?

You might assume that your landlord's property insurance would cover damage to your possessions in the event of a disaster. But you'd be wrong. Your landlord's insurance only covers the structures and common equipment for the building, along with your landlord's liability for injuries on common property. But for your personal possessions, you need renters insurance.

Many landlords will require you to provide proof of renters insurance within a certain time frame after signing a lease. You'll need to speak with your insurance agent, and they will help you think through how much coverage you need, along with any optional riders.


Once you have a renters policy, you can file a claim whenever covered damage occurs. Your insurance will cover the loss or damage, minus any applicable deductible.

What Does Renters Insurance Cover?

There are some basic coverages you can expect with most renters insurance policies, including:

  • Your contents or personal belongings at home
  • Contents or personal belongings away from home 
  • Your personal liability for injuries to others while on your property (both for medical payments and lawsuits)
  • Additional living expenses, such as what you pay for a place to live while your insured apartment is being repaired or is otherwise unlivable due to a claim

Renters insurance policies will typically cover your personal property in the event of a disaster such as a fire, flooding from a pipe burst, theft, vandalism, and other similar events. Earthquakes or flooding from natural causes are usually not included.

Renters insurance will help protect all the valuables that you store in your home. Your content coverage should include things such as your mobile devices, computers, your bike, and just about anything else—from your shoes to dishes to furniture. It will cover everything you own (subject to special limits of the policy, of course).

When you set up your policy, you will need to conduct a self-inventory to decide the total amount of coverage you need. Some people underestimate the value of their belongings, but even with a minimalist lifestyle, you will have certain special items that you value. Take time to think carefully about everything you own. If you aren't prepared to cover the loss of these items out of pocket, you need renters insurance.

Example: The Bathtub Incident

Imagine you are sitting in your living room watching a movie and all of a sudden you hear dripping water. As you walk toward your living room, a piece of your ceiling cracks open and water starts pouring in. Your TV is soaked along with all nearby electronics. You call your insurance to find out what to do.

Because you have an insurance policy:

  • They will cover the costs of the cleanup.
  • They will pay for you to live in a hotel during renovation.
  • They will compensate you for losses or damages, such as your TV.

Without renters insurance, you would be on the hook for all this. You might also find yourself in a dispute with your neighbor or landlord as everyone scrambles to find someone to compensate them for losses.

That's only one example. Your policy would likely fill in the gap if you damaged your computer while overseas or if someone fell and broke their leg on your property. Some policies even cover your liability if you damage someone else's property outside your own apartment. This is known as "off-premises" coverage, and it's a reflection of the fact that your policy covers your belongings, whether they are in your apartment or not. Chances are good you'll need help from insurance at some point.

Actual Value vs. Replacement Cost Coverage

When you're looking at coverage options, it's important to know whether your policy will cover be on an actual cash value basis or a replacement cost basis. Actual cash value plans will only pay the market value of the items at the time of loss. The market value is depreciated (think of it as the garage sale price) and unlikely to give you the funds to replace the loss with a brand new item. Replacement cost coverage will cover the cost of a new replacement.

Remember to discuss the limits in your policy with your insurance representative, as well as the details on how claims are paid.

Do I Need Renters Insurance?

Even if your landlord doesn't require you to have renters insurance, that doesn't mean it's not a smart investment. You will have to consider your broader financial situation to decide.

If disaster strikes or you experience a robbery, could you cover the cost of replacing many or all of your possessions? What if you were displaced from your apartment for several months? If someone were injured in your apartment, could you handle the potentially substantial costs of a lawsuit and medical bills?

Most people cannot afford to foot these bills out of their own pockets. If you find yourself on the hook for these expenses and don't have the money available, you may be forfeiting much of your future earnings.

What Does Renters Insurance Cost?

In its 2019 rate review, which looks at data for 2017, the National Association of Insurance Commissioners reported that the average rate for renters insurance in the U.S. was $180 per year. At just $15 per month, this makes renters insurance one of the most affordable forms of insurance you can buy.


Your choice for deductible amount can impact the cost of your policy significantly. For instance, the difference between a $1,000 and $500 deductible could be as much a 25%.

Actual costs vary by region, coverage amounts, deductible, and other policy options. Your insurance agent should be able to give you several options with a range of coverage and premiums.

How Do I Get Renters Insurance?

Setting up a renters insurance policy is easy. Once you have conducted an inventory of your belongings, you'll have a reasonable idea of how much coverage you need. Shop around by visiting insurance providers online or calling them for quotes for different policy options.


When shopping for insurance, It's always smart to get quotes from several companies. You might also get the best rates by bundling different policies with one provider. For instance, if you have auto, life, and renters insurance with the same company, you might receive a "multi-line" discount.

The Bottom Line

Getting renters insurance is an important way to protect your financial future. Even if your landlord doesn't mention it, it should be one of the first things you look into when you're renting an apartment. If you take the time to do an inventory of your possessions, you may be surprised just how much they would cost to replace.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. National Association of Insurance Commissioners. "For Rent: Protecting Your Belongings With Renters Insurance."

  2. National Association of Insurance Commissioners. "Homeowners Insurance," Select FAQs and Questions, "What's Not Covered in My Policy?"

  3. National Association of Insurance Commissioners. "NAIC Releases Report on Homeowners Insurance."

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