How Much Renters Insurance Do I Need?

If you’ve recently moved into a rental property, now is the time to start thinking about getting renters insurance. You might assume that renters insurance is one of those things that’s nice to have but not essential. However, renters insurance can come in handy if your personal belongings get damaged or stolen. Without insurance, you’ll have to pay for the full cost of replacing your items out-of-pocket.

There are both pros and cons to having renters insurance, and you should have the full picture before making a decision. You’ll want to consider them when deciding on the right renters insurance policy for you. You might be asking yourself, “How much renters insurance do I need, and how much will my policy cost?” Here’s the information you need.

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      What does renters insurance cover?

      Renters insurance protects you against a broad range of risks. It can be used to replace your personal belongings (barring policy exclusions) after they get damaged or destroyed in a fire. It can also protect you from financial losses if a thief breaks in and steals your stuff by reimbursing you for the cost to replace those stolen items.

      Generally, renters insurance will protect you against theft and a number of natural disasters with a few exceptions (usually excluding floods and earthquakes). Each policy is different, though, so make sure to look over the details of the policies you’re considering to learn which covered perils are included.

      Most renters policies also include additional living expenses (ALE) coverage, also known as loss of use coverage. That means that if you end up in a hotel because a covered incident makes your rental unlivable, your renters insurance can help with that cost, along with expenses, like restaurant meals and other costs related to your claim, while you’re displaced.

      In addition, most renters insurance generally includes personal liability coverage. If a guest slips and falls at your rental and tries to sue you, for example, your policy can help with the costs, from legal defense to any settlements that come from the case.

      In short, renters insurance gives you a lot of protection for very little cost.

      How do I calculate how much renters insurance I need?

      1. Take an inventory

      Your first step is to figure out what you own and how much it’s all worth. A good way to do that is to start by going room-to-room noting everything you own. Your insurer may help you here: some companies, such as Allstate, have mobile apps that allow you to create a record of your belongings.

      Allstate’s Digital Locker guides you through the inventory process, but you can also DIY your home inventory creation. If you need a place to start, this guide can help.

      Once you have a basic list, you can add, edit or delete items; include photos, serial numbers and receipts; or even do a short video walkthrough of your apartment.

      To create your inventory:

      1. Compile a spreadsheet with all of your belongings, with photos to go along with it.
      2. Estimate the cost of replacing each item. Attach receipts or credit card statements whenever possible. This can help you with any insurance claims you need to file down the road.
      3. Pay special attention to valuables. Some renters insurance companies require you to purchase extra coverage for jewelry, electronics and other valuables over a certain dollar amount.
      4. Don’t forget about liability. Most policies start with a minimum of $100,000 of liability coverage. If there’s anything in your apartment (such as a dog) that would increase the chances of someone getting hurt in your rental, you might want even more coverage.

      Once you’ve created your inventory, total up the estimated cost of your belongings and add in the amount of liability coverage you want. That will give you a rough number to shoot for with your coverage. You might also want to include a buffer when setting your coverage limits (for example, purchasing coverage for 20% more than the value of your belongings).

      When it comes to your coverage level, you’ll also need to choose between actual cash value (ACV) and replacement cost coverage. ACV factors in depreciation, so you’ll only get what your old couch is worth now if you opt for ACV coverage. Replacement cost coverage, on the other hand, will give you enough to buy a new couch that was a comparable price to yours when it was new. If you want that extra coverage, you’ll have to pay a bit more for your policy.Don’t skimp on coverage, either. Even a very robust renters insurance policy should be fairly affordable. The Insurance Information Institute (III) reports that in 2017 (the most recent year for which data was available), renters insurance premiums averaged just $180. What’s more, their data shows that the cost of renters insurance policies have been decreasing year after year since 2014.

      2. Estimate how much you’re willing to pay out-of-pocket

      Next, think about your deductible. This is the amount you’ll pay out of pocket if you make a claim. You’ll choose this amount when you purchase your policy.

      The higher your deductible, the lower your premium costs. But be careful not to pick a higher deductible than you can afford to pay just to save money on premiums.

      Common deductibles are $500, $1,000 or $2,000. With some insurance carriers, you might be able to get deductibles as low as $100. It’s unlikely you’ll be able to find renters insurance with no deductible at all.

      One thing to note: there are several sections to your policy, including personal property coverage, liability coverage, additional living expenses and other optional coverages. Your deductible will only apply to your personal property coverage. If you make a claim on liability or medical expenses coverage, there is no deductible.

      3. Determine if you can keep an emergency fund

      Whether you have insurance or not, no one ever anticipates their personal belongings getting damaged or stolen. If you’re not sold on the idea of purchasing renters insurance, another option is to create an emergency fund. This can be a separate savings account that you put one lump sum into or deposit money into over time. By having money already set aside, you’ll be prepared should you need to replace some of your belongings unexpectedly.

      If you choose this route, reserve that money for emergency purposes only. Don’t get tempted to dip into your account so you can have a few extra dollars to spend on something you don’t need. The point of an emergency fund is to have a backup in case you need money in a pinch. If you end up draining the account and you don’t have renters insurance, you could put yourself in debt.

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      [ Read: The Cheapest Renters Insurance Companies ]

      Renters insurance coverage parts

      How do you know what renters insurance to get? To know how much you’ll need, it’s helpful to know a little about the parts of your policy.

      CoverageWhat it doesAverage amount of coverage
      Personal property coveragePays to replace your belongings if they are damaged, destroyed or stolen. This includes furniture, electronics, clothing, books and more$5,000-$50,000
      Additional living expensesPays for hotel costs, meals, laundry, storage and other costs if you have to leave your apartment while it is being repaired after a covered perilBetween 10-20% of your policy’s coverage amount
      Liability/medical expensesProtects you from lawsuits and pays for the medical costs if someone is injured while in your apartment.$100,000

      A careful reading of your policy document will tell you what your coverage consists of and what the maximum amount is that the insurance company will pay out on a claim. Generally, of course, the higher the potential pay-out, the higher your premiums will be.

      Do I need additional coverage? 

      There’s no one answer to the question: how much renters insurance do I need? Different people need different coverage levels, and you might be someone who benefits from additional coverage.

      Although the types of coverage listed above are standard, you can adjust your policy to include add-ons, or riders, that offer additional coverage. These add-ons won’t cost more than a few additional dollars per month, probably adding $20-$40 to your annual premium cost. Typical riders include:

      • Replacement cost coverage: This does not take depreciation into account. If you have a couch, for example, that is ten years old and looking a little ratty, without replacement cost coverage, you won’t receive much on a claim for it. With this optional coverage, however, you’ll receive enough money to buy a comparable couch at today’s prices.
      • Valuable items rider: If you own items of particularly high value — such as jewelry, antiques, home electronics or fine art — you may want to get additional coverage for them to ensure you could replace them if they’re destroyed or stolen. 
      • Personal business property: If you sell on Ebay or Etsy and keep your stock at your apartment, or have another home-based business, you will need additional coverage to ensure that your business items are covered.
      • Identity theft coverage: Some renters insurance policies offer the option to add on protection if your identity gets stolen. This can help you with the costs of reclaiming your identity, and may include support navigating that process.

      On top of these riders, you might also want to consider two separate policies to give you further protection:

      • Flood insurance: Like homeowners insurance, renters insurance doesn’t include flood coverage. If you live in a flood-prone area, you may want to consider purchasing a separate flood insurance policy to protect your belongings if water levels rise.
      • Earthquake insurance: Neither home nor renters insurance include protection against earthquakes. A separate earthquake policy can offer you the protection you need if you live in an area with a high earthquake risk.

      [ See: Does Renters Insurance Cover Storage Units? ]

      What is the minimum renters insurance one can have?

      You might be wondering about the bare minimum if you’re thinking, “How much renters insurance do I need?”

      Unlike auto insurance, states don’t mandate that people carry renters insurance. However, your landlord can require you to purchase renters insurance as a term of your lease. They may specify a minimum renters insurance coverage that you need to have. This protects your landlord in case of damage to the building — they don’t want their tenants trying to hold them liable.

      [ More: Is Renters Insurance Really Necessary? ]

      Regardless of whether your landlord mandates it, it’s probably a good idea to carry renters insurance. Policies are reasonably priced, and often provide a minimum of $2,500 of personal property coverage and $100,000 of coverage for liability claims.

      How to make my renters insurance cheaper

      Renters insurance is already extremely affordable, with policies costing an average of just $15 per month, according to the III. But you still might be able to reduce your premiums even more.

      • Shop around. Even though renters insurance is fairly low-cost no matter where you go, rates can vary from one carrier to the next.
      • Bundle your policies. If you already have auto insurance, consider bundling your policies for a discount. Nearly every major insurance company offers a multi-policy discount.
      • Increase your deductible. In general, insurance premiums go down as deductibles go up. If you’re not worried about a higher deductible, this can be a way to decrease your premiums.
      • Install safety devices. Many insurance companies offer discounts to renters who have certain safety devices in their apartments, such as a security system, smoke detectors or sprinklers. Check with your landlord, as your building may already have these features.

      [ Read: How Much is Renters Insurance? ]

      Things to consider

      • If you bundle your renters insurance coverage with an auto, boat or another policy, you may save on your premium. Most major insurers offer a discount for bundling. The amount of that discount varies from company to company, but doing this will almost always decrease your premium costs. Plus, it’s usually easier for you to manage all your insurance needs with one company.
      • Renters insurance can cover you even when you are not at your apartment. For example, items in storage lockers are generally covered, as are items of value in your car or boat or other remote location. For example, let’s say you leave that pricey new laptop at your table while you go get a refill on your coffee at the local Starbucks. If it’s stolen, it should be covered by your renters insurance (if it’s worth more than your deductible).
      • You may want to consider renters insurance if you’re at college. You may be covered under your parents’ policy, if you’re listed as a dependent, but it’s worth checking to see if they have full coverage for remote locations. And if you live off-campus, you’ll definitely need a policy of your own.

      We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

      Elizabeth Rivelli

      Contributing Writer

      Elizabeth is a contributor to The Simple Dollar, where she reviews insurance providers and policies. She has more than three years of experience writing for top online insurance and finance publications, including Bankrate, Coverage.com and Reviews.com.

      Reviewed by

      • Nashalie Addarich
        Nashalie Addarich
        Insurance Editor

        Nasha Addarich is an editor at The Simple Dollar and a former attorney who specializes in home insurance, auto insurance, life insurance, and savings. She is a former contributing editor to Reviews.com.

      • Angelica Leicht
        Angelica Leicht
        Mortgage Editor

        Angelica Leicht is an editor at The Simple Dollar who specializes in mortgages, mortgage refinancing, home equity loans, and HELOCs. She is a former contributing editor to Interest.com and PersonalLoans.org.