The Ultimate Guide to Renters Insurance

While nearly all homeowners carry home insurance, just 37% of renters hold the equivalent. Leaseholders may not have a dwelling to protect, but they do have personal property and financial assets at stake. Without renters insurance, those items could be lost in an instant due to disaster or crime.

Whether you’ve just signed a lease or have been living at your current address for years, the best renters insurance is always a must. Policies take just a few minutes to purchase and often cost less than a dollar per day.

The Simple Dollar is here to explain everything you need to know to find the best renters insurance.

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      What does renters insurance cover?

      Unlike homeowners insurance, renters insurance doesn’t cover the physical unit you’re occupying.

      It does, however, cover its contents and these additional areas that can be extremely useful in unforeseen scenarios.

      • Personal property: While your landlord’s homeowners policy covers the structure of your rental, it doesn’t offer any protection for the personal belongings you keep inside it. Personal property coverage helps you replace these items if they are damaged or stolen.
      • Additional living expenses: If your unit is seriously damaged and becomes temporarily unlivable, a renters insurance policy can cover costs such as hotels and meals while you’re displaced.
      • Liability protection: According to the law, you can be held financially responsible if you injure another person or damage their property, even if it’s accidental. Liability coverage helps pay for your court costs and any judgments awarded to the other party if you’re sued, even if it didn’t happen at home.
      • Medical payments: You may have the option to add medical payments coverage to your renters insurance quote. Guests who visit your property and suffer an injury can have their medical bills covered with this type of coverage, although it won’t apply to you or anyone else who lives there.

      The best renters insurance policy will cover each of these areas.

      What to know when buying renters insurance

      When purchasing renters insurance, there are a few components to know about your policy. Each type of coverage carries a different limit, which is the maximum dollar amount the insurance company will pay when you file a claim. If you choose a limit that is too low, it might not be enough to cover all your damages; too high, and you’ll overpay for coverage you don’t need.

      Make sure your liability limit is sufficient to cover your net worth, which is the total value of everything you own ­– including cash, investments and property ­– minus any debts. Your personal property limit only needs to be high enough to replace every single one of your belongings. To calculate this amount, a home inventory may be useful.

      How to create a home inventory

      Having a home inventory is a great idea for several reasons. First, it helps you get a general idea of how much your belongings are worth so you can choose the correct personal property limit when purchasing renters insurance.

      [ See: The Why and How of a Household Inventory ]

      It’s also a lifesaver in the event of a fire or other disaster that destroys your home. Without a home inventory, you’d be left trying to list every item in your home strictly from memory.

      Here’s how to make one:

      1. Grab your smartphone. You’ll need the phone’s camera and a note-taking app. (A digital camera and a piece of paper or laptop work, too!)
      2. Go through each room in your home, documenting everything inside. Take a photo or video of every item worth more than $10.
      3. As you make a visual record, create a written one, too. Write down the name of each item with as much detail as possible. For higher-value belongings such as electronics, make sure to record the make, model, serial number, and the approximate date you purchased it.
      4. Create multiple copies of your home inventory and store them in different places. For example, you might keep one copy in the cloud and another on an external hard drive in a safe deposit box.
      5. Update the list at least once a year. A great time to review it is right before you renew your renters insurance policy. This way, you’ll know if you need to purchase additional coverage for valuables that exceed your policy limit.

      Who needs renters insurance?

      First and foremost, you should know that no state requires renters insurance by law — but that doesn’t mean your landlord won’t ask for it. Many property owners make renters insurance mandatory by including it as a clause in the lease.

      Even if your landlord doesn’t require renters insurance, it’s a good idea to have a policy in place to protect your assets. The higher your net worth, the more you have at stake. It’s simply not worth the risk of losing your hard-earned savings due to a lack of protection from damage, theft and liability.

      [ Next: Is Renters Insurance Really Necessary? ]

      What will I need to buy renters insurance?

      Most renters insurance companies generally require similar documentation in order to purchase a policy. Here’s a sample checklist from State Farm to get a renters insurance quote:

      1. Your personal details, including your name, date of birth and contact information.
      2. The address of your apartment.
      3. Your move-in date, or the date on which you’d like coverage to begin.
      4. Names and personal details for anyone else living in the apartment.
      5. Information regarding any business that is carried out in your unit.
      6. The total value of your personal property.

      What is a renters insurance deductible?

      Your renters insurance deductible is the amount you’ll need to pay out of pocket if you make a claim.

      Suppose someone breaks into your apartment and steals $2,000 in electronics. If you have a $500 deductible, this is what you’ll be responsible for paying to replace it. Your renters insurance company will pay for the remaining $1,500.

      Note that if you want a lower deductible, you’ll have to pay more in premiums. But don’t pick an unaffordably high deductible just to save money on renters insurance. You should always have enough cash in your emergency fund to cover your deductible.

      What is the difference between actual cost value and replacement cost?

      When you purchase renters insurance, you may need to choose between coverage that reimburses at actual cash value or replacement cost value. This determines how much the insurance company will pay if your personal property is damaged or stolen.

      Actual cost value is an estimation of your belongings’ fair market value at the time of your claim. The insurance company calculates this by taking each item’s cost when brand new and subtracting depreciation based on the item’s age.

      • Pro: Your renters insurance premiums will be cheaper.
      • Con: The insurance company will pay less if you file a claim.

      Replacement cost value is what you’d need to pay to purchase each item brand new. Depreciation isn’t taken into consideration; you’ll receive the full amount you paid when you purchased the item brand new.

      • Pro: If your belongings are damaged or stolen, you’ll be able to replace them with brand new items.
      • Con: You’ll have to pay higher insurance premiums.

      [ Read: Actual Cash Value vs. Replacement Cost: What’s the Difference? ]

      How much does renters insurance cost?

      According to the Insurance Information Institute, the cost of renters insurance is on the decline. Average annual premiums were only $180 per year in 2019, down more than 5% since 2014. This comes to just $15 per month for renters insurance, but it all depends on whether you choose a policy with one of the cheap renters insurance companies.

      While many factors go into calculating your renters insurance quote, such as your car, credit score and driving history, your location is a major one. The cost of renters insurance varies widely depending on the state you live in. For example, premiums in Minnesota average just $140 per year, while coverage in Mississippi costs almost double at $258. Many insurance providers will also give you a discount when you buy cheap renters insurance online.

      Find the Best Home Insurance

      Save money on home insurance with our simple comparison tool.

      Matching you with providers.
      We found results in
      Click at least 2-3 companies to find the very best rate.

        Money-saving tips

        Even though renters insurance is relatively affordable, there’s no harm in taking steps to keep costs low. Here are a few tips to save money:

        • Bundle renters insurance coverage with an auto policy from the same company.
        • Choose a higher deductible (although not one you can’t afford).
        • Install a home security system.
        • Ask about discounts.
        • Compare rates from multiple companies.

        Is renters insurance worth it?

        If you’re keeping an eye on expenses, you may wonder whether it’s really worth renters insurance premiums every month. Even though coverage costs are generally low, it all depends on how much renters insurance coverage you need. Regardless, it’s still just one more expense coming out of your paycheck.

        But the real question to ask yourself is whether you can afford not to have insurance. If someone broke in or there was a fire, would you have enough cash on hand to replace your belongings? And if you do, what would happen if you were sued for liability? Do you have assets that a court could go after to cover damages?

        Renters insurance can offer protection in all of these scenarios, both safeguarding you from costs you can’t afford and securing what you have. No matter how many zeroes you see in your bank account, renters insurance is a worthwhile cost.

        How to file a renters insurance claim

        1. If your claim involves theft or vandalism, contact the police first. Write down the names of any officers you speak with and ask for a copy of the police report. Your insurer will request this information when you file a claim.
        2. Get in touch with your insurer. Ask how long you have to file a claim and what information the company will need to process it.
        3. Prepare your claim documents. If your claim involves personal property, you’ll need to provide a detailed list of any belongings that were lost or damaged. Keep receipts for any covered expenses related to your claim, such as living costs if you need to temporarily relocate.
        4. File a claim. Depending on the insurer, this might be done online or by filling out a physical claim form. Attach all the documentation you’ve gathered. Ask how long you can expect to wait for processing, and don’t be afraid to ask for updates periodically.

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

        Lena Borrelli

        Contributing Writer

        Lena Borrelli is a Tampa-based freelance writer who has worked with leading industry titans, such as Morgan Stanley, Wells Fargo, and Simon Corporation. Her work has most recently been published on sites like TIME, ADT, Fiscal Tiger, Bankrate and Home Advisor, as well as many other websites and blogs around the world.

        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.