The amount of renters insurance you need depends mostly on the value of your belongings. Renters insurance typically includes three types of coverage. You should have enough personal property coverage to replace your belongings. In case someone is injured at your place, it’s important that you have enough liability coverage to handle a major accident. Should you need to relocate while repairs are done to your rental home, you will want the proper loss of use coverage for your necessities to be handled in the interim.
Getting the correct renters insurance limits to cover all these points requires you to look at the value of your possessions, your lifestyle and your financial well-being. To do otherwise may result in inadequate coverage.
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Renters insurance coverage limits
A standard renters insurance policy is made up of three areas of coverage — personal property, liability and loss of use. Policy limits for each of these coverage types may vary between insurers, but these are the most common minimum limits seen in renters insurance policies:
- Personal property: $30,000
- Liability: $100,000
- Loss of use: 10% to 30% of personal property limit or a flat amount, depending on insurer
How much personal property renters insurance do I need?
Base the limits of your personal property coverage, also known as “contents coverage”, on how much it would cost to replace all of your belongings. The best way to get an accurate dollar figure of your total replacement cost is to create a home inventory list. This means putting together a list of your belongings such as clothes, furniture and electronics along with important information such as make, model, serial number and replacement cost for each item.
This may take a while to compile, but having an inventory list will not only make sure you have the right amount of contents coverage, it may also make filing a claim simpler and possibly speed up your claim payout.
The standard limit for personal property coverage in a renters insurance policy is $30,000 per claim. Any damaged or stolen belongings that go over your personal property limit will not be covered, leaving you to pay the difference for replacements. By the same token, having a higher contents coverage limit than you need probably means paying a more expensive premium than you should. Talk with your renters insurance company and make sure your contents coverage limit is set to handle a full replacement of your stuff.
How much liability coverage do I need in my renters insurance policy?
Standard renters insurance usually comes with a default liability limit of $100,000 per claim. If you're dealing with someone spraining an ankle at your home, this amount is probably fine. However, if you wind up in a long court case or a long hospital stay is involved, you can overshoot that dollar limit quickly. This leaves you to pay the remainder out of pocket, which could be many thousands of dollars.
We recommend that you purchase at least $300,000 in renters insurance liability coverage, and go with $500,000 if you can work it into your budget. The premium cost difference between $300,000 and $500,000 in liability is usually affordable and should provide you with sufficient coverage.
What amount of loss of use coverage do I need for renters insurance?
Loss of use coverage (LOU), also known as additional living expenses, usually has a limit of 10% to 30% of your total renters insurance coverage amount per claim. For example, if you have a policy for $30,000 in renters insurance, your LOU coverage for a claim would be somewhere between $3,000 and $9,000. Your insurer may have a flat dollar amount instead of a percentage amount, so make sure to check.
This may not sound like a lot, but keep in mind that loss of use is only meant to cover costs above and beyond your standard living expenses. These include additional costs that can arise from:
- Hotel expenses
- Restaurant meals
- Furniture rental
- Extra commuting costs
For example, if your rent is $1,000 a month and the cost of living for a month in a hotel is $1,300, your LOU coverage will reimburse you for the additional $300, not $1,300. This gives you some breathing room while you look for a new place. Most renters insurance providers offer loss of use for 12 months for a single claim, but it could be longer.
Especially if you're living in a rental home with your family, you'll want to make sure your LOU coverage can take up the financial slack while you live elsewhere temporarily. If your LOU coverage seems too low, talk with your provider about increasing it.
Other renters insurance coverages you may need
If you have high-value belongings or extreme weather in your area, there are additional renters insurance coverages to consider that aren’t found in a standard policy. These include:
- Valuable belongings: Renters insurance policies cover some types of possessions, such as jewelry and antiques, at lower payout limits than your standard property coverage. Jewelry, for example, usually has a limit of $1,000 to $1,500 per item. In order to get full coverage for your expensive belongings, consider getting an endorsement for your renters insurance policy. Renters insurance endorsements usually run about $40 to $50 a year.
- Natural disasters: It's important to know that some natural disasters, such as floods and earthquakes, are not covered by policies from any renters insurance company. This means that if your apartment gets caught in a flood and your stuff is ruined, your policy wouldn't cover any of it. In areas where such disasters are a risk, you can probably find add-on renters insurance coverage for flood or other disasters that aren't covered by your standard policy.
How much renters insurance you need: the bottom line
Even if your landlord doesn’t require you to have renters insurance, your peace of mind and financial well-being practically demand it. The cost of renters insurance is between $10 and $22 a month, on average. This is an incredibly low investment compared to what it would cost to replace all your belongings after a fire, or the medical and legal fees that can arise from a major injury occurring at your place. Paying what is essentially spare change daily to avoid potentially paying many thousands of dollars down the road is just good sense.
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