When it works properly, renters insurance provides the money you need to get your life back to normal after a covered disaster strikes. Although renters insurance does not cover every risk you face as a tenant, it does cover the most common, including fires, burglaries and even injuries or damage you may cause to other people. Here are key things to know about how renters insurance works.

In this article

How do renters insurance coverages work?

The coverages in a renters insurance policy provide financial protection from many of the risks associated with renting a home.

Whether you rent an apartment, condominium, house or mobile home, each of the coverages generally work the same, in the following manner.

Coverage What it covers
Personal property, or contents Your belongings, including furniture, electronics, clothing and recreational gear, for theft or damage from a covered peril.
Additional living expenses (ALE) Increases in rent and other living expenses if covered damage to your unit requires you to find a temporary home during repairs.
Personal liability Injuries or damage you accidentally cause to other people or their property.
Guest medical Injuries a guest suffers while visiting your home, regardless of fault.

A standard renters insurance policy extends these coverages to your spouse and other resident relatives in your home. Some companies also cover unmarried couples in committed relationships.

However, if you live with roommates who are not related to you, it’s generally best for each roommate to get their own renters insurance.

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What is a covered peril?

Covered perils are the causes of damage that your insurance company protects you from. The personal property and ALE coverages in renters insurance only kick in if the losses are the result of a covered peril, which typically include:

  • Fire
  • Lightening
  • Smoke
  • Wind
  • Burst pipes
  • Falling objects
  • Vandalism
  • Theft

Most renters insurance is offered on a named-perils basis, which only covers perils specifically listed in your policy.

However, some insurance companies also offer open-perils coverage, which protects against any cause not specifically excluded by your policy. Since open-peril insurance protects against a wider range of risks than named-perils insurance, it also costs more.

As you compare renters insurance quotes, account for differences in the perils that each proposal covers.

What does renters insurance not cover?

Whether you choose open- or named-peril renters insurance, renters insurance typically does not cover damage from floods or earthquakes. However, separate insurance is available for each of these risks.

Additionally, standard renters insurance only offers limited coverage for certain valuables. Jewelry, for example, is typically only covered for up to $1,500. Similar limits apply to fine arts, collectibles, silverware, golf clubs and other specified items.

If you have high-value items, you typically need to add a personal property endorsement to your policy to give them more protection.

How often should I shop for renters insurance?

Even though standalone renters insurance is relatively inexpensive, it’s still best to compare quotes from multiple companies when you shop to make sure you are getting the best deal.

The average price of renters insurance is $219 a year, or $18 a month, which is a bargain compared to home and auto insurance. Also, the multipolicy discounts most insurance companies offer for bundling a renters policy with car insurance bring your combined rates down even more.

Whether you have standalone renters insurance or bundle your renters and auto policies, it’s best to shop around every few years, or anytime your insurance rates go up too much.

If you bundle your renters and auto insurance, make sure the quotes you obtain show rates for both policies.

How is my landlord’s insurance different from renters insurance?

A landlord’s insurance typically covers structural damage to your unit and injuries in common areas on the property, but not your belongings or injuries in your unit.

For example, if a falling tree crashes through the wall of your apartment or rented house, your landlord’s insurance pays to repair damage to the unit. Your renters insurance covers damage to your possessions.

Similarly, if a guest is injured in the lobby of your apartment building or another common area, your landlord’s insurance covers the injured person’s medical bills.

For apartments, renters are not typically responsible for injuries that occur outside their unit. On the other hand, if you rent a house or mobile home, you may be liable for injuries that occur anywhere on the property, depending on your lease terms.

The only time you may have to pay for structural repairs to your unit is if you cause the damage.

For example, if you start a kitchen fire, you may have to foot the bill for some or all of the repairs to the building. As long as the fire is accidental, the liability coverage in your renters insurance is likely to cover the damage for you.

How do renters insurance claims work?

The claims process for renters insurance generally requires you to document your losses to receive your payments.

The first step for any claim is to contact your insurance company to report your loss. The next steps depend on the coverages that apply to your claim.

  • If a fire or other cover peril damages your unit, the insurance company is likely to send an adjuster to your home to inspect the damage and verify your eligibility for personal property and/or ALE coverage.
  • For theft claims, the insurance company typically requires you to submit a copy of your police report.
  • You usually need to notify your insurance company of a liability claim when someone tries to make you pay for their injuries and/or damaged items. You also need to cooperate with your insurance company during its investigation of the incident, and your insurance company is supposed to cover legal costs that may arise over the claim.

Keeping an updated home inventory handy is the best way to get a fair, prompt payment for personal property claims.

It’s easier to pull relevant information about damaged or stolen items off your home inventory than it is to try piecing details together in the aftermath of a disaster or burglary.

Once your personal property claim is approved, the insurance company subtracts your deductible from your payment. The amount you receive also depends on whether you insure your belongings at actual cash value or replacement cost.

How do I get renters insurance?

Getting renters insurance typically only requires a little preparation and a general understanding of the coverages you need before you request quotes.

If you don’t already have a personal property inventory, create an itemized list of your possessions with the value of each item or set. The combined value of your items reflects the amount of personal property coverage you need to request for your quotes.

The other coverages in renters insurance are offered in default amounts that are typically enough for most people. However, if you have a high salary and/or net worth, ask for a higher liability limit.

Quotes are free, no-obligation estimates of your coverage and rates that insurance companies provide upon request. The rate shown in a quote may change until you lock in your policy.

Once you decide on a quote, you can activate your policy immediately or on a future date by making a down payment or paying for the policy in full.

Frequently asked questions about how renters insurance works

The average cost of renters insurance is $219 a year, or $18 a month. The actual price you pay depends on several factors, including your location and the amount of coverage you need.

The personal property coverage in renters insurance typically extends to personal items stolen from your car, but not theft of the car itself. Your car insurance only covers theft of your vehicle if you add comprehensive coverage to your auto policy.

The personal property coverage in renters insurance covers items you keep in a storage unit or other locations away from your home, but restrictions often apply.

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