Renters insurance is affordable coverage designed specifically to protect renters after a loss. Although some renters think their landlord’s insurance policy will protect them, it usually just protects your landlord and the building you’re living in; your personal belongings and liability probably aren’t covered. For that, as Farmers explains, you need renters insurance.
Generally speaking, renters insurance covers three things: theft of or damage to your personal property contained in the rental unit, such as clothing, furniture, and electronics; your personal liability if someone is injured in your unit or you accidentally damage someone else’s property; and additional living expenses you may incur, such as hotel bills, if your unit is uninhabitable after a covered loss.
Renters insurance is similar to homeowners insurance, except it doesn’t cover the residential structure or other structures like outbuildings. Generally, insurance experts agree that renters insurance is a sound investment to protect your belongings against a variety of unfortunate circumstances, including theft, fire, storms, and natural disasters.
Although buying renters insurance may seem complicated, it’s easy to get started. This guide to buying renters insurance will walk you through each of the following steps:
- Decide what you want to cover
- Determine how much renters insurance you need
- Choose an insurance company
- Choose a policy
Imagine if the apartment, condo, or house you rent was affected by some kind of disaster – maybe a pipe broke, smoke seeped in from a fire in a nearby unit, or you came home to discover you were the victim of a robbery. These and similar scenarios would leave you scrambling to assess the damage to your belongings or determine what went missing entirely. This could force you to temporarily relocate and seriously deplete your savings account. Unfortunately, your landlord isn’t responsible for damage to or theft of your belongings. That’s where a renters policy comes in – to protect your stuff (and you, from certain types of legal liability) while you’re living in a rental home. According to the Insurance Information Institute (III), an organization that helps consumers research the insurance industry, if any damage to your personal property would cause a financial setback, you should consider renters insurance.
In addition, many renters find that they’re obligated to purchase renters insurance when they sign a new lease. Though renters insurance isn’t required by law, the III points out that landlords are permitted to require tenants to carry renters insurance. In other words, if your lease says you need renters insurance, the decision has already been made for you. Why would your landlord care? A landlord who requires renters insurance is less likely to be sued by a tenant or visitors to the property for reasons such as a theft committed on the rental property or injuries caused by tenants’ pets. Furthermore, potential tenants who don’t have proof of renters insurance may be screened out in favor of candidates who do.
You can find a lot of useful information on insurance company websites when shopping for renters insurance, including where a particular company operates, and what standard and optional coverages they offer. Although renters insurance costs vary by region, many companies offer online estimating tools to give you an idea of what you’ll pay for any given type and amount of coverage.
While it’s important to do your own research, you should also consider getting some help from a licensed insurance agent. They can advise you on exactly what type of coverage to buy and how much it will likely cost. An agent who works with just one company will only provide information and quotes from that company. On the other hand, independent agents can obtain quotes from a number of companies. Whatever agent you use, it’s a good idea to check their background to make sure they’re reputable. Visit your state insurance agency website to look for reviews and complaints, as well as the National Association of Insurance Commissioners (NAIC) website.
Steven Weisbart, senior vice president and chief economist of the III, explains that the most common mistakes when buying renters insurance involve failing to purchase the right amount of insurance, not considering extra liability coverage, and not considering additional coverage like flood insurance if you live in a high-risk area.
“You want to get the right total amount of insurance, because if it’s a complete loss, you will want to replace everything that you lose,” Weisbart says. “You also need to know what the policy doesn’t cover so that you can buy additional insurance if you need it.”
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Another mistake is not comparing prices from several insurance companies before buying renters insurance. Robert Hunter, director of insurance at the Consumer Federation of America, notes that this can result in paying too much.
“People often don’t compare prices but take what an agent gives them,” he says. “Agents usually represent only one or a few companies and may not have access to the best insurer for you. Also, an agent can make more money sending you to a higher priced insurer with a bigger commission. Be careful, and at least call a few insurers.”
If you’re apprehensive about the potential cost of renters insurance, don’t be. It’s relatively affordable, and experts generally agree that the benefits of renters insurance are well worth the cost. According to a 2021 study from the NAIC, the average annual renters insurance premium in 2018 was $179.
Note that premiums vary by state. In 2018, Mississippi was the most expensive state in terms of renters insurance, with an average premium of $252 and North Dakota was the cheapest, with an average premium of $126. Even at the high end, this survey shows that renters insurance premiums shouldn’t be a budget-buster for most households.
There are several factors that can affect the cost of renters insurance, the most important of which are the type and amount of coverage. If you stick with your insurance company’s basic renters insurance policy, you’ll have coverage for your personal property, liability from certain types of incidents that may occur on the rental property, and compensation for additional living expenses if you have to temporarily relocate from the rental property.
You can increase your limits for all three types of coverage, which will increase how much you pay for renters insurance but will provide more compensation in the event of a loss. For example, you can:
- Increase the coverage limits for your household possessions, which is useful if you own high-end jewelry, electronics, or other expensive items.
- Get a replacement cost policy instead of an actual cash value policy because it pays to replace your damaged or lost property at its new – rather than depreciated – value.
- Add supplemental coverage (known as riders or floaters) for specific valuable possessions.
- Add supplemental coverage for specific disasters, such as flood or earthquake coverage.
- Add supplemental coverage for business inventory or assets stored on the rental property.
- Add supplemental liability coverage, such as an umbrella policy.
- Increase the limit of your additional living expense coverage.
After choosing the type and amount of coverage, decide whether you want a high or low deductible. This is the amount you must pay out of pocket before receiving compensation for your losses. For example, if you have a $500 deductible and $1,000 in losses, you’ll only receive $500 in compensation for your claim. A lower deductible generally results in higher premiums for the same coverage, while opting for a higher deductible generally lowers premiums. When you select a company and a policy, you should be able to choose deductible options.
After you decide how much insurance you need and what type of policy you want, your insurance company will determine the cost of your premiums. Be sure to ask about any available discounts, such as bundling renters and auto insurance, staying with the insurance company for a certain period of time, or equipping your rental home with specific safety equipment. With that in mind, let’s take a look at the actual costs of renters insurance from the insurance companies we’ve rated and profiled.
For example, Nationwide, has a sample monthly cost of $13.43, based on our research. This is the lowest sample monthly cost in our ratings. The most expensive company in our rating is American Family. American Family is No. 4 out of the 10 companies and has a sample monthly cost of $24.29. Keep in mind that any rates shown here are for illustrative purposes only. You should contact the insurance company or insurance agent directly for applicable quotes.
#1 USAA
#1 Lemonade
#3 Erie Insurance
#4 American Family
#4 State Farm
#6 Farmers
#6 Allstate
#6 Nationwide
#9 Liberty Mutual
Choosing the best renters insurance company can seem like a daunting task, but we’re here to help with our Best Renters Insurance Companies of 2022 rating. Based on extensive research and an exclusive methodology, we’ve determined that these are the top renters insurance companies in the U.S.
To buy a renters insurance policy, you must decide what you want to cover, determine how much insurance you need, and choose an insurance company and policy. Read on to learn more about each step.
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Decide What You Want to Cover
According to the III, there are three basic types of coverage included in most renters insurance policies: personal possessions, liability, and additional living expenses.
Your personal possessions include things like furniture, clothing, electronics, appliances, kitchen equipment and utensils, home goods such as sheets and towels, and sports and hobby equipment such as bicycles and musical instruments. If these items are stolen, vandalized, or damaged in a disaster, your renters insurance policy will compensate you for your loss. You’ll need to check specific policies to see which disasters are covered, but they typically include fire, smoke, lightning, vandalism, theft, explosions, windstorms, and water damage (but not floods, unless you’ve paid extra for this type of coverage).
In short, your policy will generally cover:
- Belongings (furniture, clothing, electronics and devices, appliances, kitchen equipment, sheets and towels, sports equipment, musical instruments, etc.)
- Disasters (fire, smoke, lightning, vandalism, theft, explosion, windstorm, water)
- Property damage caused by a member of your household or a pet
- Injury caused by a member of your household or a pet
- Additional living expenses caused by temporary displacement
If you live in a high-risk area or have specialized needs, consider adding:
- Flood insurance
- Earthquake insurance
- Floater or rider policies for fine jewelry, art, or collectibles
- Umbrella or excess liability insurance
- Business property insurance
Determine How Much Insurance You Need
After you figure out what types of items and hazards you want to cover, determine how much renters insurance you need. This will require taking an inventory of everything in your rental unit. Keep in mind that some of these items may not be covered under a regular renters insurance policy if they are too valuable, particularly electronics and computer equipment, expensive specialized sports equipment or musical instruments, or other hobby equipment such as camera gear. Those items require additional renters insurance. According to Weisbart of the III, the inventory should include the age of the items as well as what you originally paid. This information, if available, is especially useful for more expensive items.
Not only will this inventory help you determine the value of your belongings and be useful for filing a claim if your possessions are damaged or stolen, but it will also help you figure out if you’re better off with an actual cash value policy or a replacement cost policy.
An actual cash value policy takes depreciation into account, which is the reduction in the value of your items due to their age and the fact that they’re used. Computer equipment and communication devices are examples of possessions that may be hit particularly hard by depreciation, and an actual cash value policy probably won’t pay the entire amount needed to replace these items with new equivalents.
According to the III, to take an inventory of your possessions you should:
- Make a detailed list of everything you own that you would want to replace if it were damaged or stolen.
- Determine purchase dates and prices to the most accurate extent possible.
- Decide if you want an actual cash value policy or a replacement policy.
- Take note of especially valuable items, such as jewelry, artwork, and collectibles.
- Get valuable items appraised and be sure to safely store any related paperwork.
- Decide how much additional coverage you want to cover each special item.
Choose a Insurance Company
Because renters insurance policies generally offer the same general types of coverage, and because premiums tend to be competitive and affordable, these details might be less important than f you were shopping for homeowners insurance.
You also want to find a company that offers good service and makes you feel that they value your business. With that in mind, here are some considerations when choosing a renters insurance company:
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- Check out different types of insurance companies, including those that use company-owned agents, those that use independent agents, and those that sell policies directly online and by phone.
- Ask for recommendations from friends and family.
- Get quotes from at least three companies.
- Remember that price isn’t the only important factor in choosing a company. You should also look at the company’s financial strength as determined by AM Best or another ratings agency because you want a company that will be financially solvent well into the future.
- Consider a company’s overall reputation, which you can determine by talking to local real estate agents and reading professional and customer reviews online.
- Make sure a company’s customer service representatives take the time to answer your questions and help you understand the policy they’re trying to sell you.
Choose a Renters Insurance Policy
When you’ve gathered renters insurance quotes, examined all the policy options, and chosen a company, it’s time to select a policy. If you’ve followed this guide, you’re already familiar with the choices, and you’ve probably already made those decisions. This is when all your careful preparation pays off. To reiterate, when it comes time to select a policy, make sure:
- You have explored all options before deciding on a policy
- The policy provides suitable coverage for all of your possessions
- You’ve weighed the cost and potential benefits of additional liability coverage and decided what makes the most sense for you
- You understand, and are comfortable with, what your policy covers and doesn’t cover
- You’ve considered adding additional coverage, particularly flood coverage, if needed
Why You Can Trust Us
At U.S. News & World Report, we rank the Best Hospitals, Best Colleges, and Best Cars to guide readers through some of life’s most complicated decisions. Our 360 Reviews team draws on this same unbiased approach to rate the products that you use every day. To build our ratings, we researched more than 15 Renters Insurance Companies and analyzed 12 reviews. Our 360 Reviews team does not take samples, gifts, or loans of products or services we review. All sample products provided for review are donated after review. In addition, we maintain a separate business team that has no influence over our methodology or recommendations.