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When you rent your home, renters insurance can help protect you financially if your belongings are damaged, stolen, or destroyed in your rental unit. Additionally, it can provide liability coverage if someone else is injured in your home. By taking stock of what you own, determining how much coverage you need, and comparing quotes, you should be able to find a policy that fits your needs and your budget.
Here are five simple steps that can get you started.
Key Points
• Renters insurance can protect you financially when your belongings are damaged, stolen, or destroyed and provide liability coverage if someone gets injured in your home.
• Taking a complete inventory of your belongings can help you determine how much coverage to buy and can also prove invaluable if you need to file a claim.
• Actual cash value policies pay based on the current depreciated worth of your belongings, while replacement cost policies cover buying brand-new items.
• Average renters insurance costs about $171 per year, though prices vary by state, company, deductible size, and coverage limits.
• Bundling renters insurance with other policies like car insurance can unlock discounts from some insurers.
What Does Renters Insurance Cover?
Typically, your landlord’s insurance covers damage to their property, liability protection in case someone is hurt on the premises, and the loss of rental income if something happens that makes their building uninhabitable. That means that it’s up to you to protect your personal belongings.
Renters insurance covers your belongings — such as furniture, clothing, electronics, and other personal items — for damage or destruction from named perils, such as fire, smoke, theft, vandalism, and water damage from broken pipes. Named perils will be explicitly listed in your insurance policy. Note that a renters policy probably doesn’t cover you in the case of earthquakes or floods. You may be able to purchase separate policies or add-ons if these are concerns for you.
Renters insurance can also provide some liability coverage in case someone is hurt in your home. And it can pay for hotel rooms or temporary rentals if you have to move out while your home is being repaired.
In some cases, your landlord may require that you have renters insurance and you’ll need to provide them with proof of insurance when you purchase it.
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How To Get Renters Insurance
You can get renters insurance from most large property and casualty insurance companies. Most will allow you to buy policies online. It’s important to shop around to several different insurance companies to compare coverage options and prices.
The following steps can help you determine how much renters insurance you may need.
Step 1: Take Inventory of Your Belongings
A complete inventory of your belongings can help you understand how much insurance you might need to buy and it will be invaluable if you ever need to make a claim.
Go room by room through your house and make a list of each item. Note down when you bought it and how much it cost (if that information is available to you). Record the item’s brand, make, and model, and include serial numbers if relevant.
Taking photos of your items, especially those with high sticker values, can also be a good idea. You may even want to take a slow-moving video of each room as well.
Step 2: Decide How Much Coverage You Need
Once you have an inventory of the items, tally their total value. This will help you determine how big your policy should be. But this value isn’t the only thing you’ll need to consider. You may need to choose between an actual cash value policy and a replacement cost policy.
An actual cash value policy will help you replace your belongings based on their current value, accounting for wear and tear and depreciation.
A replacement cost policy pays for you to buy brand new items to replace those that were lost or damaged. This policy type will likely come with higher monthly payments, though it will probably pay you more if you ever need to make a claim.
Note that renters insurance will typically have coverage limits — for instance, $50,000 for personal belongings and $100,000 for liability. You’ll have the opportunity to choose what these limits are.
Step 3: Compare Renters Insurance Quotes
Comparing the renters insurance offered by several insurance companies is an important step. Each one will use its own risk assessment formula, so pricing can be very different from company to company, even for the exact same protection. Comparing a variety of quotes can help ensure that you get the coverage you need at the best price.
Step 4: Choose Your Deductible
Your renters insurance deductible is the amount you have to pay before your insurance policy kicks in. For instance, say you have a $500 deductible and a leaky pipe causes $2,000 worth of damage to your belongings. You would need to pay $500 toward the damages before your insurance company would step in and cover the remaining $1,500.
You’ll have an opportunity to set your deductible. When you choose a higher deductible, you are assuming more risk, and your insurance company may offer lower monthly payments. Conversely, a lower deductible may translate to higher monthly payments.
Step 5: Purchase Your Policy
When you’ve found an affordable policy that meets your needs, you can generally sign up online or over the phone and complete your payment to activate the insurance. In addition to your payment information, you’ll likely need to provide your legal name, address, date of birth, and building details, including security features.
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How Much Does Renters Insurance Cost?
On average, renters insurance costs about $171 per year, or roughly $14.25 per month. How much renters insurance costs will vary state by state and company by company. And costs will differ depending on factors such as the size of your deductible and coverage limits.
It may be worth seeing if you can bundle renters insurance with any other insurance policies, such as your car insurance. Many insurance companies will provide discounts to incentivize you to do more business with them.
The Takeaway
Renters insurance can be an affordable way to protect your belongings and provide financial protection against certain unexpected events. To get the right policy, start by assessing what you own and how much it would cost to replace and then compare coverage options, premiums, and deductibles from several insurers. Once you find a policy that offers the protection you need at a price you can afford, you can purchase it and gain added peace of mind as a renter.
If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.
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FAQ
How long does it take to get renters insurance?
Once you decide on an insurance policy that meets your needs and works with your budget, the process of signing up for renters insurance often takes only a few minutes.
Can you get renters insurance if your landlord doesn’t require it?
You can purchase renters insurance whether or not your landlord requires it. You can also buy more coverage than your landlord requires, if you wish.
Does renters insurance start immediately after purchase?
When you buy renters insurance, you choose the start date. So it can take effect immediately or you can defer to a later date.
What’s the difference between actual cash value and replacement cost renters insurance?
An actual cash value policy will cover the cost of replacing your belongings less depreciation. In other words, it will cover what your belongings are worth now. A replacement cost policy will cover the cost of buying your belongings brand new.
Can you buy renters insurance for a short-term or month-to-month lease?
You may be able to purchase renters insurance for the short term, but the process can be a little indirect. You might need to do so by purchasing a 12-month policy, but many insurers will allow you to cancel your insurance before that period is up.
Photo credit: iStock/Milko
Home and Renters Insurance: Insurance not available in all states.
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