Renters insurance protects your possessions if they’re stolen or damaged while you’re renting. In addition to burglaries and vandalism, renters insurance protects you against unfortunate events, such as electrical surges, floods, and fires.
While many tenants assume they have ample coverage under their landlord’s property insurance, this is actually not typically true. Without renters insurance, you could take a major financial hit in the event of a burglary or fire by having to pay out of pocket for everything you own that is lost or ruined.
Renters insurance also offers other financial protections, such as covering personal injuries to others and temporary accommodation if you ever need to move out due to home damage.
Whether you rent an apartment, condo, or house, here’s what you need to know about renters insurance.
What Is Renters Insurance?
Renters insurance provides a number of protections, which typically include:
Personal Possessions
Renters insurance protects against losses to your personal property (think furniture, clothing, luggage, jewelry, electronics), or items that aren’t built into the property unit.
Even if you don’t own much, it may add up to more than you realize.
Liability
In the event that someone other than you is injured on your rental property, renters insurance can cover expenses related to personal injuries, such as medical bills and legal expenses should that person sue you.
Most policies provide at least $100,000 of liability coverage, along with a smaller amount to cover medical payments. You can purchase higher coverage limits for a fee.
Temporary Living Expense
If your home becomes uninhabitable as a result of one of the covered perils, your renters insurance policy may reimburse you for the cost of any extra living expenses that occur while you’re unable to reside in the rental property, such as hotels or meals out.
Your Belongings When You Travel
Your personal belongings are not only covered when you’re at home, but also when you are away from home. Your possessions are typically covered from loss due to theft and other covered losses wherever you may travel.
Get up to $300 when you bank with SoFi.
Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!
What Catastrophes Does Renters Insurance Cover?
Renters policies protect against a long list of unfortunate events. While each policy’s level of coverage will vary, a standard rental policy may cover losses to property from perils including:
• Fire
• Smoke
• Theft
• Vandalism or malicious mischief
• Lightning
• Windstorms
• Explosions
• Water from internal sources (such as plumbing leaks)
• Windstorm or hail
• Falling objects
Typically, renters insurance doesn’t cover damage caused by earthquakes or floods from external sources. You may need to purchase a separate policy or rider to get coverage for these events. A separate rider might also be necessary to cover wind damage in areas that are prone to hurricanes.
Rental policies also do not typically cover losses due to your own negligence or intentional acts.
Recommended: Choosing a Renters Insurance Deductible
Why Is Renters Insurance Important?
One of the main benefits of renting versus owning is that there is less responsibility involved. If there is a leak in the kitchen or a noisy neighbor causing problems, in theory, the landlord should handle those issues.
When renting, it’s easy to fall under the impression that your landlord will handle everything that goes wrong. Unfortunately, that isn’t always the case. Your landlord’s property insurance policy covers losses to the building itself, whether it’s an apartment, a house, or a duplex.
Renters insurance provides financial protection for many of the things that landlords aren’t insured for, or would likely be willing to cover out of their own pocket.
Is Renters Insurance Mandatory?
In some cases, yes. While renters insurance isn’t a requirement by law, landlords are legally allowed to require it in their rental agreements. Basically, if a landlord says a tenant needs it, they have to get it. If the landlord doesn’t require it in the lease agreement, the choice is up to the renter.
If a landlord requires renters insurance, it’s probably because they are looking after their own best interests. If a tenant has renters insurance, the landlord will be less likely to get hit with a lawsuit regarding injury or theft.
Even in cases where a landlord doesn’t require renters insurance, they may still favor applicants who have it over those who don’t. So if you’re looking to rent a home in a competitive area, having renters insurance may help you stand out amongst a sea of applicants.
Renters Insurance Policy Options
Exactly what renters insurance covers depends on the policy type. There are two main types of renters insurance policies that renters will likely come across:
• Actual Cash Value. This type of policy pays to replace possessions minus an amount for depreciation up to the limit of the policy. In other words, they reduce the value of the possession based on its age and use.
• Replacement Cost. This policy pays for the actual cost of replacing the possessions, and doesn’t deduct for depreciation, up to the limit of the policy. Generally, a Replacement Cost policy costs around 10% more than an Actual Cash Value coverage policy, but this higher cost may be worthwhile.
How Much Does Renters Insurance Cost?
The price will depend on what type of policy you choose, how much coverage you need, and what state you live in. The average cost of renters insurance in the U.S. is $179 per year, or roughly $15 per month.
To determine how much coverage is necessary, it helps to know the value of all your personal possessions.
Let’s say the worst happens and the rental property burns down to the ground. How much would all of the furniture, electronics, art, jewelry, clothing, appliances, and everyday items like towels cost to replace? Ideally, the policy will be enough to replace all possessions.
Creating a home inventory of all of your personal possessions and their estimated value can help determine this number. Keeping this inventory up-to-date can make it easier and faster to file an insurance claim down the road.
How to Buy Renters Insurance
If you decide you want to purchase renters insurance, here are some ways to get started.
Comparison Shopping
Renters insurance policy prices can vary greatly depending on the provider, so it can be worthwhile to shop around. It’s a good idea to get at least three price quotes, but the more the merrier.
You can call the company directly or submit an online form if available to get a quote, and then compare the different offers to see which one provides the best coverage for the best price.
Recommended: Most Affordable Renters Insurance for Apartments
Varying the Search
You may want to get quotes from different types of insurance companies, including those that sell policies through their own agents, and those that sell directly to the consumer without using agents.
You can also consult independent agents who offer policies from multiple insurance companies.
Looking Past Price
While getting the best deal possible sounds great, price shouldn’t be a renter’s only concern. An insurance provider’s customer service, claim process, and customer reviews are all important factors to take into account.
Asking for Referrals
Alongside looking at customer reviews, you may also want to ask friends or relatives for their recommendations. This is especially helpful if they have dealt with processing a renters insurance claim before.
The Takeaway
Renters insurance can provide coverage for your personal belongings, whether they are in your home, your car, or while you are on vacation. In addition, renters insurance can provide liability coverage in case someone is injured in your home or if you accidentally cause injury to someone.
To determine if buying renters insurance is worth it for you, you may want to consider whether it would be financially devastating for you to have to replace all, or even some, of your personal possessions if they were stolen or damaged. If the answer is yes, then a renters insurance policy may be a wise investment.
Renters insurance can also provide peace of mind, which some renters may feel is worth the cost.
If you decide to purchase a policy, you’ll want to understand what the policy covers, and also ask the company or agent about available discounts, deductibles, and coverage limits.
Thinking about renters insurance but worried about how to fit it into your budget? You may want to consider signing up for a Checking and Savings account with SoFi. With SoFi Checking and Savings, you can easily see your weekly spending on your dashboard in the app. This can help you stay on top of your spending, and make sure you are staying on track with your budget. With SoFi, you’ll also earn a competitive annual percentage yield (APY) and won’t pay any account fees.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOBK0523072U
