If you're kids or grandkids are heading to college or you're looking into renting instead of buying a vacation home, you've probably heard about renters insurance. While some landlords are starting to require it, if yours doesn't, you might be asking, "Do I really need renters insurance?" The answer is yes, and, to show why, here's how my policy helped me navigate an all-too-common problem renters face.
Last fall, my worst fear as a renter became a reality: A pipe burst in the apartment directly above mine, flooding my apartment. What made the situation even worse was that I got the news when I was out of town visiting family.
I panicked, even though I was told the situation was being handled. There were three questions running through my head that weekend: How many of my belongings were destroyed? How long would the repairs take? And what would my renters insurance cover?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What does renters insurance cover?
Ever since I relocated to the Washington, D.C., area from Michigan, I’ve rented — and had renters insurance (some apartment complexes and landlords require tenants to have one).
In general, a renters insurance policy covers three basics: your liability, personal possessions and living expenses in the event your apartment becomes uninhabitable. The policies typically cover losses from a burglary, vandalism, windstorms and certain types of water damage — which is where things get confusing.
If my apartment had flooded because of a hurricane, I would have been out of luck, because most renters policies don’t cover flooding that comes from outside your building. But a burst pipe falls into the accident category, which is usually covered. To file a claim, I logged on to my Liberty Mutual insurance account from my smartphone. I received text message updates throughout the process from the agent handling my claim.
How much does renters insurance cost?
As with any other coverage, a renters policy comes with insurance deductibles and coverage limits that all factor into the cost of the policy and the amount you’ll be reimbursed. My policy, which costs $18.50 a month, covers $15,000 in personal property and provides liability coverage of $100,000 and guest medical coverage of $1,000. My deductible is $500.
According to Nerd Wallet, the average monthly premium for renters insurance is about $12 a month for $30,000 in personal property coverage, $100,000 in liability coverage and a $500 deductible.
If you have car insurance, you may be able to get a discount of about 5% by buying your renters insurance from the same company.
You may want more coverage, especially for personal property, if you have high-end furniture, designer clothes or a lot of tech in your apartment. Before you decide which policy is best for you, take an inventory of your belongings and how much they cost. You can either create a spreadsheet (which is something I should have done) or use an app such as Encircle to create your list.
Additional renters insurance coverage you might need
Like home insurance, renters insurance typically excludes flood damage. So, if you live in a flood-prone area, you may want to look into additional coverage to keep your belongings fully protected.
If you’re worried about flooding, review your local flood maps to see if you’re at risk. Go to the FEMA flood map and scroll down to the FEMA Flood Map Service center to find your community flood map.
If you live in a community that participates in the National Flood Insurance Program, you may be able to purchase a separate flood insurance policy from FEMA to protect your belongings. Flood insurance costs about $99 a year for $100,000 of contents-only coverage.
If you’re concerned about other disasters destroying your belongings, you should consider buying a renters insurance policy with a high personal property limit. Coverage amounts start as low as $15,000 and can go up to $500,000.
If you have expensive electronics or jewelry, you may want to add an insurance rider (if one is available) because your standard personal property coverage may not be enough to replace them. Coverage with higher personal property limits is usually inexpensive.
Renters insurance replacement coverage vs. actual cash value coverage
Once you’ve accounted for all your items, you’ll have to decide whether to get replacement coverage or actual cash value coverage. The former, which I have, replaces the items at full cost, and the latter factors in depreciation. Replacement coverage costs about 5% more, but Penny Gusner, at Insurance.com, says it’s worth it.
“You have to compare how much you would get for your used television or computer to how much it would cost to replace it with something new and similar,” says Gusner. You could end up spending more in the end if you go with actual cash value, she says. Some online companies are automatically giving replacement coverage as your only option.
It’s also important to consider any insurance riders that could be available to you. For example, my policy offered additional home computer coverage of $5,000, which I added to protect my expensive MacBook.
In the end, I filed my claim only to discover that the amount of my losses was less than my deductible. I wasn’t surprised, but I was hoping to get something for my troubles. I’ll definitely start keeping an inventory of what I have and make sure it’s up to date.
Do you need renters insurance?
You might not own your abode, but you own what's in it. If there was a fire, flood or if your home was burgled, you would benefit from having renters insurance to help cover the costs of replacing your clothes, computer and other valuables. The value of liability coverage can't be underestimated, either. If a visitor or repair person injured themselves, you could face a personal lawsuit.
If you work from home consider a stand-alone business insurance policy that can offer more robust coverage and with higher coverage limits. This type of policy can provide better coverage limits for business equipment and liability over a typical renter's policy. These policies are good for a business that has visitors coming and going.
Renters can also buy coverage from FEMA to cover damages caused by flooding that comes from the outside. This is wise to consider as regular policies don't cover this type of flood damage. In the case of a Presidentially declared disaster, renters are also eligible for temporary housing assistance and Critical Needs Assistance (CNA), a one-time payment that can help pay for life-saving and life-sustaining items such as prescriptions, food and diapers.
Related Articles
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
How to Keep Your Charitable Giving Momentum Going All YearInstead of treating charity like a year-end rush for tax breaks, consider using smart tools like DAFs and recurring grants for maximum impact all the year.
-
Uber Takes Aim at the Bottom Lines of Billboard LawyersUber has filed lawsuits and proposed a ballot initiative, in California, to curb settlements it claims are falsely inflated by some personal injury lawyers.
-
Snowbirds: Avoid These 3 Sneaky Insurance IssuesBefore snowbirds depart for their winter retreat, they should check their insurance coverage for surprises that might arise, or else be on the hook for repairs.
-
10 Things You Should Know About Buying a Car Today, Even if You've Bought BeforeIf buying a car is on your to-do list, and it's been a while since you went shopping for a new one, this guide will help avoid any nasty shocks in the showroom.
-
Loyalty Doesn’t Pay: Why Your Car Insurance Keeps Going UpYou’ve been a good customer, now your premium is creeping up. Here’s why loyalty might be costing you on car insurance.
-
Protect Your Family From Costly Festive Fails With These Holiday TipsHaving people over this holiday season? Before opening the door to guests, here are some perils to prepare for in advance.
-
When an Extended Car Warranty is Worth It — and When it's NotGot the "we're trying to reach you about your car's extended warranty" call? Here's what you need to know before buying.
-
Does My Car Insurance Cover Rental Cars?Is it safe to decline the extra coverage car rental companies offer you when booking? Here's what you need to know.
-
I Need to Cut $1,000 From My Monthly Budget, and I've Already Given Up Starbucks and Dining Out. What Else Can I Do?Here are some creative ways to save up to $1,000 a month, even if you feel like you've already made all of the obvious cuts.
-
I Just Paid Off My Car. Can I Downgrade My Car Insurance Now?You've gotten rid of that car payment. Can you save even more by downgrading your car insurance? Here's what to consider.
