Why You Need a Renters Insurance Policy

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?

Renters insurance checkup. Ever since I relocated to the Washington, D.C., area from Michigan, I’ve rented—and had a renters policy (some apartment complexes and landlords require tenants to have one).

In general, a renters 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.

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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.

As with any other insurance coverage, renters insurance has 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. The average monthly premium for renters insurance is about $17 a month for $40,000 in personal property coverage, according to Insurance.com (opens in new tab). (If you have auto 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 keep a spreadsheet online in the cloud (which is something I should have done) or use an app such as Encircle to create your list.

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.