What Is Renters' Insurance and Why Do You Need It?

Most homeowners know that they need homeowners insurance to cover loss or damage to their property — and if you have a mortgage, you usually have no choice. But if you’re one of the more than 100 million Americans who rent a home or apartment, don’t overlook the value of renters' insurance. Some landlords require tenants to have insurance, but even if that’s not the case, a policy could go a long way toward protecting your property and personal finances.

If there’s damage to your rental from fire or a break-in, your landlord is responsible for repairs to the property you’re renting but isn’t responsible for fixing or replacing your personal possessions. That’s where renters' insurance comes in. Policies typically cover up to a limited dollar amount for clothing, furniture and electronics. 

Particularly valuable items, such as jewelry, artwork and collectibles, may require that you get additional coverage, known as a rider or a floater. When shopping for a policy, be sure to tally up the value of your belongings as accurately as possible and determine whether the policy’s limits are adequate. Consider also whether it might make sense to store valuable items, such as family heirlooms, rarely worn jewelry or artwork, at a safe location elsewhere, such as a safe-deposit box or a secure storage facility. Keep a list of your valued items with purchase and valuation records in a secure location as well. 

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-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.

Sign up

Renters' insurance may also cover the belongings of your roommate or significant other, as long as their name is on the policy. But many insurance companies will require roommates to have separate policies, rather than one for their combined property. Theft by a roommate is generally not covered by renters' insurance, so choose your roommates wisely.

Renters' insurance generally won’t cover damage to your personal property from natural disasters, such as hurricanes or earthquakes, says Janet Ruiz, spokeswoman for the Insurance Information Institute. For that, you’ll need to purchase special coverage. 

Renters' insurance will also cover liability, up to a certain limit, if guests in your rental injure themselves and it’s found to be your fault. For instance, if your pet bites someone, your policy could cover medical expenses. And if you are put out of your rental because it’s damaged or otherwise uninhabitable, a policy will typically cover the cost of lodging elsewhere, up to a certain amount.

Although renters' insurance could save you a lot of money, it doesn’t require a big investment. “It’s one of the most affordable products you can get — often as low as $300 a year,” Ruiz says. And unlike homeowners insurance, which can cost as much as three times the national average in some regions (such as Florida), renters' insurance is usually inexpensive no matter where you live, Ruiz says. 

Tips to cut the cost of renters' insurance

There are a number of strategies to cut the cost of renters' insurance.

• You may be able to get a discount by buying a policy from the same company that insures your car, for example. 
• You may also get a discount if you take steps to make your rental property safer from break-ins, such as installing a security camera, says Dustin Lemick, an industry expert and founder of BriteCo, a jewelry insurance company.
• It’s important to shop around. You can compare coverage and costs of various renters' insurance policies at sites such as TheZebra.com and Gabi.com. 
• And keep an eye on changing premiums. “Insurance companies are notorious for raising rates, and policyholders don’t even know it,” Lemick says. “Put a note in your calendar every eight to 10 months to review your policy and make sure your premiums haven’t gone up.”