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What Does Renters Insurance Cover?
By Martha C. White MONEY RESEARCH COLLECTIVE
Renters insurance protects your stuff — and your wallet — in the event of a calamity. Also referred to as a tenant or HO-4 policy, this type of property and casualty insurance covers all types of rental property: houses, apartments, condominiums, townhouses, and mobile homes. Along with coverage of your belongings, renters insurance — like homeowners insurance — protects you from personal liability and may cover your living expenses if damage to your home renders it temporarily uninhabitable.
Even if your landlord doesn’t require you to carry renters insurance, it’s a good idea. These policies are considerably cheaper than home insurance because they don’t cover the dwelling structure itself. According to the National Association of Insurance Commissioners (NAIC), renters insurance costs an average of under $200 annually — just $15 a month.
It also is a worthwhile investment because your landlord’s insurance will not cover your belongings in the event of a natural disaster, break-in or other covered incident that results in a loss to you.
What does renters insurance cover?
Standard renters insurance has three categories of coverage:
Personal belongings
After meeting your deductible, your property insurance covers — wholly or partially, depending on the type of coverage you choose — the cost of replacing stolen or damaged items, including things like:
- Clothes
- Cash
- Appliances
- Furniture and houseware ( ie. dishes, rugs, linens)
- Electronic equipment (including computers and tablets)
- Jewelry (subject to your policy’s coverage cap)
- Collectibles such as stamp, coin or trading card collections
- Sports equipment
Most rental policies also protect your stuff outside the home, as well. Insurance companies generally extend your personal property coverage to include items in your car, a hotel room, or kept at an off-site storage facility.
Most renters insurance policies cover the following perils and the types of property damage listed below:
- Fire/smoke damage: if an electrical or kitchen fire breaks out in your home or a neighbor’s home if you live in a multi-family residence
- Lightning: if a strike ignites a fire or a power surge ruins electronic devices or appliances
- Windstorms/hail: if hail or a tornado damages the structure of your residence and your belongings suffer water damage
- Falling objects: if a branch or other object falls through a roof, wall or window
- Vandalism/theft: if your property is stolen or damaged as the result of a break-in
- Water damage from pipes: if a pipe bursts or a sprinkler system malfunctions
- Power surges: if an electrical malfunction sends a surge through your wiring and wrecks items you have plugged in or if your power is out for a long period and everything in your refrigerator spoils
- Explosion: if a gas grill or water heater explodes
- Riot or civil unrest: if your belongings are stolen or damaged by pillaging or looting
- Vehicle impact damage: if a motor vehicle or aircraft crashes into your residence
- Weight of ice/snow/sleet: if precipitation triggers a roof cave-in
Personal liability
Liability coverage also is a standard feature of renters insurance policies. This is intended to cover medical expenses and legal fees if a houseguest is injured or if you or a member of your household inadvertently damages another person’s property.
Common examples of personal liability coverage claims include:
- Falls and other injuries: If a visitor to your home slips on a freshly mopped floor and breaks their wrist, your insurance will cover you if they sue for their hospital bills.
- An accident that damages someone else’s property: If an errant baseball your kid throws goes through your neighbor’s window, your insurer will step in to help.
- Damage stemming from an incident you caused while at home: If you forget to turn off the stove and your neighbor’s apartment fills with smoke, your policy will pay to make it right.
- Dog bites: If your dog bites a visitor to your home, your insurance might cover their medical bills or your legal bills if they sue you — although be aware that many insurers have exclusions for certain dog breeds.
- Funerary costs: Depending on the policy provisions, your insurer might cover the expense of the funeral if your houseguest suffers a fatal accident.
Loss of use (ALE)
Loss-of-use — also known as additional living expenses or just ALE in insurance-industry lingo — means that your insurance company will wholly or partially reimburse you if you have to move out and live somewhere else after a covered loss renders your home temporarily uninhabitable.
Specifically, loss of use coverage might include:
- Transportation costs
- Hotel bills or rent if you need to stay somewhere else temporarily
- Meals and food costs
- Storage costs for your belongings
- Boarding for pets that can’t stay with you in your temporary lodging
- Rental of furniture, if necessary
- Laundry costs
Coverage for additional living expenses will reimburse the excess amount you spend on living expenses while you’re displaced, up to the coverage limits defined in your policy. Keep in mind that policies differ, and some will only cover up to a specified dollar amount toward eligible expenses.
Common additional coverage
Nearly all insurers will let you customize your policy with supplemental coverage options for enhanced protection. These add-ons can let you raise coverage limits or protect yourself against perils that fall outside standard policy offerings. When you get a renters insurance quote, find out what kinds of rider options are provided.
Typical additions include:
Identity theft
Some insurance companies offer protection against identity theft that you can add to standard renters insurance. This protection covers the costs you would incur to restore your identity if you are victimized by a cyberattack or other type of identity theft.
Insurance against identity theft may include reimbursement for:
- The expense of getting government IDs re-issued
- Attorney and other legal fees
- Lost wages
- The cost of hiring a fraud specialist
- The cost of reapplying for loans (if you tried to borrow money and were rejected on grounds related to your identity theft)
- The cost of electronic data recovery
- The expense of restoring electronic systems compromised by the event
In addition, some insurers include credit monitoring as one of the services they offer to protect you from identity theft.
Scheduled personal property and floaters
One common variety of insurance rider or endorsement is scheduled personal property coverage, which can be used to raise the amount of coverage you have for certain categories or even individual items for which standard levels of coverage wouldn’t fully cover reimbursement.
For instance, typical renters insurance might have a $1,500 per-item personal property limit on jewelry or collectibles, so if you have belongings worth considerably more than that amount, adding a rider that lets you raise that cap could give you more peace of mind. That way, if anything happened to your valuables, you would be fully reimbursed for your items after a covered loss.
If you just have a single high-value item you want to protect, such as an heirloom ring or an autographed football, then an endorsement called a scheduled floater might be your best option. This type of coverage extension increases the limit for that item and, in many cases, also provides more comprehensive coverage that includes incidents like accidental losses — which are not covered under most standard renters policies.
Another way of protecting your most valuable belongings is umbrella insurance, an add-on that provides excess liability insurance to existing homeowners or renters policies. Umbrella insurance is often used by high-net-worth individuals or those at a high risk of being sued as a way to protect their assets. Umbrella coverage will cover any remaining expenses, such as medical bills or legal costs, after the liability limit on your existing policy is reached.
Replacement cost coverage
When you buy a renters insurance policy, you will choose between two different levels of personal property reimbursement: replacement cost or actual cash value.
If you get replacement cost coverage, the policy will cover the damage up to what it costs you to buy the same (or similar) item. Monthly premiums are higher for replacement cost coverage than for actual cash value coverage because you’re paying to cover the full value of your belongings.
Actual cash value subtracts the depreciation on your belongings and pays you their current market value — which is likely to be a smaller amount than it would cost you to replace those items with new ones.
What does renters insurance not cover?
Like some types of homeowners insurance, renters insurance is defined by what it specifically includes. A peril not specified in the policy might not be covered, and renters insurance excludes a number of perils as a matter of course. If you live in an area at an elevated risk from one or more of these types of incidents, such as floods or earthquakes, you might want to consider purchasing added insurance coverage to protect your possessions.
Common exclusions
Here are just some of the more typical examples of the kinds of incidents standard renters insurance policies don’t cover:
Earthquakes and floods
Your renters policy won’t cover a loss if it’s the result of:
- Floods
- Earthquakes
- Volcanic eruptions
- Landslides/mudslides
- Sinkholes
- Other geological events
There are some insurance companies — Nationwide, Erie and State Farm are a few of the larger ones — that do offer renters insurance for earthquake property damage as a separate rider.
Floods are another peril notorious for being excluded from coverage. While most renters (and homeowners) insurance policies cover water damage that is attributable to a windstorm or an interior leak (like a burst pipe), flood damage is excluded as a matter of course. If you rent your home in an area prone to flooding, you might consider seeking out a private flood insurance policy, or one underwritten by the FEMA National Flood Insurance Program (NFIP).
Car accidents or theft
Renters insurance won’t cover theft or damage to your vehicle, even if it occurs at your home. Likewise, it won’t cover liability costs — for a hospital visit, car repairs, etc. — stemming from a car accident. Vehicle-related issues fall under the purview of your car insurance. (If you want more details or are in the market to buy auto insurance, learn more at this guide to the best car insurance companies.)
Roommates’ property
If you are the policyholder, your roommates’ stuff will not be covered by your renters insurance policy. They need to be listed on the policy as well.
If you plan to share the cost of renters insurance with a roommate, keep in mind that for twice the amount of stuff, you’re going to need double the coverage limit so you can both be adequately protected. If you don’t increase the standard policy coverage, you would have to split any claim payout you get — which could leave you considerably short of the funds you need to replace your belongings.
Home business liability
Business property is another typical exclusion from renters insurance, although some insurers might offer endorsements you can add to a policy. This category of exclusion covers all sorts of items that are only used in the course of business, like:
- Equipment and tools
- Inventory and supplies
- Furniture
- Work computers and electronics (ie. telephone systems, specialized software)
In addition, your renters policy will not include business liability coverage if you’re sued by a customer, employee or vendor over a business-related dispute, even if you work from home.
This kind of coverage most likely requires a separate insurance policy specifically for small business coverage. These types of policies cover incidents like damage to commercial property and lawsuits against you, your products or your business.
Pest infestations
You are not likely to be covered if your belongings are damaged or destroyed by vermin, bed bugs, termites, carpenter ants or other pests. You may have the option to add coverage for bed bug infestations as a policy rider, depending on your insurer and location.
Bottom line to renters insurance coverage
- Renters insurance protects the personal items you keep at a home you don’t own against damage, destruction or theft.
- Renters coverage may even extend to items you keep in your car or a storage facility.
- If the incident is deemed a covered peril by the insurance company, you can be reimbursed the cost of replacing items up to your policy limits, and after your deductible has been met.
- Your policy also provides you with personal liability coverage, and your insurer is likely to offer optional add-ons you can use to customize your coverage.
- Another component of renters insurance is loss-of-use coverage, also called additional living expenses coverage, which will reimburse you for travel and accommodation expenses (up to the limits of your policy) if your home is deemed uninhabitable after a covered claim.
- Renters insurance typically does not cover damage caused by earthquakes or floods, stolen or damaged business property or property belonging to housemates that aren’t listed on your policy, so you may need additional coverage depending on your risks.
- You can get quotes and shop for renters insurance online, or you can work with an independent insurance agent to purchase your policy.
