What Is Renters Insurance?
Renters insurance is affordable coverage designed specifically to protect renters’ property after a named peril. Although some renters think their landlord’s insurance policy will protect them, it usually just protects your landlord and the building you’re living in; your personal belongings and liability probably aren’t covered. For that, you need renters insurance.
Generally speaking, standard HO-4 renters insurance covers four things:
- Theft of or damage to your personal property contained in the rental unit, such as clothing, furniture, and electronics
- Personal liability if someone is injured in your unit or you accidentally damage someone else’s property
- Additional living expenses you may incur, such as hotel bills, if your unit is uninhabitable after a covered peril.
- Medical payments to others you are legally responsible for the necessary medical expenses that are incurred or medically ascertained
Renters insurance is similar to homeowners insurance, except it doesn’t cover the residential structure or other structures like outbuildings. Generally, insurance experts agree that renters insurance is a sound investment to protect your belongings against a variety of unfortunate circumstances, including theft, fire, storms, and some natural disasters.
Steps for Purchasing Renters Insurance
Although buying renters insurance may seem complicated, it’s easy to get started. To buy a renters insurance policy, you must decide what you want to cover, determine how much insurance you need, and choose an insurance company and policy.
Where to Buy Renters Insurance
You can find a lot of useful information on insurance company websites when shopping for renters insurance, including where a particular company operates, and what standard and optional coverages they offer. Although renters insurance costs vary by region, many companies offer online estimating tools to give you an idea of what you’ll pay for any given type and amount of coverage.
While it’s important to do your own research, you should also consider getting some help from a licensed insurance agent. They can advise you on exactly what type of coverage to buy and how much it will likely cost. An exclusive agent who works with just one company will only provide information and quotes from that company. On the other hand, independent agents can obtain quotes from a number of companies. Whatever agent you use, it’s a good idea to check their background to make sure they’re reputable. Visit your state insurance agency website to look for reviews and complaints, as well as the National Association of Insurance Commissioners (NAIC) website.
Mistakes to Avoid When Buying Renters Insurance
Steven Weisbart, senior vice president and chief economist of the III, explains that the most common mistakes when buying renters insurance involve failing to purchase the right amount of insurance, not considering extra liability coverage, and not considering additional coverage like flood insurance if you live in a high-risk area.
“You want to get the right total amount of insurance, because if it’s a complete loss, you will want to replace everything that you lose,” Weisbart says. “You also need to know what the policy doesn’t cover so that you can buy additional insurance if you need it.”
Another mistake is not comparing prices from several insurance companies before buying renters insurance. Robert Hunter, director of insurance at the Consumer Federation of America, notes that this can result in paying too much.
“People often don’t compare prices but take what an agent gives them,” he says. “Agents usually represent only one or a few companies and may not have access to the best insurer for you. Also, an agent can make more money sending you to a higher priced insurer with a bigger commission. Be careful, and at least call a few insurers.”
How Much Does Renters Insurance Cost?
If you’re apprehensive about the potential cost of renters insurance, don’t be. It’s relatively affordable, and experts generally agree that the benefits of renters insurance are well worth the cost. According to a 2022 study from the NAIC, the average annual renters insurance premium in 2019 was $174.
Note that premiums vary by state. In 2019, Mississippi was the most expensive state in terms of renters insurance, with an average annual premium of $252 and North Dakota was the cheapest, with an average annual premium of $115.
There are several factors that can affect the cost of renters insurance, the most important of which are the type and amount of coverage. If you stick with your insurance company’s basic renters insurance policy, you’ll have coverage for your personal property, liability from certain types of legal incidents, compensation for additional living expenses if you have to temporarily relocate from the rental property, and medical payments to others if you are legally responsible.
You can increase your limits for all four types of coverage, which will increase how much you pay for renters insurance but will provide more compensation in the event of a loss. For example, you can:
- Increase the coverage limits for your household possessions, which is useful if you own high-end jewelry, electronics, or other expensive items.
- Get a replacement cost policy instead of an actual cash value policy because it pays to replace your damaged or lost property at its new – rather than depreciated – value.
- Add supplemental coverage (known as riders or floaters) for specific valuable possessions.
- Add supplemental coverage for specific disasters, such as flood or earthquake coverage.
- Add supplemental coverage for business inventory or assets stored on the rental property.
- Add supplemental liability coverage, such as an umbrella policy.
- Increase the limit of your additional living expense coverage.
After choosing the type and amount of coverage, decide whether you want a high or low deductible. This is the amount you must pay out of pocket before receiving compensation for your losses. For example, if you have a $500 deductible and $1,000 in losses, you’ll only receive $500 in compensation for your claim. A lower deductible generally results in higher premiums for the same coverage, while opting for a higher deductible generally lowers premiums. When you select a company and a policy, you should be able to choose deductible options.
After you decide how much insurance you need and what type of policy you want, your insurance company will determine the cost of your premiums. Be sure to ask about any available discounts, such as bundling renters and auto insurance, staying with the insurance company for a certain period of time, or equipping your rental home with specific safety equipment. With that in mind, let’s take a look at the actual costs of renters insurance from the insurance companies we’ve rated and profiled.
For example, State Farm has a sample median monthly cost of $13.04, based on our research. This is the cheapest rate among insurers in our rating. The most expensive company in our rating is American Family, which has a median monthly cost of $30.49. Keep in mind that any rates shown here are for illustrative purposes only. You should contact the insurance company or insurance agent directly for applicable quotes.
Where to Buy Renters Insurance
You can find a lot of useful information on insurance company websites when shopping for renters insurance, including where a particular company operates, and what standard and optional coverages they offer. Although renters insurance costs vary by region, many companies offer online estimating tools to give you an idea of what you’ll pay for any given type and amount of coverage.
While it’s important to do your own research, you should also consider getting some help from a licensed insurance agent. They can advise you on exactly what type of coverage to buy and how much it will likely cost. An exclusive agent who works with just one company will only provide information and quotes from that company. On the other hand, independent agents can obtain quotes from a number of companies. Whatever agent you use, it’s a good idea to check their background to make sure they’re reputable. Visit your state insurance agency website to look for reviews and complaints, as well as the National Association of Insurance Commissioners (NAIC) website.
Mistakes to Avoid When Buying Renters Insurance
Steven Weisbart, senior vice president and chief economist of the III, explains that the most common mistakes when buying renters insurance involve failing to purchase the right amount of insurance, not considering extra liability coverage, and not considering additional coverage like flood insurance if you live in a high-risk area.
“You want to get the right total amount of insurance, because if it’s a complete loss, you will want to replace everything that you lose,” Weisbart says. “You also need to know what the policy doesn’t cover so that you can buy additional insurance if you need it.”
Another mistake is not comparing prices from several insurance companies before buying renters insurance. Robert Hunter, director of insurance at the Consumer Federation of America, notes that this can result in paying too much.
“People often don’t compare prices but take what an agent gives them,” he says. “Agents usually represent only one or a few companies and may not have access to the best insurer for you. Also, an agent can make more money sending you to a higher priced insurer with a bigger commission. Be careful, and at least call a few insurers.”
How Much Does Renters Insurance Cost?
If you’re apprehensive about the potential cost of renters insurance, don’t be. It’s relatively affordable, and experts generally agree that the benefits of renters insurance are well worth the cost. According to a 2022 study from the NAIC, the average annual renters insurance premium in 2019 was $174.
Note that premiums vary by state. In 2019, Mississippi was the most expensive state in terms of renters insurance, with an average annual premium of $252 and North Dakota was the cheapest, with an average annual premium of $115.
There are several factors that can affect the cost of renters insurance, the most important of which are the type and amount of coverage. If you stick with your insurance company’s basic renters insurance policy, you’ll have coverage for your personal property, liability from certain types of legal incidents, compensation for additional living expenses if you have to temporarily relocate from the rental property, and medical payments to others if you are legally responsible.
You can increase your limits for all four types of coverage, which will increase how much you pay for renters insurance but will provide more compensation in the event of a loss. For example, you can:
After you decide how much insurance you need and what type of policy you want, your insurance company will determine the cost of your premiums. Be sure to ask about any available discounts, such as bundling renters and auto insurance, staying with the insurance company for a certain period of time, or equipping your rental home with specific safety equipment. With that in mind, let’s take a look at the actual costs of renters insurance from the insurance companies we’ve rated and profiled.
For example, State Farm has a sample median monthly cost of $13.04, based on our research. This is the cheapest rate among insurers in our rating. The most expensive company in our rating is American Family, which has a median monthly cost of $30.49. Keep in mind that any rates shown here are for illustrative purposes only. You should contact the insurance company or insurance agent directly for applicable quotes.
