What is renter's insurance and why do you need it?

apartment buildingHagen Hopkins / Getty

Renter's insurance is one of those things that seems unimportant ... until it's not. An easy way to think of renter's insurance is that it is like homeowner's insurance, but for renters.

A landlord who rents out their home will have their own homeowner's insurance and maybe even a landlord policy, but renters are responsible for having their own insurance to cover personal belongings and liability for incidents that happen in the time they are leaseholders.

I've been a renter for about 10 years. In that time, the buildings I have rented have been protected in the event of fires, damage, break-ins, and more - but that doesn't mean my belongings have always been covered. Having a separate renter's insurance policy has given me peace of mind that, in case something out of my control happened, I could cover the cost of replacing my things.

What is renter's insurance?

Renter's insurance is a type of insurance policy that covers your personal belongings. It usually costs around $20 per month.

Many people don't know this, but renter's insurance even covers your belongings when they are not inside your house. That's because most renter's insurance offers financial protection and coverage for all items and possessions under the renter's policy, no matter where they are in the world.

Renter's insurance is helpful in the case of theft

Before I was a believer in renter's insurance, I had some items stolen, including my $1,100 laptop. If I had been covered under a renter's insurance policy at that time, the cost of replacing my items would have been covered with a $500 deductible.

Find out how much renter's insurance would cost you with a quote from Policygenius »

One nice feature about my Assurant renter's insurance policy is that, in the event of loss or damage due to one of the perils specified in my contract, I am eligible to receive up to the replacement amount - not the estimated cash value at the time of loss or damage.

What is the difference between replacement amount and cash value amount?

It's simple. Let's use the example of the time my laptop was stolen. Because my policy would have covered the replacement amount, I could have paid the price of the deductible to replace my old laptop with a brand new one, as opposed to the estimated value of the laptop when it was stolen.

Replacement values are more realistic than estimated cash value, because who is going to go out and buy the exact same make, model, and year of every belonging in their house after a fire or other incident?

Buying a new laptop cost me about $1,100. If I had submitted a claim through renter's insurance, I would have only paid a $500 deductible. In hindsight, that was a potential savings of $600.

What belongings are covered with most renter's insurance policies?

Your personal property, including the items in your vehicle or in a storage unit, is covered by most renter's insurance policies.

In my case, while my personal property coverage is up to $20,000 per event with a $500 deductible, my policy breaks this amount down into smaller categories.

In the event of a fire or another disaster that could potentially damage all of my belongings, for example, I know that I could claim coverage for these maximums per each category, with a collective maximum of $20,000 of coverage:

$5,000 - personal belongings located in a storage facility

$1,000 - jewelry, watches, furs, and precious stones

$2,000 - firearms

$2,500 - silverware, tea sets, flatware, goldware

$2,500 - personal property for a home-based business

$1,000 - electronics

$200 - money, bank notes, silver and gold coins

$1,000 - securities, letters of credit, personal records, passports and tickets

$1,000 - watercrafts

$1,000 - non-watercraft trailers

As a freelance writer who works from home, I am particularly encouraged by the $2,500 worth of home-based business property coverage.

What perils are covered under renter's insurance?

Every policy is different as far as what perils are protected. But in my policy, fire or theft are just two circumstances for which I'd be covered.

Here is a comprehensive list of the dangers, disasters, incidents, and unfortunate circumstances that I could be reimbursed for with my current policy:

  • Fire or lightning
  • Windstorm or hail
  • Protest, riot, or civil unrest
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water/steam
  • Air conditioner or heater damage
  • Frozen plumbing

With renter's insurance, your items might be covered even if they are not in your house

Your items may be covered in transit, in storage, in your vehicle, and elsewhere with a renter's insurance policy. When I moved across the country, for instance, my possessions were covered in the moving truck for any of my policy's perils (excluding any damages that were a result of the movers' errors).

Also, when my skis were stolen from my car years ago, they would have been covered by renter's insurance if I'd had a policy.

My renter's insurance is great, but it's still worth keeping an eye open

Because of my decision to get renter's insurance six years ago, I've slept soundly knowing my belongings are covered. My Assurant renter's insurance policy has suited my needs perfectly in every home I've lived in since 2013.

My renewal is due this fall, though, and since it's been six years, I plan on doing a mini-audit between now and November. As I approach my renewal, I will keep my eyes open and compare my current coverage to other companies like Lemonade, Allstate, and Nationwide.

You should do an audit of your renter's insurance as often as you feel is necessary, or as you learn more about the ins and outs of coverage.

Renter's insurance also changes every time you move, since your premium is calculated based on the risk of each particular zip code. In this case, moving is a natural time to do an audit of your insurance policy to make sure you're getting the best peace of mind there is.

Check out your renter's insurance options today with a quote from Policygenius »

More coverage from How to Do Everything: Money

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