Do I Need Renters Insurance? Is It Required? (2024)

You might rent your living space, but it’s your belongings and personal touches that truly make it home. Perhaps you have a comfy couch and a few cherished items, like a work of art or a favorite piece of jewelry. And on occasion, you like to have a friend over for dinner.

But thieves, clumsy guests, fires and other unexpected events can disrupt your home and damage your belongings. Getting the best renters insurance can protect you when the unexpected occurs.

When Is Renters Insurance Required?

Renters insurance isn’t required by law, but a landlord may require you have a renters insurance policy as part of your lease agreement.

Property owners have landlord insurance, which covers the owner or management company for property and liability issues related to the structure and common areas, such as sidewalks and stairways. Landlord insurance doesn’t cover damage to your personal items and it doesn’t cover accidental injuries or property damage to others that you are liable for.

Why would landlords demand renters insurance? Typical reasons are:

• Renters insurance covers damaged and stolen personal property. Renters with insurance may be less apt to sue a landlord to try to get money for damaged items.
• A landlord may see renters insurance as proof that the tenant is a lower risk.
• Additional living expenses coverage is included with renters insurance and helps pay for temporary housing while the rental unit is being repaired if it’s damaged due to a problem covered by your policy, such as a fire.
• Renters insurance includes liability coverage for the renter, which may reduce the risk of a lawsuit against the landlord.

Should I Buy Renters Insurance When It’s Optional?

Renters insurance can be a wise financial decision even if it’s not required. Renters insurance costs only about $14 a month on average for $15,000 worth of personal property coverage. It covers a wide range of problems such as stolen items and accidental injuries to others. A renters insurance policy:

• Covers your personal property like furniture, electronics and clothes if your rental unit catches fire or is damaged by another issue covered by your policy.
• Covers your personal items if they are vandalized or stolen.
• Includes additional living expenses coverage that can help pay for temporary housing if your unit is damaged due to a problem covered by your policy.
• Includes liability coverage, which pays for property damage and injuries you accidentally cause to others. Liability insurance also pays for your legal defense if you’re sued for the incident.
• Includes medical payments coverage that will pay for minor injuries to guests, no matter who is at fault for the accident.

Who Needs Renters Insurance?

Tenants who may need renters insurance include:

• Someone with financial assets who can be a lawsuit target. When you have the right amount of liability insurance, you won’t have to gut your savings or sell off assets to pay for a lawsuit against you. Liability insurance pays for accidental injuries and property damage you cause to others, such as a guest who is injured while visiting your apartment or if you knock an errant golf ball through someone’s window. It also pays for your legal costs if you’re sued because of the accident.
• People with pets. Liability insurance pays for medical expenses if your dog bites someone. Consider the average dog bite home insurance claim was $49,025 in 2021, according to the Insurance Information Institute and State Farm. There were nearly 18,000 dog bite claims in that year alone.
• Renters with little or no savings. If you don’t have much money set aside in an emergency fund, renters insurance can be a key way to stay afloat if a problem like a fire damages your apartment. If a fire destroys your personal property, renters insurance can pay to repair or replace the items. Renters insurance can also help with expenses like hotel bills and restaurant meals while your apartment is being repaired.
• College students living off campus. If you live in a campus dorm, your personal belongings are likely covered under your parents homeowners insurance policy. But that’s typically not the case if you live in an off-campus apartment. You’ll need your own renters insurance policy.

7 Reasons You Need Renters Insurance

1. You Have Way More Stuff Than You Think

As a renter, one common mistake you might make is underestimating how much you actually own. Or you might think you don’t own anything of significant value. But chances are you have a fair number of essential belongings that you can’t live without and that can cost a lot to replace.

For example, what would you do if a thief swiped your laptop? Or a fire destroyed your furniture and clothes? Would you be able to afford new items at a moment’s notice?

Renters insurance is a good way to get coverage for all your personal belongings. It pays to repair or replace your damaged items and covers a wide range of problems, like theft, fires, smoke, vandalism, accidental overflow of water and explosions. It can even cover items stolen while you’re away from home, such as a laptop stolen from your car or hotel room.

You can assess what you have with a good home inventory, which can be as simple as a written list. Or you could walk through your home while recording a video on your smartphone.

2. Personal Property Coverage Can Protect Your Wallet

Personal property insurance covers your belongings, but you also want to consider the type of coverage you need.

Replacement cost vs. actual cash value

When you buy renters insurance, you have the option to choose between replacement cost or actual cash value (ACV) coverage.

If your belongings are damaged or destroyed due to a problem covered by your policy (like a fire), replacement cost coverage will pay for new, similar items. But actual cash value coverage takes depreciation into account and will only reimburse you for the depreciated value of your items.

For example, if your 10-year-old sofa is damaged by a fire, replacement cost coverage will pay for a new, similar sofa. ACV will only pay the depreciated value of the sofa, which means you’ll need to buy a cheap sofa or pay the difference in cost yourself.

Replacement cost coverage is more expensive, but it’s generally the better option.

Certain items have special limits

Some items have what are called sub-limits or “special limits” for certain types of losses, like theft. For example, a renters insurance policy might only cover $1,500 for stolen jewelry. If your $5,000 watch is swiped by a thief, you’ll only be reimbursed $1,500.

Here are some examples of special limits in a standard renters insurance policy:

• Limit of $200 for money, bank notes and gift cards.
• Limit of $1,500 for watches and jewelry that are stolen.
• Limit of $2,500 for firearms that are stolen.

It’s a good idea to schedule high-value items like jewelry and other valuables. “Scheduling” an item is optional and extends your coverage to ensure you get paid what your items are worth if they are damaged or stolen.

3. You Need Liability Insurance

A renters insurance policy includes liability insurance. This essential coverage pays for property damage and injuries you accidentally cause to others. For example, your liability insurance would cover your guest’s medical bills if they took a fall in your apartment and you are found to be legally responsible. It also pays for your legal costs, settlements and judgments if you are sued because of an accident.

A common default liability coverage amount is $100,000, but if you need more, you can typically buy up to $500,000. If that’s still not enough coverage, you can buy additional umbrella insurance of $1 million or more. Generally, you want enough liability insurance to cover what could be taken from you in a lawsuit.

4. You Also Need Coverage for Minor Injuries

Let’s say a guest suffers a minor injury, like they stub their toe against your coffee table and need to get an X-ray to find out if it’s broken. The “medical payments to others” portion of your renters insurance can pay for their trip to urgent care.

Medical payments to others coverage is designed to cover small medical expenses for others, no matter who is at fault for the accident. It’s usually sold for coverage amounts between $1,000 and $5,000. Larger medical bills will be covered by your liability insurance, if you’re legally liable.

5. Renters Insurance Covers Temporary Housing

If you are displaced from your home due to a problem like a fire, renters insurance pays for temporary housing and other costs under the additional living expenses (ALE) portion of the policy. This coverage is sometimes called “loss of use.”

ALE covers any necessary increase in living expenses needed for you to maintain your normal standard of living. This could include hotel bills, the cost of restaurant meals and services, such as pet boarding or laundry service.

6. Renters Insurance Is Affordable

You might be thinking, all this coverage is great, but there’s no way I can afford it.

Renters insurance is more affordable than you think. You can typically find cheap renters insurance for about $14 a month. The national average cost of renters insurance is $173 per year for $15,000 in personal property coverage, according to Forbes Advisor’s analysis.

Average renters insurance costs

How much your renters insurance cost will depend on several factors, including:

• The amount of coverage
• Your insurance deductible
• Where you live
• Your claims history
• If you own a dog

A good way to find a reasonable price for coverage is to compare renters insurance quotes from multiple insurance companies.

7. A Landlord’s Insurance Won’t Cover You

If you’re thinking of skipping renters insurance because you assume your landlord’s insurance covers you, think again.

Landlord insurance covers a landlord’s interests, such as the building, structures on the property (like a fence or shed) and their personal property. It does not extend to your personal belongings. In other words, if there’s a fire or tornado, your landlord’s insurance will pay to repair the building but it won’t pay to replace your stuff.

A landlord’s insurance also won’t pay for temporary housing if you can’t live in your unit because of damage.

Misunderstandings About Renters Insurance

It’s easy to overlook renters insurance, especially if you underestimate how much stuff you actually own. There are some other common misconceptions about renters insurance, such as:

• It’s expensive. You can find a good renters insurance policy for about $14 a month for $15,000 in personal property coverage.
• It’s not necessary. Renters may think their landlord’s insurance will cover them for all problems. That’s not the case. Landlord insurance doesn’t cover a tenant’s personal property, additional living expenses if you cannot live in your apartment due to a problem covered by your policy or liability coverage if you accidentally cause an injury or property damage to someone else.
• You don’t have much money so you don’t need it. Not having much money in the bank may make you think you don’t need renters insurance, but that’s actually an argument for renters insurance. If a problem like a fire destroys your apartment, renters insurance can help you replace your belongings and pay for extra living expenses somewhere else.
• Your roommate’s renters insurance covers your stuff. Unless you’re listed on the roommate’s policy, their insurance does not cover you.

Do I Need Renters Insurance FAQ