Renters insurance protects individuals against common losses and liabilities they face when renting a home or apartment. A standard policy offers three types of renters insurance coverage, each for different situations.
Although renters insurance is not legally required, it’s beneficial for anyone who rents. Having a renters insurance policy covers your legal and financial responsibility in the event of a covered claim, like a fire. Compared to other types of insurance, renters insurance is typically very affordable, with an average premium of $ 179 per year.
What does renters insurance cover?
Standard renters insurance policies include coverage for your personal items, your liabilities and temporary accommodations if your home becomes uninhabitable. Most renters insurance policies include named perils coverage, and cover your personal belongings at their actual cash value (ACV).
[ Read: Is Renters Insurance Worth It? ]
Renters insurance coverage is comprehensive, but it does not cover everything. You might need to purchase more coverage in the form of add-on policies to fill gaps in your coverage. Some common renters insurance endorsements are flood insurance, earthquake insurance and valuables coverage for jewelry, art and electronics. Adding these policies will increase your premium, and some endorsements have a separate deductible.
What are the types of renters insurance?
There are three types of renters insurance included in a standard policy. Here’s a brief overview of each coverage and its purpose.
Personal property coverage
Personal property coverage protects your personal belongings, like furniture, small appliances and clothing, from certain losses. Most renters insurance policies cover your belongings against named perils, which are listed in your insurance policy. Named perils typically include the following losses:
- Fire, lightning and smoke
- Windstorm and hail
- Explosions
- Riots
- Damage by aircraft and vehicles
- Vandalism
- Theft
- Volcanic eruption
- Falling objects
- Snow, ice and sleet
- Sudden or accidental water or steam discharge
- Sudden or accidental freezing of pipes
- Sudden or accidental electrical surges
One of the biggest perks of renters insurance is that it will cover your personal belongings anywhere in the world. So if you’re on vacation in Europe and your backpack gets stolen, your renters insurance policy will reimburse you for the cost of a new one. It also covers your items at work and in your car.
Renters should keep in mind that this type of policy offers limited coverage for valuables. If you own a fine jewelry collection, have furs in the closet or keep a large amount of cash on hand, your renters insurance probably won’t cover it if something happens. In this case, you would need to purchase an endorsement to raise your policy limit, or schedule your valuable items.
[ Read: How to Buy Cheap Renters Insurance Online]
Liability coverage
Accidents happen, often unexpectedly, which is why having liability insurance is valuable. Renters insurance policies include two types of liability coverage — personal liability coverage and medical payments coverage. Personal liability coverage protects your financial responsibility if a guest gets injured in your home, or if you accidentally cause damage to someone else’s property.
Here’s an example. Say that you bought a brand new washing machine, and during the installation process, the water hose unexpectedly burst and water began to seep through the floor and into the apartment below yours. In this case, your renters insurance liability coverage would pay to repair the water damage and replace your downstairs neighbor’s personal items that were affected.
Medical payments coverage is the other part of liability insurance. Imagine that you have a friend over and they slip on a loose floorboard that you had been meaning to fix. They end up breaking their ankle and need medical attention. In this situation, your personal liability insurance would cover the costs related to their injury, whether it’s an ambulance ride, X-rays, surgery and rehabilitation.
Renters insurance liability coverage also protects you in legal situations. If you were sued and summoned to court over a claim that you caused, liability insurance would pay for your lawyer fees, court costs and a settlement with the plaintiff.
Loss-of-use coverage
Loss-of-use coverage is the third policy included in renters insurance. This coverage, sometimes called additional living expenses, pays for things like lodging, restaurant bills, laundry and parking if your home is damaged by a covered claim and you have to temporarily move out.
Loss of use coverage only applies when your home is affected by a covered loss. That means it doesn’t cover temporary accommodations if your home is being voluntarily remodeled or has a rodent or bug infestation.
[ Read: The Cheapest Renters Insurance Companies of 2021 ]
Loss of use coverage can be a huge benefit if you ever need to use it. However, this policy won’t grant you a free vacation. Your loss of use policy has a coverage limit, which is the highest amount of money the insurance company will pay.
To get reimbursed for lodging and food bills, you’ll need to get the expenses approved by your insurance provider. If you book a five-star hotel in another country or spend hundreds at expensive restaurants, it probably won’t be covered. When you’re using loss-of-use coverage, it’s important to keep your receipts to submit to the insurance company.
Replacement cost renters insurance policies
Most renters insurance policies cover your personal items at their actual cash value (ACV). That means if an item is damaged or destroyed, depreciation is factored into your payout. For example, say your mattress cost $ 500 brand new, and five years later it gets destroyed by water damage. Your insurance company might give you $ 250 to replace it, because the item has depreciated over time.
[ Read: Actual Cash Value vs. Replacement Cost: What’s the Difference? ]
If you want a higher payout, some insurance companies give you the option to upgrade your policy to replacement cost value (RCV). With an RCV policy, your payout does not include depreciation. That means you would receive $ 500 to replace your damaged mattress. However, it’s important to note that upgrading to an RCV will raise your premium.
Too long, didn’t read?
There are three main types of renters insurance — personal property coverage, liability coverage and loss-of-use coverage. Renters have the option to add endorsements to their policy for additional protection, like flood insurance or valuable items coverage. The more coverage you have, the higher your premium will be. However, choosing your renters insurance coverage strategically will ensure you don’t have gaps in coverage that could leave you vulnerable to legal or financial risks.
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In response to the Covid-19 pandemic, many insurance companies provided relief in the form of percentages back on monthly bills as well as a freeze on coverage cancellations due to inability to pay. While it’s not recommended, you could technically stop your coverage to save money if absolutely needed — but again, it’s strongly advised against.
See below for more details on how you can benefit from the recently approved economic relief act:
Who can benefit from this?
To qualify for rental assistance under the CARES Act at least one household family member must qualify for unemployment or have a significant income lost due to the pandemic. Income must fall at or below 80% of your county’s average income. You must also be a risk of homelessness.
Who’s getting how much?
If families fall below 50% of the average income they’ll be given priority for rent relief funds. Families can get up to a year of rent covered, and three months in the future with the CARES Act rent relief assistance.
How to apply
If you need to apply for assistance, the way you do that will vary depending on where you live. If your city or town has an existing rental assistance program, you’ll likely use that to apply for new aid.
You can contact your local housing authority, nonprofit groups or reach out to your local representatives to find out where and how to apply. Your landlord may also be able to apply for you — but they’ll have to get your approval and signature before doing so.
