Last Updated: February 2024
In contrast to landlord insurance, renters insurance is designed to safeguard tenants’ personal belongings within the rented space. It also often includes liability coverage, which provides protection if a tenant is legally responsible for injury to others or damage to others’ property. This type of rental property insurance can be a great supplement a landlord’s own coverage, providing an additional layer of security to protect the property.
What is Renters Insurance?
Renters insurance, also known as tenants insurance, is a form of coverage that protects the policyholder’s (i.e. tenants) personal belongings inside a rented property such as an apartment or even student housing. In addition to covering personal property against risks such as theft, fire, or vandalism, it also often provides liability coverage for injuries or property damage that the policyholder might inadvertently cause. Renters insurance may also cover living expenses if the rented unit becomes uninhabitable due to a covered event, making it a vital tool for tenant protection and financial security.
What is Covered & Not Covered in Renters Insurance
If a landlord requires tenants to purchase renters insurance, they should understand the limits and exceptions common among these policies. This type of policy generally shields tenants from certain types of loss or damage to their personal belongings, personal liability claims, and sometimes additional living expenses. However, not all events or items are covered under standard policies via exclusions, making it very important for tenants to thoroughly review their policy details.
| Typically Covered | Typically Not Covered |
|---|---|
| Personal property damage due to perils like fire, theft, or vandalism | Damage from certain natural disasters, such as floods or earthquakes |
| Personal liability for injuries or property damage | Personal property in extremely high-value categories, like expensive jewelry or fine art, beyond certain limits |
| Additional living expenses if the rental unit becomes uninhabitable due to a covered event | Damage caused by pests, such as bed bugs or rodents |
| Medical payments to others who are injured in the policyholder’s rented unit | Personal property losses outside of the policy’s named perils |
Average Cost of a Renters Insurance Policy
$2101
1Based on 2020 HO-4 Coverage including broad named-peril coverage for the personal property of tenants. Source: Insurance Information Institute
We estimate the average cost of a renters insurance policy to be $210 per year. The cost of renters insurance can vary widely, depending on factors like the location of the property, the tenant’s personal credit history, and the amount of coverage chosen. Despite these variables, renters insurance is still quite affordable. On average, in the United States, renters insurance tends to cost between $15 and $25 per month, making it a cost-effective method for tenants to safeguard their personal belongings.
Renters Insurance Example
To better understand how renters insurance works, let’s visualize an example where a tenant, John, experiences a burglary in his apartment, and personal items valued at $5,000 are stolen. John has a renters insurance policy with a personal property coverage limit of $20,000 and a deductible of $500. After reporting the theft to the police and his insurance company, John would pay the first $500 (his deductible) towards replacing his stolen items. The insurance company would then cover the remaining $4,500.
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Should Landlords Require Tenants to Get Renters Insurance?
Requiring tenants to carry renters insurance can provide significant advantages. Firstly, it ensures that tenants’ personal belongings are covered in case of a loss, which can prevent disputes about property responsibility. Additionally, the liability portion of renters insurance can cover damages that tenants might inadvertently cause to the property, or injury to others, thereby potentially reducing your liability exposure. Many landlords find it extremely beneficial to include a renters insurance requirement in their lease agreements.
How Much Renters Insurance Should a Landlord Require?
The amount of renters insurance a tenant should carry often depends on the value of their personal belongings and the level of liability protection they may need. However, a common recommendation is for tenants to carry at least $30,000 in personal property coverage and $100,000 in liability coverage. These figures provide a baseline that can accommodate a wide range of potential losses or liability issues. It’s worth noting that higher-value personal belongings or those with greater particular risks may warrant higher coverage amounts.
Why Is Renters Insurance Required if the Building Owner Already has a Landlord Policy?
While a landlord insurance policy protects the actual building, it generally does not extend to a tenant’s personal belongings. Renters insurance is designed to fill this gap, covering the tenant’s furniture, electronics, clothing, and other personal items. Furthermore, landlord policies typically do not include liability coverage for the tenant, so if a visitor is injured in a tenant’s unit, renters insurance can cover that potential expense. Additionally, should a covered disaster make the unit uninhabitable, renters insurance can help cover the cost of a temporary living arrangement for the tenant.
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About the Author
Ryan Nelson
I’m an investor, real estate developer, and property manager with hands-on experience in all types of real estate from single family homes up to hundreds of thousands of square feet of commercial real estate. RentalRealEstate is my mission to create the ultimate real estate investor platform for expert resources, reviews and tools. Learn more about my story.
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