So you’ve decided to move to a new apartment. You’ve paid a security deposit, first and last month’s rent. Your bank account may be screaming from the up-front outlay, but you’re not done spending yet. It’s time to look into renters insurance.
Renters insurance isn’t required by law, like car insurance is. But check your lease—your landlord may require it. Before we get into the numbers, let’s go over what renters insurance covers–and what it doesn’t.
What renters insurance covers
As a renter, you don’t have to insure the beams and windows that make up your home—the owner does that. Instead, you should consider insuring the items you have inside it. But insurance goes beyond just covering your personal possessions. Mike Crowe, CEO of comparison site Clearsurance, breaks it down into four functions:
It pays to replace your essentials if they’re stolen or destroyed. This property coverage is often good outside your home, too, like if your laptop is stolen during your subway commute, for example.
It protects you from personal financial liability if someone gets hurt on the property you rent.
It pays your living expenses if your home is unlivable for a short period of time, like after a fire.
It sometimes covers damage you cause to someone else’s property beyond your home. Say you’re out with your friend and you spill your drink on their laptop. Or, it might cover you if you’re walking your dog at the park and it bites someone.
What it doesn’t cover
If you live in a geographic region that’s prone to natural disasters, you may need to buy additional insurance.
Renters insurance covers plumbing issues, but doesn’t cover the kind of flooding that’s caused by hurricanes and heavy rainfall. That coverage is available through the National Flood Insurance Program, and if you live in a designated flood zone, it’s going to be a mandatory purchase. Comparison site ValuePenguin says the average cost of flood insurance is $699 per year. If you live in a particularly vulnerable state, your cost could be almost double that. Live in Connecticut? If you’re in a designated flood zone, you could be looking at flood insurance that costs $1,395 per year on top of your normal renter’s policy.
You can also add earthquake coverage to your renters policy, if you need it. If you live in California, you may need to purchase coverage through the California Earthquake Authority, a nonprofit insurance provider. The average cost for separate earthquake insurance is $1.75 for every $1,000 of coverage, also per ValuePenguin.
Another consideration can come up for renters with roommates: Your policy typically only covers your personal belongings. You can either specifically ask to have your roommate listed on your policy, or they can get their own coverage.
Be cautious before volunteering to put your roommates on your policy, however. Dealing with roommates is stressful enough without worrying about how their actions could impact your insurance costs. Any claims made on your policy will be tracked in your Comprehensive Loss Underwriting Exchange (CLUE) report, which maintains records for home-related insurance and for auto insurance. That report helps providers evaluate the risk of insuring you. If you end up needing to make a claim (or two or three) because something happened to your roommate’s belongings, it’ll go on the policy holder’s report and could mean you end up paying more for insurance for years down the line.
What it costs
Put aside the extras like earthquake and flood coverage, and let’s look at what ordinary coverage costs. The average annual premium for a renters insurance policy is $185, according to the Insurance Information Institute.
That rate can vary from state to state and even down to the ZIP code. And while you might not be able to switch up where you live (and it probably wouldn’t be worth it just for the savings on renters insurance), you can adjust your coverage—and your costs—to your needs.
Personal property coverage typically starts at a value of about $30,000, Crowe explained. If you don’t own much or just want bare-bones coverage, some carriers offer policies that cover $10,000 worth of items. Meanwhile, liability coverage typically starts at a value of $100,000 and can go up to $250,000.
But how much coverage do you need? “You need to assess your worst-case scenario if you have to go out out of pocket to replace things you can’t absolutely could not live without,” Crowe said. That might mean clothing, your cell phone or computer at the very least. “From a liability standpoint, you need to think about if someone were to sue you personally for something that happened on your property. Could you afford to [hire an attorney] without insurance?”
Inventory programs like Sortly and Encircle can help you catalog and photograph items in your home. Beyond helping you figure out what you care most about insuring and how much coverage you need; these tools can make it easier to file a claim with the necessary details and photos.
If you’re not sure where you start when you’re checking insurance quotes, plug in $30,000 of personal property coverage and $100,000 of liability coverage to get some baseline pricing. You may be able to get a lower premium by raising your deductible—that is, being willing to pay more out of pocket for the initial couple hundred dollars worth of whatever you’d need to replace if you have to file a claim.
Make sure the coverage you’re considering covers the replacement value of your items, not the cash value. Since most items depreciate over time, Crowe said, you need to know you’ll get enough money from your insurer to replace them with new versions.
There are two more factors that can increase your cost.
The first is any item that’s particularly expensive—say, an engagement ring or pricy digital camera. Your insurance carrier may require you to get insurance specifically for those high-value items as a separate bit of coverage under your policy. The cost depends on the value of the item, and if it’s something you don’t have a receipt for (like heirloom jewelry), you may need to supply a professional appraisal.
The other is dog ownership. If you have a large dog or one from an “aggressive” breed group, your four-legged best friend could raise your rates.
How to buy renters insurance
Getting renters insurance isn’t too difficult or time-consuming because there are fewer risk factors to evaluate compared to some other types of insurance, says Crowe. You can buy coverage directly from an insurance carrier, through an agent, or through an aggregator platform that shows you quotes from several companies.
If you’re just getting started, Crowe recommends checking customer review platforms first. His company, Clearsurance, offers this, but you can also check out Policygenius and even the Better Business Bureau.
If you already have auto insurance, check with that provider as you might be able to get a discount for bundling your coverage. You can also often get a discount by paying your annual premium up front instead of monthly. And don’t forget about any extra safety features you have, like a security system or video doorbell. Those can lower your rates, too.