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If you buy a home with a mortgage loan, getting homeowners insurance isn't optional. While it's not legally required, lenders typically insist on it to help protect their very hefty investment in your property.
But what about renting, when you're not the owner or responsible for damage you didn't cause? Rental insurance also isn't required by law, though some landlords require tenants to purchase it as a condition of the lease. The good news: Renters insurance coverage also significantly benefits tenants.
When Is Renters Insurance Required?
Renters insurance isn't legally required anywhere in the United States, so you are not legally obligated to have it.
However, some landlords choose to put in their leases that tenants must purchase renters insurance. That's because while these policies primarily protect renters, they also come with compelling benefits for landlords, especially regarding liability.
Why Does My Landlord Require Renters Insurance?
Landlords don't need to require renters insurance. However, some mandate it in their leases since it has many protections for landlords (in addition to the benefits it offers renters).
As the property owners, landlords have their own insurance, but it's typically limited to covering damage to the building itself. It's there in case there's damage to the structure from weather or other unexpected events like fires, but that's about it. It doesn't usually cover damage or theft of the tenant's belongings, or damage made by the tenant.
If there's property damage as a result of the renter's negligence or mistake—say they accidentally set fire to the kitchen or left a faucet running that caused water damage—renters insurance might cover the bill. This perk is especially valuable to a landlord, since a tenant may not have the means to pay for these repairs themselves.
Renters insurance typically has liability coverage that can help you, as the renter, with sticky situations where someone might sue you (like if your dog hurts a guest or a visitor is injured at the property). If this happens without renters insurance in place, the liability—meaning legal and financial responsibility—might fall on the landlord. Requiring renters to have insurance with liability coverage adds a layer of protection.
What Are the Benefits of Renters Insurance?
Even if you aren't required by your landlord to purchase renters insurance, it can still be a smart idea to buy a policy. Here are a few reasons why renters insurance can benefit tenants:
- Protects your belongings: If you don't have renters insurance and someone breaks in and robs you, or your possessions are destroyed in a natural disaster, the landlord generally isn't obligated to cover any of your losses. (There may be an exception if the landlord failed to take reasonable security measures to prevent break-ins, and the tenant sues.) A key perk of renters insurance for tenants is that it helps cover the expense of repairing or replacing personal belongings from a covered event.
- Offers liability coverage: Having a renters insurance policy protects you financially in certain situations where you may have legal liability. This can happen if someone's hurt on your property and sues you. Additionally, if you cause accidental damage to the property, the liability coverage in your policy may help pay for repairs.
- Pays for temporary displacement: Let's say your rental property is damaged by a weather disaster and temporarily uninhabitable. Some rental insurance has additional living expenses coverage, which pays for the costs of staying elsewhere until repairs are made and you can return. This might reimburse you for expenses like hotel rooms, restaurant meals and other costs you wouldn't have otherwise required.
- May cover loss outside the rental: You might be surprised to learn that renters insurance doesn't only cover stolen or damaged possessions in the rental property. Most policies also include off-premises coverage, which protects your belongings from the same covered disasters as if they were in your home. For example, if you had belongings stolen from your car or hotel room, your coverage may pay for replacements.
Learn more >> What Does Rental Insurance Cover?
Who Should Consider Renters Insurance?
Renters insurance can provide financial protection and peace of mind for all renters, but it's especially useful if you're in one of these situations:
- You have valuables. If you don't have many valuable items, and someone robs your home, you might not experience many large financial losses. But if you do have valuables, such as electronics, art, musical instruments, collectibles or luxury jewelry, the financial hit could be devastating. Renters insurance solves this by covering the cost of repairing or replacing your belongings. If you have many high-value items, you might want to add a floater to the policy for extra coverage.
- You don't have a financial cushion. Losing some upscale items in a robbery is devastating, but imagine if a fire starts in your rental while you're away and you lose all your belongings. The cost to replace everything and start over could be gargantuan. If you don't have a robust emergency fund to help you rebuild from a crisis like that, renters insurance can be a critical backup.
How Much Renters Insurance Do You Need?
There's no point in paying for a robust policy with more coverage than needed, but you also don't want to end up underinsured and lack sufficient coverage in case of a disaster or other incident. How can you land on the right amount of renters insurance?
According to the Insurance Information Institute (III), it's ideal to have enough renters insurance to replace all of your personal belongings should they be stolen or destroyed in a covered event.
It's easy to underestimate the total cost of your possessions; you might just think of the high-ticket items. But consider how much it would cost to replace all of your day-to-day items like furniture, clothes, shoes, electronics, kitchen cookware, appliances, books, exercise equipment and more. To form a realistic estimate of your property value and have adequate coverage for it all, take a home inventory.
For the liability piece, make sure your policy will have adequate coverage if you're sued and lose. If someone is injured on your property, sues you and wins a judgment, you want your policy to be sufficient to cover it so they can't go after your personal assets. If you're worried the policy isn't enough to protect you, you can gain additional liability coverage by purchasing a personal umbrella insurance policy.
You'll also need to consider how much of a premium and deductible you can afford. Renters insurance is typically inexpensive, with premiums often costing as little as $15 per month. Your actual rates and terms can vary due to a variety of factors.
Learn more >> Seven Factors That Impact Your Renters Insurance Costs
How to Buy Renters Insurance
If you're ready to find a renters insurance policy, here's how to get started.
1. Determine How Much Coverage You Need
Take a home inventory to help you get an accurate estimate of the value of your belongings. This informs how much coverage is needed, and if you should add a floater policy for valuables.
Be aware that, if your new landlord requires you to purchase renters insurance, they might require a minimum amount of liability coverage.
2. Compare Options
Take time to comparison shop so you can ensure you're getting the best deal with the most coverage. If you already have auto or life insurance, request a quote for renters insurance from that company to take advantage of any bundling discounts.
Whether you have an existing insurer or not, it's smart to collect quotes from several insurance companies. Getting quotes is free and without commitment. Don't just look at rates; policies can vary, so review coverage amounts, deductible costs and the fine print of what is and isn't covered.
Obtain quotes online, by calling an insurer or visiting a local insurance agent's office.
3. Seek Discounts
While exploring options, look for ways to save money besides bundling with your existing insurer. Some renters insurance policies reduce premiums if the property has certain safety features like smoke detectors, sprinkler systems, deadbolt locks, security cameras and alarm systems. Ask your landlord if you're unsure what security features are in place so you can maximize any discounts.
You might also land discounted rates if you have good credit since there's often a credit check. If your budget is tight, look for other ways to reduce renters insurance costs, like having a higher deductible.
4. Submit Your Information
Once you've selected the winning quote, submit a full application for renters insurance. Expect to provide basic personal information, like your birthday and Social Security number, in addition to relevant details like the value of your personal property and when you want your policy to start.
Once your application is approved and you submit payment, you'll have a new renters insurance policy, and hopefully a lot more peace of mind.
Learn more >> 10 Ways to Reduce the Cost of Your Renters Insurance
The Bottom Line
Even though renters insurance isn't required legally or by all landlords, it can still be smart to carry a policy—particularly one large enough to replace your belongings or cover you in a lawsuit. Protecting your rental does come at a cost in the form of premiums, but it can really pay off if there's ever an accident or damaging event.