What Is Renters Insurance and How Does It Work?

Renters insurance is an important yet often overlooked financial safety net for tenants. While the building owner likely has landlord insurance, that coverage does not extend to the renter or their property. Many renters would be surprised to know that bundling renters insurance with an auto policy may only cost a few dollars more each month and can provide financial protection for their personal belongings.

What is renters insurance?

The number of renters is growing three times faster than the number of homeowners, according to Redfin. With rising home prices making renting more appealing, this trend is likely to continue. If you’re renting, understanding what renters insurance is and how it works is important to your financial health.

Many landlords require renters insurance as a stipulation of the lease agreement, but some do not. However, it’s typically a good idea to have a policy in place. A comprehensive renters insurance policy (aka HO-4 policy) can help cover your personal belongings, liability exposure and additional living expenses should your home become uninhabitable due to a covered event.

The good news is purchasing renters insurance is typically quite affordable compared to many other types of insurance. If you’re in the market for renters insurance, here’s what you need to know.

What is covered by renters insurance?

Renters insurance may apply in numerous situations, depending on the endorsements that you add to your policy. It does not cover intentional loss or damage, but it can cover damage caused by other renters in the building. For example, if a fire starts in a neighboring apartment, renters insurance can cover damage to your belongings.

Renters insurance typically includes the following coverage types:

• Personal property insurance: This coverage will help pay for damage to your personal belongings after an approved claim. This may include furniture, clothing, jewelry and electronics. High-value items, such as artwork and jewelry, may require additional coverage.
• Personal liability insurance: This is the portion of your policy that covers legal or medical costs if someone is injured or their property is damaged in your home and you are found negligent.
• Additional living expenses: If your apartment or rented home is damaged to the extent that you cannot live in it until it is repaired, this coverage will help pay for the cost of lodging and other expenses, including meals or pet boarding. It only covers additional expenses, however, not expenses you would normally have. So, for example, your hotel bill will be covered, but the utility bill for your rented home will not be covered.

You may also have the option to add things like identity theft coverage, pet liability coverage and scheduled personal property coverage to your policy. If you are unsure what coverage types to consider, talking to a licensed agent could help.

What doesn’t renters insurance cover?

By definition, renters insurance does not cover the dwelling, other structures or any of the permanent fixtures of the home. Most renters policies exclude damage to your personal items caused by earthquakes and flooding. While earthquake coverage can often be purchased as an endorsement, you may need to buy a separate policy if you live in a high-risk area. Similarly, flood insurance is commonly offered as a separate policy, although a few companies offer it as an endorsement.

Also notable, the premium you pay for standard renters insurance usually includes coverage of losses due to theft, but the policy typically spells out the exact items covered. And some of your personal items may only be covered up to a specific dollar amount.

How much does renters insurance cost?

Renters insurance costs $170 per year on average, according to the latest data available from the Insurance Information Institute. However, the cost of your renters insurance policy will vary based on several factors, including how much personal property coverage you purchase, which level of liability coverage you select, whether you add optional coverage for broader financial protection and what your claims history looks like.

What states offer renters insurance?

Renters insurance is available in all 50 states and Washington, D.C. However, states with a high density of renters, such as California and New York, may have more active renters insurance markets with more companies and endorsements to choose from.

Note that renters insurance isn’t just for those who rent apartments. Renters in condos and homes also have the option to purchase renters insurance to cover their belongings and liability exposure.

What companies offer renters insurance?

Renters insurance is available in every state, and renters typically have an abundance of carriers to choose from. Even renters living in states with insurance challenges due to extreme weather usually have an easier time finding coverage than a homeowner would. The best renters insurance company for you will depend on your coverage needs and which carriers are available in your area, among other considerations.

To help narrow your search, below are the renters insurance carriers that rank above average in the J.D. Power 2024 U.S. Home Insurance Study.

*USAA solely extends coverage to active-duty military, veterans and qualifying family members. As such, it is not eligible for official ranking with J.D. Power.

Can I transfer my renters insurance to a new apartment?

Yes, your renters policy can usually move with you, but you need to contact your insurance agent to update it. For out-of-state moves, there is a chance that your current carrier doesn’t offer coverage in your new location. Also, your premium may increase or decrease depending on changes in risk factors. For example, maybe your new building has alarms or sprinkler systems that qualify for a discount. If your building has a higher number of units or is in an area with a higher crime rate, your rate might increase.

It’s also important to note that you cannot transfer your renters insurance policy to another person. If you are leaving your apartment but a housemate is staying behind, they will need to purchase their own policy.

How do I save on renters insurance?

Although renters insurance is generally much less expensive than homeowners or condo insurance, there are still ways to reduce your premium. Here are some potential tactics:

• Bundle your policies: If you also have an auto insurance policy, consider bundling your renters insurance with the same insurer to earn a discount.
• Install protection devices: If your apartment has smoke alarms, a carbon monoxide detector or a home invasion alert system, you might save money on your policy.
• Consider how you pay: If you can pay your annual premium in full, you might save money. If you do need to pay in installments, many companies offer discounts if you sign up for automatic withdrawal.
• Increase your deductible: Your deductible is the amount you will pay out of pocket if you file a claim. Generally, the higher your deductible, the lower your premium. Just be sure to choose a level that you can afford to pay if you file a claim.

Every insurance company is different, so discussing your policy with a licensed agent could help you find additional ways to save.

Can I cancel my renters insurance at any time?

Yes, in most cases, you can cancel your renters insurance at any time. However, it’s important to review the terms of your insurance policy so you understand if there are cancellation fees or other restrictions.

To cancel your renters insurance, you typically need to contact your insurance company directly. You may be required to provide a written request or follow a specific process outlined by the insurer. It’s a good idea to check your policy documents or contact your agent so you have accurate information on the cancellation process and any potential fees.

Keep in mind that while you can cancel your renters insurance at any time, it’s generally recommended that you have continuous coverage for your personal belongings and liability. If you no longer need the coverage or are switching to a different insurance provider, make sure to secure new coverage before canceling your existing policy to avoid any gaps.

Frequently asked questions

• Is renters insurance common?
  

  Yes, renters insurance is a common policy. There are about 45.2 million renters in the United States, and most financial experts agree that renters insurance can provide valuable financial protection. Because of the prevalence of renters in the country, several insurance companies offer renters insurance with reasonable premiums. The average cost is less than $200 per year.

• Do I really need a renters insurance policy?
  

  Everyone’s situation is different and purchasing any kind of insurance policy is a highly individualized decision. Renters insurance is not required by law in any state, but a landlord has the right to require tenants to purchase a policy. However, even if you are not required to, renters insurance does typically offer a decent amount of coverage for a relatively low cost. If your budget is particularly tight, you may be able to take advantage of discounts to lower the cost of a renters insurance policy while still gaining valuable financial protection.

• How do you get renters insurance?
  

  The process of purchasing renters insurance is generally simple and there’s typically no waiting period, which means you may be eligible to get coverage on the same day you apply. For most people, the first step to finding the best insurance company is to obtain quotes from multiple insurers. Most companies offer personalized quotes online or by phone, or you could visit a local agency to speak to an insurance agent about your needs. During the quote process, you typically need to provide personal information like your name, address and date of birth.

• How do I choose a renters insurance company?
  

  Because there are several insurers that offer renters insurance on the market, you may not know where to start your search. Determining what kind of coverage you need and what features you want — like a digital app, 24/7 customer service or a live agent — may help you find carriers that suit your needs. You can then request quotes from several companies to compare prices, coverage, discounts and more.

• What kind of insurance do I need if I own a rental home?
  

  If you rent out a property, you may want to consider a landlord dwelling policy. This type of policy covers the structure of the home, detached structures and any personal property that you provide for the home (such as furniture). Your renters should consider purchasing a renters insurance policy, though, because a landlord dwelling policy does not provide any coverage for renters’ possessions. If you operate a short-term vacation rental, the coverage you need may differ. Speak with your insurance agent to determine which policy is best for your individual situation.

• Does a renters insurance policy cover my pets?
  

  It depends. Your pets are generally not considered personal property, so damage or injury to your pets is not typically covered by a renters insurance policy. For that, you need pet insurance. However, your liability coverage may cover damage or injury that your pets cause to others. Note that some dog breeds and exotic animals may be excluded; any animal that you do not disclose to your insurance company could be excluded, too. Discussing your pet(s) with your insurance company is often the best way to confirm your carrier’s guidelines.