Renters Insurance: Is It Needed and Is It Worth the Cost?

Apartment for rent sign displayed on residental street.
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It’s moving day, and all of your stuff fits into the back of a medium-sized rental truck. With only one trip between your old and new apartment required, you’re happy you don’t own very much.

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But, as you unload the truck and unpack the boxes on the other end, take a mental inventory of all the things you own — and their worth. What you lack in quantity, you definitely might make up for in value.

The 70-inch television. The expensive laptop. The top-of-the-line AirPods. Your golf clubs. The jewelry you’ve acquired through the years. Oh, and don’t forget the $1,000 couch that the furniture store will deliver to your new place soon.

So maybe the value of your things adds up to more than you thought. And here’s the question: If something happens — a fire, water damage from a broken pipe, a theft — could you afford to replace your possessions?

If the answer is no, it’s time to consider renters insurance.

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What Is Renters Insurance?

The owner of your property carries insurance on the building. Renters insurance helps protect you from the loss of the personal property you own. That’s everything from your clothing to your electronics to your kitchenware and even the contents of your pantry.

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Many insurance policies also pay for losses of your personal property if you are traveling and your possessions are stolen while you are away from home. If you can’t live in your apartment or rental home while damages are being repaired, your policy likely will cover costs associated with finding a temporary place to live. Finally, if someone is injured in your apartment and it’s ruled your fault, your insurance will cover your personal liability as well as the costs of legal claims.

No law requires you to have renters insurance. Still, some apartment complexes or individual landlords could mandate it and specify minimum amounts of personal liability coverage you must carry.

How Much Does Renters Insurance Cost?

The premiums for renters insurance range from $15 to $30 per month, the National Association of Insurance Commissioners reports. The cost depends on where you live, the amount of property you own and the square footage of the rental property. Some companies, such as Liberty Mutual and Lemonade, advertise renters insurance policies that start as low as $5 per month.

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As with any insurance you buy, it is wise to shop around with at least a few carriers to know exactly what you are getting for your monthly premium. Questions to ask include:

  • What are the amounts of policy coverage for both loss and personal liability?
  • What deductible amounts are available, and what is the price difference per month?
  • Are there coverage limits on certain items, such as jewelry, electronics or collectibles?
  • Are additional living expenses paid for if your unit is uninhabitable for a while?
  • Will the insurance protect you if your dog bites someone?
  • Are there any natural disasters not covered?
  • Are discounts available if the rental property has smoke detectors, deadbolts, a security system or smart devices designed to protect it?

Actual Cash Value vs. Replacement Cost

Another important question to ask is whether the policy has actual cash value or replacement cost coverage. The agent will explain the difference to you, as well as the difference in the cost of the premium.

In short, actual cash value pays you what an item is worth today if it is stolen or damaged beyond repair in an insurable incident. Replacement cost pays to replace an item.

For example, if that $1,000 couch you bought is destroyed by fire three years from now, the insurance company might value it at just $250. That’s the amount you’d receive with an actual cash value policy — once your deductible has been met. Things such as depreciation and normal wear and tear are factored in with actual cash value coverage. But if you have replacement cost coverage, you’ll receive the amount required to replace the couch.

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The Bottom Line

The cost of renters insurance is small compared to the potential benefits. For the price of a few cups of fancy coffee or a couple of fast-food meals each month, you can insure your personal property, guarantee you’ll have the money to pay for the loss of use of your home and protect yourself from financial ruin in the case of liability.

It’s worth a few minutes of your time to investigate the cost vs. the benefits.

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About the Author

Jami Farkas holds a communications degree from California State University, Fullerton, and has worked as a reporter or editor at daily newspapers in all four corners of the United States. She brings to GOBankingRates experience as a sports editor, business editor, religion editor, digital editor — and more. With a passion for real estate, she passed the real estate licensing exam in her state and is still weighing whether to take the plunge into selling homes — or just writing about selling homes.
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