You should be aware that there are many things that most policies do not automatically cover: backup of sewage into your residence, earthquakes, floods, and other “acts of God.” These things can be covered for an additional premium if you feel you are at significant risk.

Also, if you have any unusually expensive or valuable items, such as high-end electronic equipment, fine jewellery, musical instruments, or an important collection of art and antiques, you may need to purchase floater insurance in the form of a rider to cover these items. In addition, a separate rider might be needed to cover wind damage in certain areas from hurricanes.

Renters’ insurance policies also do not cover losses caused by the tenant’s own negligence or intentional acts.

How to Get Renters Insurance

Assess Your Insurance Needs

When you apply for renters insurance, it’s a good idea to photograph or digitally video everything you own. For expensive items, make sure to write down any serial numbers that could help verify your claim.

You can even take it a step further and enter the items into a spreadsheet along with an estimate of each item’s value. Although these steps take some extra effort, you should do them for two reasons.

  1. You probably think that the total value of the items you own is less than it actually is, which puts you at risk of under-insuring yourself. When you make yourself sit down and assess the actual value of each item you own individually, you will get a more accurate picture of what your belongings are worth. Perhaps you have around 50 Blu-ray DVDs. That may not seem like much to you, but at $20 a piece, you have a collection worth $1,000 that you won’t want to have to pay to replace in case of fire.
  2. While your insurance company probably won’t want the inventory or the photographs when you take out the policy, your documentation will be indispensable if you ever need to file a claim because you will be better able to prove the value of your possessions. Make sure to keep copies of your inventory outside of your apartment, such as in a bank safe deposit box, with a trusted friend or relative, or emailed to yourself as an attachment, so that all your supporting documents won’t get destroyed along with your belongings.

Choose an Insurance Company

Once you’ve figured out how much insurance you need, you’ll be ready to locate insurance companies that offer renters insurance policies in your area. To find a company, you can simply do an internet search for renters insurance and your state.

Another approach would be to check with family and friends for recommendations and rates. Make sure to tell your insurance rep how you found them and if you have any other existing policies with them because you can often get family rates or package deals (e.g., if you purchased both home and car insurance together). Once you’ve located potential insurers, research the companies’ insurance ratings through a company such as AM Best, which rates insurance companies’ ability to pay you when you make a claim.

Start the Application

After investigating your options, it’s time to start the application process. If several companies checked out financially, there’s no reason not to apply to all of them to see which one can offer the best combination of low rates and solid coverage.

Some companies may allow you to complete the entire process online. Others may want to speak to you on the phone or send you some paperwork to fill out. In most situations, it shouldn’t be necessary to meet with a representative in person.

Fine-Tune Your Policy

The application will be relatively simple to complete. The only questions that might trip you up are related to the type of construction of your dwelling, the year it was built, and the type of roof material used. For some properties you can actually find this information on Zillow.com; if not, you can get it from your landlord.

The two types of coverage available to renters are actual cash value and replacement cost. Actual cash value coverage pays what the property was worth at the time damage or loss occurred and is the least expensive type of renters insurance available. Replacement cost pays the full amount of replacing the items or property with new ones and is about 10% more expensive than actual cash value coverage.6

Unless you’re on the tightest of budgets, it’s wiser to opt for replacement cost coverage. It ensures that if, say, your couch is destroyed in a fire, you’ll receive the full $1,000 you’ll need to buy a spanking new model, instead of the couple of hundred dollars that your old sofa was worth due to depreciation. While replacement cost coverage tends to be slightly more expensive, the difference in premium is usually negligible when weighed against the huge increase in coverage you get.

At this point, you’ll also want to decide which deductible best fits your financial situation. As with all types of insurance, the lower your deductible, the higher the premiums, because with a low deductible, the insurance company will need to cough up more money in the event of a claim. Deductibles can range from $500 to as much as $2,000. If you raise it from $500 to $1,000, you could get as much as a 25% reduction in your premium.7 Consider how much you can afford to spend to replace your belongings in the event of a major loss, then insure yourself for the difference. Your deductible can be low to start, and you can always increase it later as needed.

Pay for Your Policy

Compared with homeowners insurance, renters insurance is relatively inexpensive. Both the National Association of Insurance Commissioners (NAIC) and the Insurance Information Institute place the average cost of renters insurance at about $15 per month, while the figure for homeowners insurance is about $75 per month. These figures reflect data up to 2019, which are the most recent available.89 Rates vary from state to state and from company to company, and, of course, they are based on the amount of insurance you purchase and other factors, including the amount of the deductible you choose.

Renters’ insurance often provides substantial discounts for measures you take to reduce the risk to the insurer. These can include fire or burglar alarm systems, fire extinguishers, sprinkler systems, and even deadbolt locks on outside doors. As mentioned above, you might also get an additional break if you are already a policyholder with a particular company.

Insurance tends to be cheaper when you pay an entire year’s premium at once instead of paying in instalments, so if you can afford to pay annually, you should do so (insurance companies love to tack on administrative fees when you pay in instalments). If you decide to pay monthly, be aware that some companies will require an automatic monthly withdrawal from your checking account.

Once you get your new policy in the mail, you’ll want to read it to make sure that you understand exactly what is and isn’t covered and confirm that it states any nonstandard additional coverage you purchased. Also, double-check that your deductible and premium amounts are correct.

The Bottom Line

“What is renters insurance?” is a fair question, but a better question might be, “Why should I have renters insurance?” The answer: It keeps accidents and annoyances from becoming bank account and budget killers. Remember that your landlord’s insurance protects their building, but it does not cover your stuff—ever. Only you can protect yourself and your possessions.