What Is Renters Insurance and How Does It Work?

If you rent, you need renters insurance! No ifs, ands or buts about it. Unless you’re a minimalist whose entire life could fit in a suitcase, your belongings are worth a lot more than you realize.

Actually, most people underestimate how much their stuff is worth. But don’t leave yourself exposed. If something happened to your apartment or house, renters insurance is the perfect back-up plan. Plus, many landlords require it. But most renters say they don’t have it.

We’ll explain more about why you need it. And we’ll walk you through how to buy renters insurance so you can check it off your to-do list.

Why Do I Need Renters Insurance?

Renters insurance is a type of protection that will cover the cost of your possessions if they’re damaged, vandalized or stolen while you’re renting. Like homeowners insurance, it’s one of the eight types of insurance you can’t go without.

Let’s pretend you’re renting and your apartment is broken into. Your laptop, iPad, jewelry and brand-new flatscreen TV are stolen. Gone with the wind. What can you do?

First, the thief probably won’t have a change of heart and show up at your doorstep with all your stuff. And even if the police catch them, that’s still no guarantee you’ll see your things again. But what about your landlord? Well, they’re not in the business of writing checks out of the generosity of their heart.

Enter renters insurance. It does three main things:

1. Covers the cost of replacing your things in the event of theft, fire, storm, vandalism, electrical malfunctions or plumbing issues.
2. Gives you liability coverage, meaning if someone is injured at your place, you’ll be financially protected from medical bills or legal fees.
3. Pays for additional living expenses if you need to stay at a hotel while your place is being repaired.

Now that you know you need it, you’re probably asking, How do I get renters insurance? Good question! Let’s find out.  

How to Get Renters Insurance: 5 Tips

Don’t be overwhelmed. Follow these tips and you’ll soon be a renters insurance Jedi Master (if there is such a thing).

1. Research what your landlord covers.

The first step is to figure out what kind of insurance your landlord has. They’re required by law to have insurance on their building, but it won’t cover your stuff. It also probably won’t take care of any damage from water backup or appliance-related incidents. Ask your landlord for their renters policy to see what part you’ll need to handle.

2. Create an inventory.

Next, go through your place and record what you own. Estimate how much coverage you’ll need to replace everything. Group your stuff into categories like electronics and appliances, furniture, clothes and shoes, jewelry, soft furnishings, and so on. Then tackle any special items, like that fancy exercise machine or expensive bicycle. For higher-end items, you may want to purchase something called floater insurance. This protects larger assets like art or antiques.  

Take video and pictures of your stuff. Write down brands, models and serial numbers if you know them. Save receipts for big-ticket items if you can. Keep all this in a safe place or on a spreadsheet saved to a cloud drive.

3. Research renters insurance policies.

No one likes homework. But this step will pay off if you ever actually have to make a claim on your renters policy. Do your research on renters insurance policies to get a feel for what’s covered and what isn’t. This will help later when it comes time to shop around.

Protect your home and your budget with the right coverage!

There are two different kinds of renters insurance: replacement cost and actual cash value. Replacement cost is a little more expensive since it pays the full amount to replace your belongings, but it’s well worth the difference, and we recommend you always get it. Sure, actual cash value is cheaper, but that’s because it only covers what your stuff was worth when it was damaged. Do yourself a favor and get replacement cost coverage.

You’ll also want to add some type of flood or earthquake insurance if you live in areas prone to these disasters.

4. Consider your liabilities.

Think about any extra liability coverage you might need. If you’re a smoker or have pets, you might want to increase your liability. You’ll be asked about these because both can affect your premium. Also, consider how often you have company in your home—whether you host a book club or just plain old parties! The more people you have over, the more likely it is someone could get hurt. Increasing your liability coverage is really worth considering. It normally only costs a few dollars but can save you a bundle when disaster strikes. And if you think you’ll need more than the usual amount of liability coverage, check out umbrella insurance for extra protection.

5. Be ready to provide details.

Depending on where you live, you’ll be asked to answer these questions and more when it comes time to get a quote:

• What’s your full address and type of residence?
• Does your home have a smoke alarm, carbon monoxide detector, sprinkler system and security alarm?
• Is your home powered by electricity, gas or both?
• What floor do you live on if you’re in an apartment building?
• Who lives with you?
• Does your front door have a deadbolt?

If you don’t know the answers to these questions, you can reach out to your landlord. Provide as much detail as possible to get the best rate.

How Much Does Renters Insurance Cost?

Now that you know how to get renters insurance, how much does it cost?

The average person pays around $10 to $21 a month for renters insurance.¹ The average annual premium is $174—that’s about what it would cost to replace your fancy air fryer.²

The cost of renters insurance varies based on things like where you live and how much coverage you want. For example, if you get $100,000 in personal property coverage, you’ll obviously pay more in premiums than if you got $25,000. And opting for replacement cost coverage instead of actual cash value will also increase your premium. Increasing your liability limit will also bump up your premium a bit.

If you want to bring your premium down, you could raise your deductible. (Your deductible is the amount you have to pay before your insurance company will start ponying up.) A higher deductible means you’ll pay less in monthly premiums but more out of pocket when you make a claim. It’s definitely worth raising your deductible if you can afford the extra risk.

You can also sometimes get discounts if you install extra security features like burglar alarms or deadbolt locks.

Keep in mind that even the higher end of a renters insurance premium costs less over the course of a year than replacing a damaged or stolen laptop or TV. And you don’t have to lose everything at once to be able to file a claim.

Is Renters Insurance Worth It?

Renters insurance is a great deal and it’s absolutely worth it. It’s affordable and offers excellent protection for your things. And as the number of renters increases across the country due to the unprecedented housing market, more people will need renters insurance. (If you don’t want to rent the rest of your life, check out these tips to get your finances on track.)

Without renters insurance, you’d have to drain your savings or go into debt to replace your stuff—not to mention you’ll be financially responsible if someone is hurt in an accident or dog bite in your home.

Think about it. You’re protecting your personal computer, TV, favorite armchair, those early hardback editions of Harry Potter you collected years ago, and that pair of shoes you love more than you should and just can’t find anywhere anymore.

When you total how much these things are worth in dollars and cents, and how much they’re sentimentally worth to you, it’s more than the premium and then some. That’s why renters insurance is something all renters should have.

Get Coverage Today!

The steps for how to buy renters insurance are pretty simple. If you’re ready to get started, you could go online and start gathering quotes yourself. Or you could work with an independent insurance agent to help you get the best policy.

Our Endorsed Local Providers (ELPs) know the insurance market inside out and can help you find a policy that gives you the same or more coverage than the one you found online and for a similar cost or less in premiums. They’re RamseyTrusted and can advise you on coverage you’ve forgotten to include or discounts you’re eligible for—like bundling renters insurance with your auto insurance.

Bottom line? Independent agents can scan many more insurance companies, saving you time and possibly money.

Find an independent agent today!