After getting your first job, you have finally rented a nice, cozy apartment for yourself and can now enjoy the feeling of living in your own place.

One day, however, you come home only to realize that your apartment has been burgled and some of your possessions stolen.

How do you recover what you have lost? If not burglars, a tree might crash through your window on a stormy night and damage your television, fridge, or some other expensive appliance.

Not only do you need to replace this items, but you might also have to find somewhere to stay while the place is being repaired.

If you don’t have renters’ insurance, these events can drain you financially. And the above scenarios are just a few examples.

What if your dog bites your neighbor’s kid and your neighbor sues you? What if a friend gets injured while in your apartment?

All these are situations that might put a dent in your pocket, something that can be easily avoided if you have renters’ insurance.

Most people think they are covered by their landlord’s insurance, but nothing could be farther from the truth.

Your landlord’s insurance only covers what the landlord owns, which is the physical structure, the house itself. As for your personal belongings, insuring them is your responsibility.

This is where renters’ insurance comes in.

If you not conversant with renter’s insurance, or if you have heard about it but don’t know whether you really need it, you are in the right place.

This article is going to cover everything you need to know about renters’ insurance.


To understand renters’ insurance, you have to first get how it differs from homeowners’ insurance.

On purchasing a home, you also need to purchase homeowners’ insurance, since your home is a valuable asset that must be protected against risks such as fire.

As a tenant who has rented a home, on the other hand, you would instead go for renters’ insurance.

Renters’ insurance differs from homeowners’ insurance in that it does not protect the physical structure of the home.

Since the renter does not own the structure, he or she cannot insure it – that would be the responsibility of the property owner, in this case the landlord.

Instead, renters’ insurance insures your possessions.

It protects your goods against perils such as fire, lightning, falling objects, explosion, riots, or vandalism.

The house itself is insured by the landlord, but your possessions are your own responsibility.

These include your books, electronic appliances, furniture, and so on.

Renters’ insurance also covers the expenses you might incur when your dwelling has been made uninhabitable.

In addition, renters’ insurance covers you in case someone gets injured in your apartment. It also covers you when somebody else’s personal property is damaged and they sue you.

The building’s owner bears the responsibility of insuring your dwelling, but none at all for your personal belongings.

Therefore, in case of a fire, the damage upon the building itself will be covered under the landlord’s insurance, but your own personal belongings won’t.

This is why some large or medium-sized rental properties have it as a requirement in the lease that all tenants must hold renters’ insurance.

Renters’ insurance covers all sorts of dwellings, so long as you are renting your home.

This includes condos, apartments, and houses.

Since renters’ insurance only covers your personal property and not the actual dwelling, it is far less costly than homeowners’ insurance.


Each renters’ insurance policy is unique as what it covers depends on the insurer you pick and the type of coverage you want.

However, most renters’ insurance policies typically cover the following:

1. Personal Property

Most people purchase renters’ insurance as a way of protecting their personal belongings. Risk events that may be covered by renters’ insurance include:

  • Fire
  • Lightning
  • Hail
  • Aircraft
  • Falling objects
  • Explosion
  • Frozen plumbing
  • Riots
  • Theft
  • Smoke
  • Vandalism
  • Sudden and accidental water discharge from plumbing or appliances
  • Wind
  • Weight of snow or ice

Most standard renters’ insurance policies protect against fire, vandalism, water damage, theft, power surges, and other out-of-your-control events.

However, most do not protect against mudslides, earthquakes, flood water, or nuclear hazards.

If the area you live in is prone to these hazards, you should talk to your insurance agent about getting a separate policy for these.

Furthermore, you should note that certain property types get coverage only up to a certain limit set by the insurer.

For instance, the limit for electronics could be $2,500, while the limit for jewelry and furs could be $1,500.

In that case, if you own a customized computer, an engagement ring, or an expensive golf clubs set, it would be best to purchase an additional personal articles policy.

Such add-ons to your renter’s insurance won’t cost you much, but they provide protection for valuable items that would be costly to replace.

2. Loss of Use

In many cases, renters’ insurance policies cover expenses when your actual dwelling becomes damaged and uninhabitable.

The policy pays for your living expenses until the repair of your property is complete.

The policy may also pay for you to find somewhere else to live.

In most cases, insurance policies pay this expense for a maximum period of two years.

An example is when a tree crushes through the roof of your house and you need to find a hotel to live in.

Loss of use covers the hotel bill, food, and other related expenses, as well as the repairs.

3. Inflation Coverage

Renters’ insurance may also cover inflation – making automatic adjustments for inflation.

The insurance coverage on your personal property increases with the rising cost of living.

The rate of increase is based on the inflation index.

4. Liability Coverage

Liability coverage covers the expenses that arise when someone sues you after getting injured inside your apartment.

An example is a situation where a guest slips and falls inside your apartment, or when your dog bites your neighbor’s child who now has to get stitches.

Liability coverage includes attorney’s fees and court costs, as well as medical costs for the injured party.

Many tenants think that their landlord’s liability coverage covers them in the event of such accidents.

However, if that accident is caused by your possessions, you as the tenant will be held responsible.

Note that liability coverage does not cover you for negligence or for intentional bodily injury.

For instance, it will not cover you when you fling a baseball in a parking lot trying to hit somebody. In addition, it does not cover business pursuits.

For instance, if you bake brownies in your apartment and someone gets food poisoning from eating them, the liability coverage won’t be applicable. In such a case, what you need is a business owner’s policy.

Liability coverage also doesn’t cover vehicle-related damage or injury.

An example is when due to a failure in your emergency brake, your parked car hits somebody.

To cover this, you need to get auto insurance.

5. Additional Coverage

Other than these basics, some renters’ insurance policies might have additional coverage.

For instance, “Credit card and bank forgery” coverage ensures you are protected against monetary fraud attempts.

An example is when a burglar breaks into your house and nabs your check book or credit card, using it to run up fraudulent charges or writing fake checks.

“Property of others” coverage protects the property of guests in your house – for example, when you have borrowed a friend’s laptop and it gets destroyed by a leaking pipe.


Equally important in understanding an insurance policy is knowing what it does not cover.

In most policies, specific exclusions are listed to ensure customers know exactly what they are buying. Examples of risks not covered by renters’ insurance include:

  • Losses caused by your negligence as a tenant.
  • Losses caused by flooding.
  • Losses caused by landslides or earthquakes.
  • Losses caused by nuclear hazards.


When shopping for renters’ insurance, you might come across the terms actual cash value (ACV) and replacement cost value (RCV).

These terms determine the monthly payments you are going to make towards your policy, as well as the amount of payout you can expect from your insurer.

Actual Cash Value (ACV)

Actual cash value refers to an item’s current, depreciated value.

Over time, most things naturally reduce in value over time, with the exception of items such as heirlooms, antiques, and collectibles.

Over time, due to wear and tear, items lose value. Furthermore, due to changing fashion, things go out of style and as a result are worth far less than they were originally worth.

For instance, let’s say you have an iPhone that you bought several years ago when it cost approximately $800.

However, in the years since you bought it, technology has advanced and design styles have evolved.

In addition, the phone has undergone considerable wear and tear during those years. The ACV of that iPhone could now be something like $200.

To better understand actual cash value, imagine if you had to sell that old iPhone on eBay or Craigslist.

How much money would you actually get for it?

This is a good metaphor to help you understand what ACV is.

However, the insurer’s method of calculating ACV might be a bit more complicated than this.

The insurance company might use a set table of depreciated values or it could work with a specific formula to calculate ACV.

Replacement Cost Value (RCV)

Replacement cost value refers to how much it will cost you to replace the item with a new one.

For instance, if the iPhone we mentioned above is damaged by a fire, you will have to replace it. Obviously you can’t get a new iPhone for $200, which is the ACV.

To get a new iPhone of the same model and quality, you might need about $450, and that is the replacement cost value.

A better example would be a couch that you purchased four years ago at a cost of $4,000. It got burned in the same fire that destroyed your iPhone.

The couch had during the last four years depreciated in value and its ACV was $2,000.

However, to replace the couch, you will probably need $4,000 (couch prices don’t change as fast as smartphone prices).

That means that the RCV would be $4,000, the same price as when you originally bought the couch, because that is how much it will cost to get a new one.

Comparison Between ACV and RCV

Where you have to choose between these two terms when purchasing a renters’ insurance policy, your decision should be guided by how much you are willing or able to pay monthly.

For instance, if you choose RCV, the policy will fully replace your lost or damaged item at the current market value.

However, the downside is that your monthly premiums will be higher than for ACV insurance.

On the other hand, if you choose ACV, you will enjoy lower monthly premiums.

However, you will only receive the depreciated value of your item, and this might not be enough money to replace the item.

Ensure that you read the small print on your renters’ insurance contract to ensure you get the option you want.

How ACV and RCV Work in Renters’ Insurance

Insurance companies have certain regulations concerning their calculation of actual cash value and replacement cost value reimbursements.

Each policy may differ slightly in its terms.

Generally, you should have the ability to recover the actual cash value of an item immediately after filing a claim.

On the other hand, to receive payment for the full received cash value, you will have to first actually replace the item and then submit a receipt.

After you have filed a claim, the insurance company collects information concerning your items to help determine the replacement cost value and actual cash value of each item.

They will then issue an ACV payment as quickly as possible, once all the claim requirements are met.

Claim requirements typically include submitting relevant receipts, police reports, and photos of items/damages.

If your intention is to replace the item, you have to purchase the new one and then submit a receipt.

The insurance company will then reimburse you for the difference between actual cash value (which they had already paid you) and replacement cash value.


Renters’ insurance is, on average, quite affordable – relative of course to the amount of coverage it provides.

In the US, the average cost of renters’ insurance is approximately $16 monthly or about $187 annually.

In the United States, about 37% of all households rent their homes – this accounts for over 43 million households.

However, despite renter’s insurance being relatively affordable, only 40% have purchased renters’ insurance coverage, according to Value Penguin. The number is growing, however.

Typically, renters’ insurance rates range between $15 and $30 monthly (that is $180 and $360 annually). This is purely a ballpark figure to help give you a rough estimate of what renters’ insurance will cost you.

Renter's Insurance

Cost of renters’ insurance by state. Source: Trusted Choice

How much it actually costs you will depend on several factors, such as the location of your rented dwelling, the amount of liability protection, your personal property coverage, and any safety features you may have on the property such as burglar or fire alarms.

If you live in hurricane territory or near a flood area, the average cost of renters’ insurance in your area is bound to be higher than other areas.

If you as an individual or the house/apartment you live in has a history of numerous claims, your premiums are also likely to be higher than the average.

In addition, raising reimbursement levels for electronics or valuable jewelry also raises the average rental insurance costs.

The Impact of Your Deductible on Renters’ Insurance Costs

When making an insurance claim, there is an amount of damage costs which you will be held responsible for. This amount is known as a renters’ insurance deductible.

Typically, a renters’ insurance deductible will be at $500 or $1,000. However, you have a range of choices to select from.

If you choose a higher deductible, you will have responsibility for a larger share of the costs.

However, you will pay lower rates. It is better to choose lower deductible plans, so as to ensure you don’t pay more out of your pocket when you make a claim.

The Impact of Item Valuation on Renters’ Insurance Costs

The item valuation in your policy also influences the amount of renters’ insurance costs.

A policy with a high valuation for your possessions means you will pay a higher premium.

Typically, you can select an insurance policy on the basis of whether it values your items on actual cash value (ACV) or on replacement cost value (RCV) basis.

Should you pick an ACV policy, which is cheaper than the RCV one, you get reimbursement for your damaged property at its current value, which includes the wear and tear.

An ACV policy is best when you want to keep the policy cost low and if you have a lot of new possessions that have not lost much value.

If you select a RCV policy, which is more expensive, you will be reimbursed at the item’s current value, with wear and tear not being considered.

In other words, you will be reimbursed based on how much it costs to buy a new item of the same type.

Select an RCV policy if you can handle the slightly higher rates and if you are keen on getting a more generous reimbursement from the insurance company when you make a claim.

The Impact of Endorsements for High-Value Items on Renters’ Insurance Costs

Standard renters’ insurance policies may exclude high-value items like art or jewelry.

Alternatively, these valuable items might be covered up to separate, lower limits.

In that case, it will cost you extra to purchase an endorsement for increased coverage.

The Impact of Safety Features on Renters’ Insurance Costs

Proving to your insurer that you are a lower-risk customer can lead to lower renters’ insurance rates.

For instance, if you have burglar alarms, fire alarms, deadlocks, and other safety features, you may get a discount from the insurance company.

Other Factors Besides Coverage That Affect Your Renters’ Insurance Costs

Other factors that will have an impact on your policy’s price include pets, location, and insurance & credit history.

  • Pets: Owning an animal increases liability risk as it could injure someone else or damage their property. This doesn’t of course extend to harmless pets like gold fish. A dog, particularly the aggressive breeds, or a reptile, will prompt some insurers to raise the rate or to even exclude coverage for your pet entirely.
  • Location: If you live in a place that is at a higher risk for natural disasters, the renters’ insurance policy will be more expensive. This is also true if you live in an area that has higher crime rates.
  • Insurance and credit history: A person who has filed an insurance claim in the past is considered more likely to do it again in the future than one who has never filed a claim. The more numerous the claims, the riskier the customer, and hence the higher their renters’ insurance policy will be. Furthermore, insurance companies have found a correlation between one’s credit history and the likelihood of filing a claim. People who have poorer credit scores are more likely to file frequent claims than those who have strong credit scores.


If it still not clear to you why you need to get renters’ insurance, below are some of the major benefits you will gain from getting renters’ insurance:

  1. It covers your personal possessions, since they are not typically covered by your landlord’s homeowner’s insurance, which only covers the physical structure of the building or home you live in.
  2. It is affordable – much more affordable than homeowner’s insurance, which is what you would pay if you owned your home. Most renters’ insurance policies range between $100 and $200 annually, though as we have seen the cost varies depending on a variety of factors.
  3. It provides liability coverage, in case someone is injured in your house and decides to sue you. The policy will also cover their medical bills.
  4. It provides fire/wind coverage, in case your belongings are damaged due to wind or fire.
  5. It provides theft coverage.
  6. It covers any damage or injuries you or your family may cause to others. This comes in handy if you have kids – for instance, if your kid smashes a neighbor’s rare antique china with a baseball.


The following are some of the reasons some people may hesitate to take a renters’ insurance policy:

  1. It does not cover flooding, earthquakes, or landslides. If you live in an area that has a high risk of floods or earthquakes, you will have to take out an additional policy.
  2. Actual cash value policies don’t pay enough to replace the lost item. On the other hand, replacement cash value policies are more expensive.
  3. The policy may not cover highly valuable items, which necessitates taking out a separate policy for those items.


Getting renters’ insurance is absolutely worth it.

Considering the number of things that could go wrong at any time, it is wise to insure your personal possessions.

This will ensure you don’t go broke when something happens to your personal belongings or to your guest.

Considering how affordable it is, I don’t see a reason why you should not get renters’ insurance.

Do You Really Need Renter's Insurance?

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