What Is Renters Insurance?

Renters insurance is a type of insurance policy designed to help provide financial protection for people renting a home, whether it be an apartment, condo, duplex, townhouse, or house. It typically includes coverage for personal belongings and third party liability. Renters insurance can offer peace of mind if you rent your home. In this article, we'll explain renters insurance more.

How Does Renters Insurance Generally Work?

Renters insurance is a specific type of insurance policy designed for individuals who rent a home, apartment, townhouse or condo. Also referred to as “tenant insurance” or “apartment insurance,” it typically provides coverage for personal belongings, third-party liability and additional living expenses (in the event a covered peril displaces the tenant) in exchange for a premium payment. 

The process typically begins with researching insurance companies and renters insurance coverage options. After securing the policy, premiums must be paid to keep the renters insurance policy active.  Covered claims will be paid by the insurance company in accordance with the policy’s terms and conditions. 

Renters Insurance Coverage

The terms and conditions of each policy will vary but renters insurance policies typically offer the following coverages:

Personal Property Coverage

This provides coverage for your personal belongings, such as furniture, electronics and clothing, in the event of covered events such as fire, vandalism and certain types of water damage. It's important to note that there may be policy limits for certain high-value items, so additional riders or endorsements might be necessary depending on the renter’s particular needs and circumstances.

Liability Coverage

This providers coverage for third-party liability claims (i.e. causing bodily injury or property damage to a third party). Liability coverage typically includes legal fees, medical expenses, and repair costs. For example, if a guest slips and falls in your rental unit, liability coverage can help cover their medical expenses and any potential legal fees in the event of a lawsuit.

Additional Living Expenses (ALE)

ALE is also known as loss of use coverage and helps cover the cost of temporary housing and other living expenses if your rental home becomes uninhabitable due to a covered event. This can include hotel bills, restaurant meals, and other costs incurred while your rented home is being repaired or rebuilt.

Optional Coverages and Endorsements

Depending on your needs, you may be able to select coverage options or purchase additional coverages via endorsements for your circumstances. These can include:

Replacement Cost Coverage: Replacement cost value (RCV) refers to the amount it would take to repair or replace damaged property with materials of similar quality and functionality. Actual cost value (ACV), on the other hand, refers to the amount the insurance company will pay to repair or replace damaged property based on its actual cost at the time of the loss, taking into account such factors as depreciation.

Scheduled Personal Property: Typically available by endorsement or rider to an existing policy, this additional coverage may be useful if you have high-value items like jewelry, art, or collectibles.

Identity Theft Protection: This may be added to an existing policy by endorsement (for additional premium) to help cover expenses related to restoring your identity if it's stolen.

What Does Renters Insurance Typically Not Cover?

While the terms, conditions and exclusions of each policy may vary, here are some common claims that renters insurance typically does not cover:

Flood Damage: Standard renters insurance policies do not cover damage caused by flooding. If you live in an area prone to floods, you may need to purchase a separate flood insurance policy.

Earthquake Damage: Similar to flood damage, most renters insurance policies do not cover damage resulting from earthquakes. You may be able to add earthquake coverage by endorsement or purchase a separate earthquake insurance policy if you are in a high-risk area.

Pest Infestations: Damage or infestations caused by pests such as rodents, bedbugs, or termites are generally not covered. It's often the responsibility of the landlord to address pest control issues, but check your lease agreement for specifics.

Your Roommate's Belongings: Unless your roommate is specifically listed on your policy, their personal belongings would not be covered under your renters insurance. They would need to obtain their own policy for coverage.

High-Value Items: While a standard renters policy covers personal property, it typically has coverage limits on high-value items like jewelry, art, or collectibles. You may need to purchase additional coverage to maintain adequate insurance for these items.

Intentional Acts: Any damage resulting from illegal activities, or intentional acts is typically not covered.

Business-Related Items: If you run a business from your home, your renters insurance may not cover business-related equipment or liabilities. You would need a separate business insurance policy.

Wear and Tear: Normal wear and tear or gradual deterioration of your property is not covered. This includes things like paint peeling, carpet wearing out, or other maintenance-related issues.

Why Consider Renters Insurance?

Renters insurance helps provide financial protection for renters’ covered property in case of a covered event. It can be an affordable way to help safeguard personal property and offer enhanced peace of mind as a renter.

If you need assistance exploring renters insurance policy options, we're happy to talk to you. Connect with us today.