What does renters insurance cover?

Key Takeaway
When you rent property, like a house or apartment, the valuables inside could be at risk of theft, damage, or destruction. Or, you could be held liable for damage you or your guests cause to other people's property. That’s where renters insurance comes in. Renters insurance is an important type of insurance policy that could protect you from serious financial hurdles in the future.

What does renters insurance cover?

When you rent property, like a house or apartment, the valuables inside could be at risk of theft, damage, or destruction. That’s where renters insurance comes in. Renters insurance is an important type of insurance policy that could protect you from unexpected property loss and expenses.

But what is renters insurance, and what does renters insurance cover on a standard policy? Here's a break down of some of some of the most commonly asked questions about renters insurance.

What exactly is renters insurance?

Renters insurance, which can also be called tenant insurance, is a type of insurance policy that covers unexpected events or "covered perils." In a nutshell, it covers damage, destruction, or loss of property within a rental property (any property you don't own but live in, such as an apartment, house, townhouse, etc.).

For example, say that you live in an apartment and someone breaks into that property. They steal your computer, your monitor, and a bunch of other personal property. If you have renters insurance, you could get reimbursed for that lost property thanks to your renters insurance policy.

Renters insurance is useful for renters, as it protects them from unexpected financial losses. But it’s pretty helpful for landlords and property owners as well. Renters insurance can help tenants pay for unexpected losses so they can keep living in the same property – then, the landlord doesn’t have to find a new tenant for the property in question because of sudden financial difficulties.

So, what does a standard renters insurance policy cover?

When determining whether they should take out renters insurance, lots of property renters want to know what a given policy will cover. Let's break down what a normal renters insurance policy protects you against and what you'll be reimbursed for. There are (generally) three types of coverage in a standard renters insurance policy.

Personal property coverage

Personal property coverage covers the cost to repair or replace your personal belongings if they are lost due to a theft, environmental damage, and more. Personal belongings are always specified in a policy’s paperwork, but they normally include things like:

·         Clothes

·         Furniture

·         Electronics

·         Kitchenware

·         Tools

Note that each policy has a different definition of personal belongings, so what one policy may cover, another may not. Like all insurance policies, you are only covered up to your personal coverage limit. For example, if your policy covers you for $2000 in personal property loss, but you lost about $2500 worth of property, you’ll only be reimbursed for $2000.

Personal property coverage is the cornerstone of most renters insurance policies. It's also especially important if you happen to rent property in an area of town that might have a higher-than-average likelihood of break-ins or theft.

Note that personal property coverage only protects you against theft that happens inside your property. It normally doesn’t protect you against theft or property damage that happens outside the property. As an example, if your car is stolen in a rental apartment block parking lot, your car probably won’t be covered by your renters insurance policy unless otherwise stated.

Liability coverage

In a nutshell, liability coverage reimburses you if you accidentally damage the property of another person or if a guest is injured on your property and you are found to be responsible. Let’s break both of these hypotheticals down in more detail.

First, imagine a circumstance where you live in a second-floor apartment and you accidentally drop something onto the first-floor balcony of the apartment below you. In doing so, you damage that tenant's grill. If you have liability coverage, you'll be reimbursed for that damage and can easily pay the person back for the accident.

Second, imagine that you invite someone over to your apartment, and they accidentally slip and fall on a pool of water that has leaked out from your refrigerator. They blame you for the accident. If you have liability coverage, you’ll be reimbursed for that person’s medical bills so you don’t have to pay for them out-of-pocket or through some other insurance policy.

As with personal property coverage, your liability protection only extends up to your coverage limit. However, most renters insurance policies include liability coverage by default, just in case. This can be a great element of your renters insurance policy if you want to maximize peace of mind.

Extra living expenses coverage

Many renters insurance policies also cover extra living expenses. This type of coverage protects you or covers you against any additional costs you might incur if and only if your rental residence is damaged and left uninhabitable for a certain amount of time.

Say that your apartment gets flooded because of a massive storm. Naturally, you can’t be expected to live there while repairs are underway! Rather than having to give up your rental agreement, however, additional living expenses coverage pays for some of the cost of hotel bills, travel expenses, and certain other additional costs while repairs are made.

This type of policy doesn’t protect you against structural damage to the building you are renting, nor does it cover landlords’ expenses. So there’s no guarantee that this type of insurance policy will make it easier for you to return to your rental property. But it can provide you with financial stability during a very difficult time, at least up to coverage limits.

Extra living expenses coverage is a good idea if you live in an area where natural disasters or structural damage are more likely than usual (e.g., you live on the coastline and tides are rising, or you live in Southern California, where earthquakes can happen from time to time.)

As with other insurance policies, extra living expenses coverage extends up to a certain predefined limit. It’s usually quite high, however. Also, the timeline for which you can expect extra living expenses coverage varies from plan to plan. Usually, you only get extra living expenses coverage payments for a certain number of weeks or months. After that point, it’ll be up to you to find other living expenses or to determine whether you can move back into your rental property.

How are theft-related losses covered?

Since most renters insurance policies focus on theft-related loss, it’s a good idea to fully understand how this relates to your policy and how your losses are covered.

Generally, a typical renters insurance policy that includes personal property coverage will pay to replace any stolen items. It does this by looking at the current market value of the property in question or by averaging the value of the property in question if a market price isn’t available (e.g., the property you lost is no longer made or sold).

Furthermore, theft from your car might be covered under your renters insurance policy if the theft occurred while your car was on a rental property, such as an apartment complex parking lot. Note that this can vary from policy to policy, however, so you shouldn’t expect that it is automatically included in your current policy choice.

On top of that, theft-related losses are only covered after you pay a deductible. A deductible is a certain amount of money you have to pay toward the protected item's repair or replacement before the insurance company agrees to pay for the loss.

As an example, if you lose a gaming system and television that both add up to about $700 in losses, and your deductible is $500, you have to pay $500 for replacements. Then you can file an insurance claim for the remaining $200.

Other optional coverage

In addition to the above coverage, many renters insurance policies include other optional coverage types that you can opt to pay for. These are usually not necessary, but by adding them to your policy, you’ll pay a higher monthly premium in exchange for a greater range of coverage. Some examples of optional renters policy coverage include:

·        Building addition and alteration coverage. This type of renters insurance pays for any covered damages to the additions, fixtures, improvements, alterations, or installations you make your home. It’s more common with condominiums or other properties, but it’s still present on some renters insurance policies if your landlord allows you to make alterations. For example, if you add a deck to your rental property and it gets damaged, building addition and alteration coverage will help you with the costs of repairing or replace it

·         Credit card coverage. This type of coverage pays for any unauthorized transactions on your credit cards, as well as your bank debit cards or ATM cards (up to a certain limit.) This policy typically also applies to any counterfeit money transfers or forged checks made in your name

·         Theft extension coverage, which gives you extra protection for personal belongings that are stored in or on any type of motor vehicle, watercraft, or trailer. Say that you have an RV in an apartment parking lot. Normal renters insurance won't cover losses from theft of property in that vehicle, but theft extension coverage likely will

·         Valuables plus (or some other name). This type of policy gives you extra coverage for high-value items that could be stolen, like jewelry, fine art, watches, and so on. This is an important type of renters insurance coverage, as standard personal protection coverage doesn't usually cover the cost of very high-value or expensive items

·         Water backup coverage, which protects you against any losses that are caused by backed-up drains or sewers. This is distinct from flood-related damage coverage, which is often included in renters insurance policies by default

·         Earthquake coverage, which pays you up to a certain limit for any covered losses to your rental property that are caused by earthquakes or volcanoes

As you can see, there are a lot of things a renters insurance policy can potentially cover. You should read over a potential policy carefully to fully understand what’s covered and what isn’t. That way, you won’t run into any unexpected and unwelcome surprises if you ever need to file a claim.

Does renters insurance cover mold damage?

In most renters insurance policies, mold damage is not covered. For example, if your apartment has a lot of mold growing over the walls and ceilings, it probably won't be covered, and you'll have to pay for any associated medical bills or property losses yourself.

There is an exception to this: if the mold comes from a problem that is covered by an existing renters insurance policy. For example, if there is an internal water leak that comes from an apartment building’s plumbing, any mold damage that comes from that issue could be covered under your policy (since water damage from the plumbing is already covered).

What about dog bites and pet damage?

What if you are a renters insurance policyholder, and your dog bites one of your guests or a fellow tenant? Some renters insurance plans do cover medical bills associated with dog bites and other pet damage under the personal liability coverage.

However, this is heavily specific to each individual policy. Be sure to read the details of your renters insurance carefully so you know whether you are covered or not.

How to know how much renters insurance you need

With so many different types of coverage available, you might not know how much renters insurance you really need or what additional coverage you should pay for. This is doubly true if you have limited finances and need to make every dollar count.

In general, the best choice is to heavily consider:

·         The risks of your area. As an example, if you live in a very safe neighborhood and there haven’t been a lot of reports of theft or break-ins, you probably don’t need a lot of extra theft coverage or extra coverage for high-value items. Similarly, if you live in the high desert, you probably don’t need flood coverage or coverage from damage caused by backed-up water systems!

·         How much personal property coverage you need. It's always a good idea to take a general inventory of all the belongings that you store in your rental home or your vehicle. Once you have an overall idea of the value that could be stolen in a break-in, you can determine how much personal property coverage you need and what your maximum ought to be.

·         Your personal finances and budget. Naturally, more renters insurance is always good, but if you can’t afford an extra policy, don’t sweat it too much. It’s better to keep your financial situation more stable than it is to walk a thin line because of a bit of extra insurance coverage.

Is renters insurance required?

Typically, yes. These days, most landlords of reputable, high-value properties require tenants to pay for renters insurance if they wish to sign a rental agreement. These costs are often folded into the overall rent of the property or other tenant fees you may need to pay.

That said, renters insurance may not legally be required in your state or territory. Some landlords prefer that tenants take out renters insurance to maximize their financial stability or to prevent renters from suing the landlord for losses.

If an apartment does not require renters insurance, do some extra research on the property and the surrounding area. Many low-value apartments do not require renters insurance, as the landlords of these properties don't think that it is worthwhile or believe they can quickly swap out tenants if needed.

Even if renters insurance isn’t legally required or mandated by your landlord, you should consider getting a policy. Many renters insurance policies don’t cost too much on top of your monthly rental bill and associated expenses. Some policies can also be acquired quite cheaply through your landlord or apartment association.

Wrap up

Overall, renters insurance covers personal property loss, liability for accidental damage and medical bills, and sometimes extra living expenses. The best renters insurance policies are pretty comprehensive, giving you tons of peace and ensuring you don’t have to worry about paying out-of-pocket for accidental property loss or damage.

If you don't already have it, consider taking out a renters insurance policy in the near future so you can be covered!

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