What Does Renters Insurance Cover

If you’re like most renters, you’ve probably asked yourself, “What does renters insurance cover?” Well, the backbone of any renters insurance policy is personal property coverage—in other words, protection for all your stuff. However, renters insurance offers other benefits as well.

What Is Renters Insurance

As a renter, you don’t need to worry about protecting the building you live in. Your landlord has insurance to cover that. What you do need to worry about is protecting the things you own. That’s where renters insurance comes in. Here are the main areas of coverage you’ll get with a renters policy.

Personal Property Coverage

Renters insurance pays to repair or replace your personal belongings if they get damaged or stolen. Examples of items covered by renters insurance include computers, bicycles, clothing and furniture.

Your items don’t have to be inside your apartment to be covered by renters insurance. They can be away from your apartment too. Here are some examples:

• If you’re on vacation and someone steals your laptop from your hotel room, your renters insurance can cover you.
• If your camera gets stolen from your car in the mall parking lot. Many people think that your auto policy would apply here, but it’s actually your renters policy.
• If a personal item is damaged in a storage unit.

If you live with a roommate, your renters insurance policy won’t cover their belongings. To make sure their stuff is covered too, you should have two separate renters insurance policies or one policy with both of your names on it.

Liability and Medical Coverage

Other than protecting your belongings, renters insurance can also cover you if someone gets hurt and you’re found responsible. For example, if a guest at your home accidentally trips and falls, and then files a lawsuit against you, renters insurance can help pay for your guest’s medical expenses, as well as your defense and court costs.

Additionally, liability is not tied to the apartment, so the incident could happen anywhere at all. Let’s say your dog knocks someone down at a park and injures them. If you were sued and found liable, your renters insurance could pay up to the liability limit amount on the policy.

Emergency Living Expenses

As a tenant, if you’re temporarily forced out of your apartment due to a fire or some other covered event, renters insurance will help with emergency living expenses. That means it would help pay for your hotel, your meals and other related expenses.

Additional Protection

If you want to maximize your protection, you can always add other coverages to your renters insurance policy. Cyber protection is a good example of valuable add-on coverage. It will keep you and your family one step ahead of cybercriminals.

Here are just a few examples of what it covers:

• If you’re the victim of a cyber-attack, your coverage could help pay to restore your computing device or connected home device to its previous level of functionality.
• If you’re the victim of cyber extortion, your coverage could pay for a professional to advise you on how to respond.
• If your child gets cyber-bullied and you need to switch schools, cyber coverage could help pay for that move.

Additionally, if you live in an area prone to flooding, you may want to purchase a separate flood insurance policy. Remember, renters insurance does not cover damage caused by flooding. A separate earthquake insurance policy is something else you should consider depending on where you live.

What Is a Covered Event

Bear in mind, renters insurance will only cover your belongings if they’re damaged by a peril that is listed on your renters insurance policy. This would make it a covered event. Typically, covered events include:

• Fire or lightning
• Windstorm or hail
• Smoke
• Vandalism
• Theft
• Weight of ice or snow

Some of these covered events can be complicated. For example, let’s say the ceiling of your apartment caves in from too much ice and snow, and your television is damaged as a result. In this case, your landlord’s policy will pay to repair the ceiling, while your renters insurance policy will help pay to replace the television.

Actual Cash Value vs. Replacement Cost

Typically, you will have a choice between two types of personal property coverage on a renters insurance policy: actual cash value or replacement cost. The difference is important.

• Replacement cost value – Pays you to replace the damaged item with a new, similar item.
• Actual cash value – Pays you what the damaged item is worth at the time of the loss.

*Based on 10% yearly depreciation
**Based on 3% yearly inflation

EXAMPLE

Per the chart above, let’s say the sofa you bought for $1,000 five years ago is damaged in a fire. If your renters insurance policy provides for actual cash value, you’ll receive what your sofa is currently worth—which might be $590 due to depreciation.

If you have replacement cost value, you’ll receive the value of a new sofa of the same size and quality. In this case, you may receive $1,159 due to inflation. Having replacement cost on your contents may cost a little more upfront, but it is really important if you want to fully restore your damaged items.

What Isn’t Covered by Renters Insurance

Renters insurance does not cover everything. As previously discussed, renters insurance does not cover you if your belongings are damaged by an earthquake or flood. That’s because flood insurance and earthquake insurance are both separate policies.

In addition, renters insurance won’t cover damage to the physical structure of the apartment or rental property. Typically, the landlord’s insurance covers that.

For example, let’s say you accidentally let the washing machine overflow and water floods the first floor. That’s not going to be covered under your renters policy because it’s not your stuff. However, your renters policy would cover you if your landlord sued you and you were found liable. At that point, your liability limit would kick in.