When you rent an apartment, you gain freedom and flexibility. However, you also take on risk. Not only do you need to protect your belongings, but you also need insurance coverage if you cause harm to somebody else.

This is where renters insurance enters the picture. It's a special type of insurance policy covering all the losses you might incur as a tenant of a landlord's property. Importantly, it protects against liability and can cover temporary living costs if there is an unexpected reason you can't live in your home.

There's a common myth that renter's insurance covers everything to do with your rental unit. That's not true. Landlords have landlord insurance for that, since the building and structure is their responsibility.

Specifically, renter's insurance covers the things that matter to you most, like your clothing, electronics, furniture, and kitchenware. It also provides you with additional coverage, as mentioned, giving you peace of mind during the rental period.

TL;DR

Renters insurance is a type of insurance that covers you against the risks of renting a property. It protects you against fire and theft, and provides liability coverage for any damage or injuries you cause to other people while living at the accommodation. Unlike conventional landlord insurance, it covers more than just the building itself. It protects renters against the things that matter most to them, from their financial security to their belongings.

Why Every Tenant Should Have a Renter's Insurance Policy

There are two main reasons why you should get a renter's insurance policy once you become a tenant.

It protects you against personal property loss

The main reason to get insurance is that it protects you against personal property loss. Many renters have thousands of dollars worth of personal property, which something like a fire, water leak, or burglary can wipe out. But when you have an active policy, you can recoup the money and buy back anything that you've lost.

It protects you against additional forms of loss

The other reason for buying a renter insurance policy is it protects you against loss from things like expensive lawsuits. For example, if a guest slips and falls in your apartment, you could be liable to legal action.

Also, living in an apartment close to other people means that your actions could damage somebody else's property, and you could face large legal fees or medical bills. Therefore, standard renter insurance policies provide up to $100,000 in liability protection. (And you can opt to increase that limit if you want).

You'll notice, as a renter, that many landlords ask for proof of coverage before signing the lease agreement as part of their

tenant screening checklist. This is an extra form of protection designed to safeguard you financially before you move into your accommodation. If you don't take out renters insurance, you are risking financial hardship in the future. Landlords who don't require you to take out this protection may be lower quality.

Personal Property Coverage: Safeguarding Your Belongings

Personal property coverage is the core of renter insurance and it comes in two flavors.

The first is replacement cost coverage. This provides you with the cash you need to buy the damaged or lost item brand new. It doesn't deduct any depreciation related to the age of the property.

The other option is actual cash value coverage. This pays the depreciated value of the item at the time of loss. For example, if water damage destroys your old television, you'll get the value of the TV on the second-hand market.

Renters' policies cover practically every object in your home, like sofas, beds, electronics, and clothing. However, the insurance company may require you to pay a separate premium for high-value items in your home, like jewelry, collectibles, and cameras.

You may also need to bolt on additional policy elements for property that's kept outside of your main property, such as your bicycle or a laptop that you take to work. (Make sure you speak to your insurance agent about what’s covered).

Understanding Liability Coverage in Your Renters' Policy

As discussed, liability coverage is the other principal element in your renter's policy that provides you with additional protection. For example:

  • Renters insurance protects you if other people experience minor injuries on your premises
  • Provides money for a full defence cost if you are targeted by a lawsuit
  • Protects you if a child gets hurt on your balcony
  • Handles other third parties' legal bills and medical expenses

The Essential Role of Liability Insurance for Tenants

Liability insurance plays an essential role for tenants and is a compelling reason to purchase renters insurance at lease renewal. You can think of liability insurance as a form of financial safety net. It prevents small mistakes from leading to life-changing financial losses.

Additional Living Expenses and Other Key Benefits

Finally, you can use a basic renters insurance policy to pay for additional living expenses when an event makes your accommodation unliveable,. For example, insurers will pay for you to live in another rental unit or perhaps a hotel after a fire, storm destruction, or major water damage.

You can also sometimes get additional benefits when you make a renters insurance claim, such as:

  • Loss of use protection (when you can no longer use your rental unit)
  • Medical expense protection in no-fault cases
  • Endorsements for things like earthquakes or sewer backup

How Much Does Renters Insurance Cost and How Do You Buy It

Renters insurance is relatively inexpensive. Most homeowners pay between $10 and $30 a month, with personal property protection limits up to $50,000 and the $100,000 standard liability protection ceiling.

FAQs

Do I need a rental property inspection for renters insurance?

No, you do not need a rental property inspection for renters insurance. Most landlords will provide landlord insurance, which covers the building and structure.

Does renters insurance cover damage done by pets?

Landlords are increasingly allowing pets in rental properties. Therefore, if you own a pet, it's good to look for a renter's insurance policy that also covers pet damage. You may need to add this as an extra option on top of your existing policy.

How do I get insurance savings on my policy?

You can save money on your renter's insurance policy by bundling it with other policies you own from the same carrier (like health insurance), paying annually, or improving your credit score.