Renters Insurance Your comprehensive guide
According to data published by the National Multi Housing Council, more than 94 million Americans (nearly one-third of the country’s total population) live in a rental house, apartment, or condominium. However, a 2012 report by the Insurance Information Institute found that only 31% of current tenants have obtained any sort of renters insurance to protect their belongings from damage, loss, or theft.
The issue for most is not affordability (policyholders typically pay no more than $300 per year), but lack of information about coverage options for renters. This article will discuss what is and isn’t covered by a renters insurance policy, the best ways to obtain renters coverage, and a few money-saving tips to help keep your premiums as low as possible.
What Does Renters Insurance Cover?
Although individual plans will vary in their coverage, renters insurance typically covers damage or property losses the policyholder is not liable for; these losses tend to involve certain weather-related events, human intruders, or structural problems. According to MSN Money, renters may cover:
- Fires, explosions, or lightning
- Volcanic eruptions
- Wind or hail storms
- Riots or civil disturbances
- Damage caused by aircraft or passing vehicles
- Vandalism, theft, or malicious mischief
- Falling objects
- Damage caused by the weight of ice, snow, or sleet
- Damage stemming from sprinkler systems, household appliances, faulty plumbing, heating, or air-conditioning fixtures
- Damage from artificially generated electrical current that is not caused by missing tubes, transistors, or other electronic components
Most plans do not account for damages or losses caused by earthquakes, floods, or other “catastrophic” weather events. Renters may be able to purchase flood coverage through the National Flood Insurance Program.
In addition, renters insurance will cover additional living expenses (ALE) when one of the aforementioned events leaves your residence uninhabitable. Here’s what to keep in mind with ALE concerns:
- These expenses include hotel accommodations, vehicle rentals, and meals
- Most plans will cover these costs at a rate between 30% and 50% of the total policy
- So based on that rate, if your renters policy is valued at $200,000, then your “additional living expenses” will probably fall between $60,000 and $100,000
- The insurance provider covers these expenses while your property is rebuilt, but in some cases, these expenses will no longer be covered after a year has passed.
Finally, renters insurance provides what is known as ‘liability protection’:
- This covers the costs incurred if an individual is injured at your residence and then decides to sue you for medical expenses
- This coverage also protects against damages to someone else’s personal property that occur at your residence
- Liability protection includes legal fees and awards to the plaintiff up to a certain amount predetermined by the insurance provider
John Capuano, an associate insurance examiner with the New York State Department of Financial Services, tells The New York Times that many renters incorrectly assume their belongings will be covered under their landlord’s property insurance policy. However, he notes that tenants must obtain renters insurance coverage for all belongings kept within their rental unit. The landlord will only be held liable if damages or losses occur as a result of faulty maintenance or structural damage the landlord has failed to address.
What Types of Coverage Are Available?
Before you begin contacting insurance providers and comparing different policies, it’s important to identify your coverage needs. According to the Insurance Information Institute, this means a thorough inventory of your belongings. Here are a number of things to consider when putting that list together:
- Begin with your most expensive possessions, such as:
- Fine china, crystal or silverware
- Custom-built furniture
- But also be sure to cover more common property. The Oregon state website has an excellent homeowner’s and renter’s inventory list, broken down by rooms of the house. Print this list out and fill it out as you move through the property creating your inventory.
Once you’ve created a somewhat exhaustive inventory that includes receipts and invoices, then you can accurately calculate the total value of all your belongings. You’ll also want to take photos of everything so that you have a log of all items in their current condition, and as with car insurance, the more angles, the more thorough the pictures, the better your records will be. Many experts recommend keeping these documents in a safety deposit box or a secure offsite location to ensure they are not destroyed in the event of a disaster. Check out this government guide to storing family and household records to learn more.
ACV Coverage vs. Replacement Cost Coverage
Renters insurance policies offer one of two types of coverage. Actual cost value (ACV) awards beneficiaries with a monetary amount that reflects the value of your items and property just prior to loss, damage, or theft. Replacement cost coverage, on the other hand, awards the beneficiary an amount that will cover the costs of purchasing new items.
The majority of providers offer plans with ACV coverage, and this option typically charges lower premiums. On the other hand, premiums for replacement cost coverage tend to be roughly 10% higher, but beneficiaries stand to earn a larger payout for their belongings than policyholders who have ACV coverage.
Deductibles, Liability, and Additional Coverages
The Renters Deductible
Once the type of coverage has been chosen, you can determine your policy’s deductible, or the amount of money you’ll be required to pay out-of-pocket until the coverage kicks in. Whether you choose ACV or replacement cost coverage, you will not receive any insurance money until costs related to the claim have surpassed the amount of the deductible. The deductible for most renters falls between $500 and $2,000. The higher the deductible, the lower your monthly premium will be.
A renters insurance policy will only cover your belongings up to a certain amount. For this reason, renters are advised to obtain a ‘floater,’ or separate insurance policy that covers individual items, like diamond rings, furs, original artwork, and other expensive pieces of property. For each possession that warrants a floater policy, you’ll be required to provide a receipt of purchase and, if necessary, a certification of recent appraisal. The figures you submit will determine both the monthly premium you’ll pay for the floater policy and the payout you’ll receive if a claim is filed for the item.
Renters Liability Protection
The amount of liability protection you stand to receive is yet another important part of choosing a renters insurance policy. Liability protection will cover you, the members of your family, and your pets in the event that someone files a lawsuit for bodily injury or property damage that occurs at your rental unit. Standard policies usually provide between $100,000 and $300,000 for legal fees and, in the event of a successful lawsuit, the financial payout.
If you’re concerned your liability protection will not provide sufficient coverage in the event of a lawsuit, you can purchase what is known as an ‘umbrella policy’ that kicks in when the initial protection has been exceeded. According to the III, umbrella policies usually cost an additional $150 to $300 per year in exchange for $1 million in supplemental liability protection; if you wish to increase the amount of your umbrella policy even further, the typical rate is $50 to $75 for every additional installment of $1 million.
Visitors and No-Fault Medical Coverage
It’s important to note that most renters policies include no-fault medical coverage for anyone who visits your home and is not included in your plan. If someone is injured on your property, they may receive medical treatment and bill your insurance company for all expenses, which could help negate the need for a formal lawsuit. In most cases, insurance providers cap no-fault medical coverage at $5,000.
Other Things to Keep in Mind
Some policyholders will have additional considerations. For example, policies generally provide a maximum of $2,500 for damaged or lost business equipment. Individuals who work from home may require additional protection to replace these items and cover the costs of lost income.
Individuals who travel frequently and keep their valuables in a storage unit should also seek out additional coverage. Most plans will protect against damaged or lost items that belong to the policyholder but aren’t kept on their property; this is known as off-premises coverage. However, some insurance companies will limit the amount of coverage for off-premises items to as low as 10% of the total policy. For this reason, frequent travelers are encouraged to choose a policy that will provide adequate coverage for all stored valuables; an even less expensive option might be to forego the insurance coverage and store your valuables in a safe deposit box.
Once you’ve carefully considered all of the variables that specifically apply to you, your family members, your pets, and your property, then you will be able to make an informed choice about policy.
Who Should Obtain Renters Insurance?
Generally speaking, anyone who lives on leased property should purchase renters insurance. However, the conditions ― and the costs ― will vary for each policyholder, depending on factors like age and income.
Many young Americans become tenants for the first time while enrolled in a college, university, or vocational school. Students who live in dormitories or other on-campus residences are covered under their school’s insurance plan, but those who choose to live in off-campus rental units, including sororities and fraternities, should consider obtaining renters insurance.
According to CNN Money, renters insurance will only cover the policyholder’s damaged or lost property; not items belonging to any roommates. However, people who share a residence are often able to purchase joint plans. Since the average college student does not own a lot of valuable or expensive items, basic policies that cost as little as 50 cents per day will typically provide adequate coverage.
The Best Renters Insurance
Price is the driving force behind most renters insurance purchases, but it’s impossible for us to know which company has the lowest rate for you. We focused on finding companies we’d be confident buying insurance from, knowing that you’ll need to compare quotes for yourself. We looked for high ratings from J.D. Power and Consumer Reports, strong financial ratings from A.M. Best, Standard & Poor’s, and Moody’s, then tested the finalist’s customer service and quote process.
Elite financial strength, above-average customer satisfaction rankings, plenty of potential discounts and endorsements, a helpful inventory app, and the easiest quote process.
Policyholders gave Amica full marks for “problem-free claims experience,” including “damage amount” and “timely payment” following a claim.
One great thing about renting is that your landlord’s responsible for the building upkeep, which involves plenty of unglamorous, time-consuming work. But your rent checks they stop short of covering every risk to you and your property. Even if your landlord doesn’t require it, renters insurance is a smart purchase because in addition to covering your personal property, it provides a cushion of liability insurance if you’re ever sued for damages or injury to someone else.
All our top picks have strong financial strength ratings and top-tier customer satisfaction scores, but the only way to find the best price on the policy for your home or apartment is to do the legwork of getting a few quotes.
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How We Found the Best Renters Insurance Companies
We used the Insurance Information Institute’s “Find an Insurance Company” tool, as well as state insurance department websites, to compile a list of 68 renters insurance companies. From there, we screened them according to the following standards.
- Nationwide availability. (Well, at least 35 states.) We wanted to make our picks relevant for all our readers, so we looked for 35-plus states of coverage and no special eligibility requirements. This eliminated niche providers that might be great for certain people, such as USAA (which is only available to US servicemembers and their families; if you qualify for USAA, you should definitely get a quote).
- No middlemen. Not every renters insurance company designs and services its own policies. If it doesn’t, it’s effectively a broker between you and your underwriting company, and that’s an extra step that doesn’t benefit you. When it’s time to make a claim, wouldn’t you rather deal directly with the company cutting the check?
- Financial strength. Then we checked each company’s financial strength ratings from at least two of the following three agencies: A.M. Best, Standard & Poor’s, and Moody’s. High ratings are essential — they indicate if a company is financially secure enough to make good on any claims.
- Consumer ratings. At the end of the day, it’s all about the claims process. Does your insurer make it easy to file and collect? This one is hard to test firsthand without committing insurance fraud, so we turned to survey results from J.D. Power and Consumer Reports. We compared each company’s “Customer Satisfaction Index Ranking – Renters Insurance” from J.D. Power’s 2016 U.S. Home Insurance Study, as well as its score on Consumer Reports’Homeowner Insurance Ratings. Both are based on survey responses from actual policyholders, who were asked to rate their insurance company on things like premium amount, agent courtesy, and the all-important claims process. We required our finalists to score at least an 80 (“very satisfied”) from Consumer Reports, and also be in the top three tiers (average or above) in J.D. Power’s rankings.
Having narrowed the field from 68 to five, our last step was to compare the shopping experience for each of our finalists. We looked at how well they explained renters insurance, how easy it was to speak to a rep, and whether we could actually get a quote online. We also compared specific coverage options (beyond standard personal property and liability), and the discounts offered by each.
Premiums didn’t factor in.
Even though price remains the driving force behind most renters insurance purchases, it’s practically impossible for us to say which company will offer you the lowest rate, given that everyone’s dwelling and situation are different. So, we focused on finding companies we’d be confident buying insurance from, knowing that individuals must eventually compare quotes for themselves.
Your renters insurance premiums depend primarily on three things.
As with all real estate, the first consideration is location, location, location. If you live in a particularly windy or snowy climate, or an area with high crime, you’ll pay more. The other two main factors are your coverage amounts for personal property and liability, and the amount of your deductible. Then, to a lesser extent, the following also have an impact: the material your building is made from, whether it has protective equipment (like storm windows and smoke alarms), how close it is to fire and police stations, and finally, your credit report and personal history of insurance claims.
Our Picks for Best Renters Insurance Companies
State Farm — Best Overall
State Farm combines elite financial strength with above-average rankings from J.D. Power and Consumer Reports and checks all the boxes for potential discounts and endorsements, but the shopping process, which was helpful from start to finish, is what vaulted it into our top spot. Its website clearly laid out what’s important in renters insurance, providing useful background for the quote process (How much personal liability do you need? Do you want replacement cost or actual cash value?). No other top pick came close. If this is your first time getting renters insurance, it’s beyond helpful.
State Farm was the only one of our finalists to offer an online tool to inventory your personal belongings — which not only makes filing a claim so much easier, but also makes it easy to zero in on just exactly how much coverage you need. Finally, State Farm’s quote revealed a few pleasant surprises, like high standard coverages for home computers ($5,000) and only a tiny premium increase for $200,000 more in liability coverage.
Amica — Highest Customer Satisfaction
Amica was the only one of our finalists to exceed State Farm’s financial strength ratings; it’s in a league of its own for financial reliability. On top of that, it is head and shoulders above the competition in Consumer Reports’ ratings. Policyholders gave Amica full marks for “problem-free claims experience,” including “damage amount” and “timely payment” following a claim. Amica consistently sits at the top of J.D. Power’s homeowners insurance rankings too, even though it doesn’t write enough renters insurance to qualify for the official “renters insurance” index ranking. We loved its straightforward quote process, and especially the Live Chat option on its website, something no other finalist offered. While State Farm has better educational materials and a better way to inventory your home, Amica’s performance makes it a top contender, and definitely worth getting a quote from.
Nationwide — Honorable Mention
Nationwide came very close to matching State Farm in both consumer rankings and financial strength, and its website does a nice job defining what’s important in renters insurance. It didn’t best State Farm or Amica in any area, but it’s still a super-solid choice, and might also give you the lowest quote. And why not? Its quote tool was the easiest one to follow, clearly listing specific included coverages for things like jewelry, building additions, and “loss of use” (more on that later) as well as line items for optional endorsements like identity theft insurance.
There is one slight drawback: Nationwide requires a minimum of $20,000 in personal property coverage to trigger its “Brand New Belongings” full replacement value option. This means that if you don’t have many belongings to insure, but want to be able to purchase new stuff in the event of a total loss, you might have to pay for more insurance than you need.
Did You Know?
A standard renters policy covers a lot — but not everything.
The main renters insurance policy form, HO4, covers three basic things: your personal property, legal costs stemming from lawsuits against you, and medical payments to people who injure themselves while on your rented property (as long as they don’t live there). The medical payments portion of HO4 is what’s known as a “named perils” policy, meaning it only covers certain risks, all of which are “named” in the policy. There are 16 named risks in total, and they cover just about everything that could befall your pad, from fire to burst pipes to volcanic eruption (seriously). Two notable threats that aren’t covered in the standard form are hurricanes and flooding; you can purchase hurricane coverage as an optional endorsement, and flood insurance directly from the National Flood Insurance Program. Flood insurance is never a bad idea; the Insurance Information Institute cites it as the most common and costly natural disaster in the US.
“Loss of use” coverage isn’t standard, but you should get it.
Another thing not always covered in a standard HO4 is insurance for when you’re forced out of your home due to a covered event. Called “loss of use” coverage, it pays for you to stay in a hotel while repairs are made to your dwelling, typically up to a month. (All of our top picks include this coverage in their standard renters policies.)