If you rent a house or an apartment, you might think you don't need insurance because you don't own the building. Your landlord has coverage, right? Probably. But your landlord's insurance only covers the building, not your belongings. Without insurance of your own, you could be left with nothing in the event of a fire or burglary. And what if a friend slips on your bathroom floor and hits his head on the bathtub? Your landlord's insurance won't pay for his medical expenses, either.

What is it?
Renters insurance (HO-4) is a special kind of homeowners insurance. It provides no coverage for the building itself. Instead, it covers your personal possessions if you rent a house or apartment and offers a level of liability protection.

What is covered?
Standard renters insurance policies only cover losses which result from any of 17 "named perils." If your property is lost or damaged as a result of one of these perils, your insurance company will compensate you for your loss. The covered perils are as follows:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil disturbance
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Broken glass
• Volcanic eruption
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water
• Sudden and accidental tearing apart
• Freezing
• Artificially generated electrical charge

What is not covered?
It should go without saying that losses caused by any other event are not covered. However, most renters insurance policies go a step further, listing specific events which the policy does not cover. Typical exclusions include:

• Enforcement of building codes and similar laws
• Earthquakes
• Flooding
• Power failure
• Neglect
• War
• Nuclear hazard
• Intentional acts

If you live in an area prone to earthquakes or flooding, you should consider purchasing a separate policy to insure your possessions against damage caused by these hazards.

Replacement cost vs. Actual cash value
These may sound like highly technical terms, but they are actually very important in determining how much money you will get if you ever have to file a claim. When you get a quote you should always make sure you know which type of coverage is being described.

Actual cash value coverage reimburses you for only the amount your property was worth when it was stolen, damaged, or destroyed. This means that if all your clothes suffer smoke damage in a fire, your insurance company probably won't pay much more than you could've made at a garage sale - not the $4,000 you spent over the last six years to create the perfect wardrobe.

Replacement cost coverage, on the other hand, reimburses you for the amount it will cost to replace your property. If you bought a $400 television two years ago, you'll receive enough money to go out and buy another television just like the old one. Replacement cost coverage typically pays significantly more than actual cash value coverage.

Limitations
Like any type of insurance, your renters insurance policy places a limit on the amount it will pay out. Coverage levels can typically start somewhere around $15,000 and go up from there. As you increase your level of coverage, your premiums will increase as well.

In addition, insurance companies have per-category limits for certain items such as jewelry, antiques, computer equipment. If the value of your property exceeds these limits, you will want to get an appraisal proving its worth. You can then purchase an additional rider to cover the full value of your property.

Liability coverage
Renters insurance also provides liability coverage. A typical renters insurance policy covers you for accidents and injuries that occur in your home, as well as accidents outside of your home that are caused by you or your property. (This does not include automobile accidents.) This liability coverage includes legal defense costs, if you are taken to court over such an accident.

Additional living expenses
If your house or apartment is unlivable as a result of any of the 17 named perils, renters insurance will typically cover your "additional living expenses." That means that it will pay for you to live somewhere else (usually in a comparable house or apartment) while your home is being repaired. The dollar limit on this type of coverage is stated within the policy. There may also be a time limit on this type of coverage.

What does it cost?
The cost of renters insurance varies greatly depending on such factors as where you live, the construction of the building, your deductible, and how much insurance coverage you need. But renters insurance is much less expensive than homeowners insurance. Replacement cost coverage is somewhat more expensive than actual cash value coverage, but in the event of a catastrophic loss is always worth the extra premium.

Learn More...

Overview | Understanding The Basics | Types Of Insurance | Coverage Amounts
Choosing A Policy | Filing A Claim | Other Types Of Insurance | Home Safety Tips
Planning Concerns | Home Glossary

Please Note: The information contained in this Web site is provided solely as a source of general  information and resource.  It is a not a statement of contract and coverage may not apply in all areas or circumstances.  For a complete description of coverages, always read the insurance policy, including all endorsements.