Is Renters Insurance Worth It?

It’s hard to imagine things going wrong when everything is going right, but you don’t need to catastrophize to see whether buying protection against the unexpected makes sense for you.

Renters insurance is worth considering, even if it’s not required by your landlord. One big reason: It’s a low-cost way of protecting you financially so you’re covered if something happens. 

“Not only does renters insurance provide coverage for personal belongings in the event of damage or theft, it provides you with peace of mind,’’ says Adam Friedman, senior manager of Zillow Insurance Services.

Having liability coverage through renters insurance also can head off a potential source of conflict with a landlord if you cause accidental damage to your rental home that you can’t afford to pay for.

Below, we’ll break down factors like cost, what is and isn’t covered and other things to consider in deciding whether renters insurance is worth it for you.

What is renters insurance?

Renters insurance is a policy that generally provides financial protection if your things are damaged or stolen, and liability protection if someone is injured in your rental unit or if you accidentally cause harm to someone else or their property.

It also covers additional living expenses if you’re temporarily displaced following a covered loss. For example, if your rental unit is damaged by fire, renters insurance may help pay for alternative accommodations, meals and other essential expenses to minimize disruption to your life.

“If your rental home becomes unlivable due to a covered loss, renters insurance can help cover the cost of temporary living arrangements,’’ says Friedman. “If someone is hurt while in your home, your renters insurance policy could help pay medical and legal expenses, saving you from having to pay out of pocket.”

In 2022, 49% of all renters had renters insurance, according to the Insurance Information Institute, a New York based non-profit that provides information and analysis to the insurance industry.

For a majority of those renters (55%), the insurance was required by their landlord as a condition of renting, the institute's survey found.

How much does renters insurance cost?

Renters insurance is generally affordable, with premiums that fit various budgets. You can typically customize your coverage and select the level of protection that suits your needs. Some of the things you may be able to customize: the coverage limits, deductibles (the amount you pay upfront before coverage kicks in), and additional endorsements based on the value of your possessions and your personal circumstances.

To give you an idea of the cost, Mississippi had the highest average renters insurance premium in 2020 at $21.33 a month. Oregon had the lowest at $12.80 a month, according to the Insurance Information Institute.

What does renters insurance cover? 

Renters insurance typically covers the following:

1. Protection for personal belongings

Your personal belongings hold value, both sentimentally and financially. Renters insurance provides coverage, up to your policy limit, for your possessions, providing financial coverage against losses due to theft, fire, vandalism and certain natural disasters. In the unfortunate event of loss or damage, renters insurance can help you recover by helping pay to repair or replace belongings, including furniture, electronics, clothing and other valuable items.

2. Liability coverage

Accidents happen, and sometimes they can lead to costly liability claims. If someone is injured in your rental unit or if you accidentally cause damage to someone else or their property, your policy can protect you from significant financial burdens by helping cover legal expenses, medical bills, and potential settlements or lawsuits. It can even cover events that occur outside your home.

3. Additional living expenses

Few things are more disruptive than having to uproot after an event that makes living in your home impossible. If a disaster strikes, renters insurance can cover additional living expenses like hotel bills, meals, laundry, and other necessary costs while you are displaced. 

4. Medical payments

If a guest or visitor is injured in your rental property, renters insurance can cover their medical expenses regardless of who was at fault.

What isn’t covered by renters insurance?

While renters insurance provides valuable coverage, there are things that are typically not covered, including:

1. Flood and earthquake damage

Most standard renters insurance policies do not cover damages caused by floods or earthquakes. To protect against losses related to those events, you would need to buy separate insurance policies.

2. Certain natural disasters

Renters insurance typically covers many types of disasters, such as fire or windstorm, which can include wind damage from tornadoes and hurricanes, according to the Federal Emergency Management Agency. FEMA recommends you review your policy to understand the specific events covered.

3. Intentional damage

If you intentionally cause damage to your rental unit or someone else's property, it would not be covered.

4. Business or commercial activity

Renters insurance generally doesn’t cover damages or liability related to business or commercial activities conducted in your rental property. Separate business insurance would be required to protect against these risks.

5. Pets

Some renters insurance policies exclude coverage for certain dog breeds or specific liability claims related to pets. If you have a pet and want coverage for incidents involving your pet, including dog bites, be sure to review your policy or discuss this with your insurance provider.

Also check with your landlord since some landlords charge a pet deposit that covers damage to the rental property from your pet. That way you can evaluate whether you want or need to add additional coverage. 

Like any insurance, it’s important to carefully review the terms and conditions of your policy so you understand the full extent of the coverage and any exclusions or limitations that may apply. If you have specific concerns or unique circumstances, consult with your insurance provider to make sure you have the necessary coverage in place.

Why is renters insurance important?

Unless you have sufficient savings to cover a loss, renters insurance can help protect your finances and replace belongings such as clothing, jewelry and electronics that you might not otherwise be able to replace if you had to pay solely out-of-pocket.

How much coverage is enough? 

The amount of coverage you need depends on your circumstances, the value of your belongings, the potential risks you face and your own comfort level. 

For instance, while renters insurance covers your belongings, there are often limits on coverage for high-value items such as jewelry, artwork, or collectibles. If you have valuable possessions, you might need to get additional coverage or consider adding endorsements to your policy.

To help determine what might be an adequate amount of coverage for you, consider doing the following:

Take inventory of your belongings. Take an inventory of your personal belongings and estimate their value. This includes furniture, electronics, clothing, appliances, jewelry, and any other valuable items you own. Consider the cost of replacing these items in the event of theft, damage, or loss.

Assess your potential liability risks. Liability coverage protects you if someone is injured in your rental unit or if you cause damage to someone else's property. Consider the potential legal expenses, medical costs, and damages you may be liable for. It's generally recommended to have liability coverage of at least $100,000.

Review additional living expenses. Evaluate the potential living expenses you might incur if your rental unit becomes temporarily uninhabitable due to a covered event. Consider the cost of alternative accommodation, meals, and other necessary expenses. Some policies provide coverage based on a percentage of the personal property coverage limit.

Decide on deductibles. Determine the deductible amount you are comfortable with. A higher deductible can lower your premium, but keep in mind that you'll need to pay this amount out of pocket before your insurance coverage kicks in.

Like any insurance, it’s important to carefully review the terms and conditions of your policy so you understand the full extent of the coverage and any exclusions or limitations that may apply. If you have specific concerns or unique circumstances, consult with your insurance provider to make sure you have the necessary coverage in place.

There are a number of insurance providers that offer Renters Insurance, including Zillow. Click here for a quick and simple free quote.

Disclaimer: Availability and eligibility requirements vary by state, policy type, policy terms, and underwriting company. Additional endorsements and credits are subject to availability and qualification. Please refer to your policy contract (including any endorsements) for your rights and duties as a policyholder.