If you're renting an apartment or home, you'll need an insurance policy to cover your belongings. Your landlord's property insurance policy covers losses to the building itself; whether it's an apartment, a house, or a duplex. Your personal property and certain liabilities, however, are covered only through a renter's insurance policy that you, as a tenant, have to find and pay for. While 95% of homeowners have a homeowner's insurance policy, only 41% of renters have renter's insurance.

Why do so few renters have insurance? One explanation is that many people incorrectly assume they are covered by their landlord's policy. Another reason is that people underestimate the value of their belongings. If you add up the value of just your clothing and electronics, it probably wouldn't take long to get into the thousands of dollars.

One more often overlooked reason is liability: If someone is injured in your house—a friend, neighbor, or the pizza delivery person—they could sue you. Even if you thought you didn't need insurance, here are six good reasons why you should get a renter's insurance policy.

Key Takeaways

  • When renting a home, you'll need an insurance policy to cover your personal belongings known as renter's insurance.
  • Landlords have property insurance but those policies cover only the building, not your personal items within.
  • The majority of renters don't purchase renter's insurance, either because they don't think it is necessary or believe they are covered under the landlord's policy.
  • Reasons to purchase renter's insurance include its affordability, the coverage of losses to personal property, it might be required, it provides liability coverage, it covers your belongings when you travel, and it may cover additional expenses.

1. It's Affordable

The average renter's insurance policy costs $180 a year in 2017 (latest figures), according to the National Association of Insurance Commissioners (NAIC). Your actual cost will depend on factors, including how much coverage you need, the type of coverage you choose, the amount of your deductible, and where you live.

2. It Covers Losses to Personal Property

A renter’s insurance policy protects against losses to your personal property, including clothes, jewelry, luggage, computers, furniture, and electronics. Even if you don't own much, it can quickly add up to a lot more than you realize; and a lot more than you'd want to pay to replace everything.

Renter's policies protect against a surprisingly long list of perils. A standard HO-4 policy designed for renters, for example, covers losses to personal property from perils including:

  • Damage caused by aircraft
  • Damage caused by vehicles
  • Explosion
  • Falling objects
  • Fire or lightning
  • Riot or civil commotion
  • Smoke
  • Theft
  • Vandalism or malicious mischief
  • Volcanic eruption
  • Weight of ice, snow, or sleet
  • Windstorm or hail
  • Damage from water or steam from sources including household appliances, plumbing, heating, air conditioning, or fire-protective sprinkler systems

Losses resulting from floods and earthquakes are not covered in standard policies. A separate policy or rider is required for these perils. In addition, a separate rider might be needed to cover wind damage in areas prone to hurricanes. And renter’s insurance policies don't cover losses caused by your own negligence or intentional acts. For example, if you fall asleep with a lit cigarette and cause a fire, the policy most likely will not cover the damage.

3. Your Landlord Might Require It

Your landlord's insurance covers the structure itself and the grounds, but not your belongings. A growing number of landlords require tenants to purchase their own renter's insurance policies and they'll expect to see proof.

This could be the landlord's idea, or it could be an "order" from the landlord's insurance company. The idea is that if the tenants are covered themselves, some responsibility can be shifted away from the landlord. If you need assistance finding or obtaining coverage, your landlord may be able to help.

4. It Provides Liability Coverage

Liability coverage is also included in standard renter’s insurance policies. This provides protection if someone is injured while in your home or if you (or another covered person) accidentally injure someone. It pays any court judgments as well as legal expenses, up to the policy limit.

You may have to pay a deductible on your policy before coverage kicks in.

Most policies provide at least $100,000 of liability coverage and a smaller amount for medical-payments coverage. You can request (and pay for) higher coverage limits if need be.

5. It Covers Your Belongings When You Travel

Renter's insurance covers your personal belongings, whether they are in your home, car, or with you while you travel. Your possessions are covered from loss due to theft and other covered losses anywhere you travel in the world. Check your policy or ask your insurance agent for details on what constitutes "other covered losses."

6. It May Cover Additional Living Expenses

If your home becomes uninhabitable due to one of the covered perils, your renter's insurance policy may cover “additional living expenses,” including the cost associated with living somewhere else temporarily, food, and more. Check with your policy to find out how long it will cover additional living expenses, and if it caps the amount the company will pay.

The Bottom Line

Renter's insurance provides coverage for your personal belongings, whether they are in your home, car, or with you while you're on vacation. In addition, renter's insurance provides liability coverage in case someone is injured in your home or if you accidentally cause injury to someone.

Be sure you understand what your policy covers, and ask your agent about available discounts, deductibles, and coverage limits. For example, be sure you know whether your insurance provides replacement cost coverage (RCC) for your personal property or actual cash value (ACV).

The first will pay to replace your 15-year-old carpet, say, with a new one, at current market rates, while the second will only reimburse you for the value of a carpet that's 15 years old. Needless to say, RCC costs more.

When choosing renter's insurance, make sure to choose a company that works best for you.