Leases and rental agreements often include a clause alerting tenants to the fact that the landlord’s property insurance will not cover any losses to the tenant’s personal property that might result from an accident on the premises. For example, if a fire that’s the fault of the landlord destroys part of the rental unit and damages your possessions, the landlord’s policy will not cover you—it will compensate only the landlord for the cost of repairing the structure. You could demand compensation from the landlord and sue if necessary, but the source of any recovery will be the landlord, personally, not his insurance company.
Similarly, the landlord’s liability policy won’t cover you if property is damaged or someone is injured on the property as the result of your carelessness. This means that you may be personally responsible if your actions cause:
- damage to the rental unit or other tenants’ property
- loss of or damage to your belongings, or
- injuries to yourself or others.
Because of these realities, you may see a clause in your lease or rental agreement requiring you to obtain renters’ insurance, which will cover losses to your belongings as a result of fire or theft and also provide coverage if your negligence causes property damage or injury to other people. Typically, landlords will ask for proof that you actually purchased renters’ insurance, such as a copy of your policy’s face sheet or a certificate of insurance from your company, which lists the type of policy, its coverage limits, and its expiration date. Whether it’s legal to require tenants to purchase liability insurance is a topic of hot debate among lawyers; one state, Virginia, has explicitly legislated that it is. (Va. Code Ann. § 55-248.7:2.)
Even if your landlord does not require renters’ insurance, buying it can be a good idea if you can afford it.
What Renters’ Insurance Covers
Renters’ insurance covers the following:
- loss due to theft, including some losses that occur away from home
- negligent destruction of your or the landlord’s property (for example, if your bathtub overflows and damages the floor of your bathroom and the ceiling of the apartment beneath you)
- liability for injuries or losses to others (a guest slips and breaks her leg on your freshly washed kitchen floor), and
- natural disasters or damage to your property caused by other people (the creek rises, flooding the building, or your neighbor starts a fire that damages your unit).
Renters’ insurance will not cover intentional damage. It also will not pay back rent, nor will it cover any sums you might owe the landlord in excess of your security deposit.
What Renters' Insurance Costs
The cost of renters’ insurance depends on the location and size of the rental unit and the value of your possessions. It typically costs a few hundred dollars a year for a $50,000 policy.
How to Choose Renters’ Insurance
When considering renters’ insurance, follow these steps when choosing a company and policy.
Take a Property Inventory
In order to choose a policy limit, you’ll need to know the value of the items that you’ll insure. (The smallest amount of coverage is usually $15,000-20,000.) You will be surprised at the monetary value of your possessions, including your computer, phone, television and stereo equipment, bicycles, cameras, clothing, and furniture. In addition to helping you choose a policy limit, taking an inventory will make it easier to make a claim, should you need to do so.
For useful forms, search “property inventory” online. Make a copy of your inventory and keep it in a safe place away from home.
Shop Around for Renters' Insurance
Find an agent or company representative you trust—possibly your automobile insurance agent, or one recommended by friends or relatives. Keep your inventory handy so that you can compare premiums.
And ask about things not covered by the policy or where dollar limits are low. Cash is usually not covered and jewelry, computer, and table silver coverage typically is limited, but you may be able to buy additional coverage (called a “floater” policy). Bicycles are usually covered (but not cars, vans, boats, or trucks). If you run a home business, you may need to purchase additional coverage for office equipment.
Determine Whether the Renters' Insurance Policy is for Replacement Value
If you suffer a loss, your renters’ policy can cover your belongings in one of two ways. It can reimburse you for the actual cash value (what your three-year-old computer would sell for today on the open market) or pay replacement value (what you would have to spend today to get a comparable computer). Obviously, a replacement value policy is preferable but is likely to cost more.
Consider a High Insurance Deductible
If your landlord requires renters' insurance to cover any damage you cause to the rental unit or the landlord's property, but you really aren't worried about the theft or loss of your own goods (maybe they aren't worth much or you live in an extremely safe area), you can save a bundle by getting the highest deductible the insurance company offers.