What Does (And Doesn't) Renters Insurance Cover?

Renters insurance covers costs associated with personal property damage or theft, personal liability damages, emergency medical expenses for guests, and additional living expenses if you need to temporarily relocate. However, because only certain events or "perils" qualify for a claim, your insurer will not reimburse you for every event related to these coverages.

We recommend that anyone renting a home consider purchasing a renters policy as an affordable way to protect themselves from the financial consequences of these events. If you already have renters insurance, continue reading to learn about the types of events that a typical renters insurance policy covers.

What is renters insurance?

Renters insurance covers the costs of unexpected personal property damage or theft, as well as legal liability. Anyone renting an apartment, condo, home, or other living space can purchase renters insurance. Although the policy is similar to home insurance, there are some key differences:

• The structure, or dwelling, in which the tenant lives is not covered by renters insurance. Damage to the building is the responsibility of the landlord, who will most likely cover these risks with a landlord insurance plan.
• Renters insurance is significantly less expensive than homeowners insurance.

If you want to buy renters insurance, you have several options, ranging from established insurance companies like State Farm and Allstate to newcomers like Lemonade or Jetty.

What does renters insurance cover?

Renters insurance generally offers four types of financial protection.

• Personal property damage: If your personal property is damaged as a result of a covered peril, your renters insurance company will pay for the damage up to the limits of your policy. A covered peril is a damaging event that is named in your policy (or is not expressly excluded from coverage), such as fire, wind, or theft.
• Personal liability: If someone is injured or their property is damaged and you are blamed, your policy will cover liability costs, including legal fees. A standard policy provides liability coverage of up to $100,000.
• Additional living expenses: If your rental home or apartment is rendered uninhabitable as a result of a covered peril, your renters insurance policy will cover expenses in excess of your normal living expenses. This is also known as loss of use coverage.
• Medical Payments: Limited coverage for medical expenses incurred by a guest on your property.

These coverages, when combined, provide tenants with significant financial protection against unexpected events, but it's critical to understand which situations you'll be covered for and which you won't be.

Renters insurance covers personal property against specific perils

The main benefit of renters insurance is that it protects your personal belongings from common sources of unexpected damage and theft. Almost everything you own inside and outside your rental unit or home is considered personal property.

However, renters insurance will not cover everything that causes damage to your property. You will only be able to file a claim if the cause of the damage, referred to as a "peril" in insurance parlance, is covered by your policy. Covered perils may vary between renters insurance policies, but almost all will cover the common perils listed here. Floods and earthquakes are two of the most common perils that are not covered by renters insurance.

When your personal property is damaged or stolen and is covered by your renters insurance, you can file a claim for reimbursement up to the policy limits. For example, if a fire destroys all of your property in your apartment, valued at $10,000, your renters insurance company will reimburse you for that amount, less your deductible.

When purchasing renters insurance, make sure to choose limits that will cover you in the event of a total loss. This ensures that you will be fully reimbursed in the unfortunate event that a fire or other peril destroys your belongings. According to Allstate, the average renter's personal property in the United States is worth approximately $30,000 for a standard two-room apartment, so it's critical to create a home inventory and understand the value of what you own.

Renters insurance covers personal liability

Most renters insurance policies include $100,000 in liability coverage, which covers the costs of a lawsuit or damages.

Although a single person is unlikely to face a lawsuit, the consequences can be severe in the rare event that one does. Assume a visitor falls and injures themselves. They may file a lawsuit against you to recover their medical expenses. Assume your dog bites a visitor: In the United States, the average cost of a dog bite claim is around $35,000. Personal liability insurance will pay for attorney fees as well as any damages that a policyholder may be ordered to pay a plaintiff.

One caveat is that insurance companies frequently write into their policies that they will only cover the expenses of their choice of attorney. The attorneys appointed by insurance companies are generally experienced litigators who work in the best interests of their clients.

Renters insurance covers costs when your apartment isn't livable

If your apartment becomes unlivable, additional living expenses (ALE) coverage from your renters insurance will help pay for the increased costs of living away from home. ALE, like personal property coverage, only applies if your home becomes unlivable as a result of a covered loss—that is, one of the perils covered by your renters insurance policy. This coverage is also known as loss of use.

If your apartment in San Francisco or Manhattan burned down, having to stay in a hotel in one of those cities would be prohibitively expensive. Eating out every night would only increase the bill. If you have renters insurance, these costs are covered up to the policy limits. If you live in a high-priced city, you may want to increase the limit on this part of your policy.

Renters insurance covers accidental injury costs for visitors

If guests are injured on your property, renters insurance policies provide limited medical payments coverage. This could include their hospital stay, surgical procedures, x-rays, dental bills, and other related expenses. Unlike liability coverage, the cause of the injury is irrelevant, so your guest can be covered under this category regardless of the cause, up to policy limits, which typically range from $1,000 to $5,000. This coverage only applies to guests, so it does not apply to anyone who lives on the property or is listed on your policy.

Other things covered by renters insurance

Renters insurance policies frequently include supplementary coverages in addition to the four primary coverages.

• Debris removal: After a covered loss, renters insurance will often help cover some of the costs of debris removal. Personal property limits apply in this case.
• Building additions or alterations: If you paid for upgrades or alterations to your rental unit, renters insurance may cover damage caused by a covered event. Building addition coverage is typically limited to a percentage of your personal property coverage limits, such as 15%.
• Forgery of credit cards and checks: Renters insurance may cover losses incurred by the policyholder as a result of the theft and fraudulent use of credit cards or the forgery of checks. Typically, coverage is limited to a set amount, such as $1,000.
• Food spoilage: If your apartment experiences a mechanical or power failure, resulting in refrigerated food loss due to spoilage, renters insurance policies will frequently cover you. In most cases, this will be covered by personal property limits.

Optional add-ons

A renter's policy can be supplemented with a variety of optional add-ons, known as endorsements. These can be used to increase coverage limits or to cover a peril that would otherwise be excluded. Renters insurance, for example, may provide additional coverage for earthquakes or floods, two common and damaging perils that are rarely covered by a standard renters insurance policy. Renters insurance policies may also include add-on coverage for more specific risks, such as a sinkhole endorsement, which would protect your belongings from that peril.

If the coverage you require is not available as an endorsement, you may need to purchase a separate insurance policy to ensure adequate coverage.

What does renters insurance not cover?

Renters insurance's personal property and liability coverage will not protect you from all risks. Property damage caused by floods, for example, will not be covered, and liability coverage for events involving dangerous dog breeds may also be excluded. Coverage for specific high-value items, such as jewelry, may also be more limited. We've compiled a list of some of the most common coverage exclusions and limits found in renters insurance policies.

Renters insurance does not cover property damage for all perils

Renters insurance will rarely, if ever, cover personal property damage caused by specific perils such as earthquakes, riots, and pests.

Bed bugs and pests

With a few exceptions, most renters insurance policies will not cover damage costs associated with bed bugs. They are considered a maintenance issue, along with other pests such as rodents, and are not covered by your standard renters policy.

Earthquake and flood damage

Most standard renters policies exclude earthquake and flood damage, though some companies may offer coverage as an add-on for a fee. If you are at risk for these perils and your renters insurance policy does not provide earthquake or flood coverage, you will need to purchase a separate flood or earthquake insurance policy for your personal property. These policies may be available from your landlord's insurance provider or from a different insurer.

Car theft or damage

If you own a car, your renters policy will not cover damage or theft. You will require comprehensive coverage on your car insurance policy. However, belongings inside your car at the time of theft are covered by renters insurance.

Roommate property

Renters insurance policies do not typically cover the costs of damage to your roommate's belongings. They must be listed on the policy in order to be covered, in which case you could split the cost of renters insurance.

However, unless they are related or a spouse, we would advise against adding roommates. Adding a non-relative to your policy may save you money, but it will divide coverage among all those who have been assigned to the policy. So, if your policy covered up to $20,000 in damage, you and your roommate would split the cost of that coverage for all of your belongings.

Renters insurance has lower limits for expensive personal property

Personal property coverage limits on renters insurance do not apply uniformly across all items. Given the high monetary risk posed by their damage or theft, specific high-value items such as jewelry and electronics may be covered under separate sub-limits. If you own expensive individual items, make sure to purchase a renters insurance policy that allows you to increase sub-limits to ensure you're fully covered.

For example, if you have $15,000 in jewelry and $25,000 in total possessions, your coverage may be insufficient because most standard policies only cover up to $2,000 in jewelry. If you want higher limits, you must purchase additional coverage for that item.

Renters liability coverage may exclude specific incidents

Although liability insurance covers the majority of legal liability costs, there are some significant exceptions in the case of pets. Bodily harm caused by a pet, such as a dog bite, may be covered by renters liability insurance, but policies may exclude these events in certain situations.

Many insurers, in particular, exclude coverage for aggressive dog breeds, such as pit bulls, and may even deny you coverage entirely if you own one of these breeds. Exotic pets, such as reptiles or monkeys, may also be excluded from renters insurance liability coverage. Finally, your renters insurance liability coverage, like property damage coverage, will not extend to your roommate unless they are family.

How do renters insurance companies pay out claims?

Only if you file a claim will your insurer provide you with coverage for these occurrences. A claim is a request made by a policyholder to their insurance company for compensation for a covered loss. In the case of renters insurance, a policyholder would file a claim for personal belongings damage or theft, personal liability coverage, or additional living expenses incurred. A property damage claims process, for example, will involve several steps.

• Make an inventory before anything happens: Make an inventory of all your possessions, as well as any documents that determine their value, such as receipts.
• Document the damage: Following a qualifying event, such as a fire in your home, photograph all damaged items in order to file a claim.
• Submit the claim: To begin the claims process, contact your insurer. Your insurer will supply you with the necessary forms and documentation. Finally, the insurer will dispatch a claims adjuster to assess the damage and determine your reimbursement.

Filing a claim can be a time-consuming process, but the more information you have readily available for your insurer, the more likely it is that your claims process will be accelerated and you will receive timely compensation for your loss.