How Much Renters Insurance Do You Need?

If you’ve recently moved into a rental property, now is the time to start thinking about getting renters insurance. You might assume that renters insurance is one of those things that’s nice to have but not essential. However, renters insurance can come in handy if your personal belongings get damaged or stolen. Without insurance, you’ll have to pay for the full cost of replacing your items out-of-pocket.

There are both pros and cons to having renters insurance, and you should have the full picture before making a decision. You’ll want to consider them when deciding how much renters insurance you need and what you can expect to spend.

How do I calculate how much renters insurance I need?

1. Take an inventory

Your first step is to figure out what you own and how much it’s all worth. A good way to do that is to start by going room-to-room noting everything you own.

You can easily collect your own inventory:

1. Compile a spreadsheet with all of your belongings, with photos to go along with it.
2. Estimate the cost of replacing each item.
3. Pay special attention to valuables. Some renters insurance companies require you to purchase extra coverage for jewelry, electronics and other valuables over a certain dollar amount.
4. Don’t forget about liability. Most policies start with a minimum of $100,000 of liability coverage. If there’s anything in your apartment such as a dog that would increase the chances of someone getting hurt in your rental, you might want even more coverage.

Once you’ve created your inventory, total up the estimated cost of your belongings and that will give you a rough number to shoot for with your coverage. You might also want to include a buffer when setting your coverage limits (for example, purchasing coverage for 20% more than the value of your belongings).

2. Estimate how much you’re willing to pay out-of-pocket

Next, think about your deductible. This is the amount you’ll pay out of pocket if you make a claim. You’ll choose this amount when you purchase your policy. The higher your deductible, the lower your premium costs. But be careful not to pick a higher deductible than you can afford to pay just to save money on premiums.

Common deductibles are $500, $1,000 or $2,000. With some insurance carriers, you might be able to get deductibles as low as $100. It’s unlikely you’ll be able to find renters insurance with no deductible at all.

One thing to note: there are several sections to your policy, including personal property coverage, liability coverage, additional living expenses and other optional coverages. Your deductible will only apply to your personal property coverage. If you make a claim on liability or medical expenses coverage, there is no deductible.

3. Determine if you can keep an emergency fund

Whether you have insurance or not, no one ever anticipates their personal belongings getting damaged or stolen. If you’re not sold on the idea of purchasing renters insurance, another option is to create an emergency fund. This can be a separate savings account that you put one lump sum into or deposit money into over time. By having money already set aside, you’ll be prepared should you need to replace some of your belongings unexpectedly.

If you choose this route, reserve that money for emergency purposes only. Don’t get tempted to dip into your account so you can have a few extra dollars to spend on something you don’t need. The point of an emergency fund is to have a backup in case you need money in a pinch. If you end up draining the account and you don’t have renters insurance, you could put yourself in debt.

What is the minimum renters insurance one can have?

Unlike auto insurance, states don’t mandate that people carry renters insurance. However, your landlord can require you to purchase renters insurance as a term of your lease. They may specify a minimum renters insurance coverage that you need to have. This protects your landlord in case of damage to the building — they don’t want their tenants trying to hold them liable.

Regardless of whether your landlord mandates it, it’s probably a good idea to carry renters insurance. Policies are reasonably priced, and often provide a minimum of $2,500 of personal property coverage and $100,000 of coverage for liability claims.

How to make my renters insurance cheaper

Renters insurance is already extremely affordable, with policies costing an average of just $15 per month, according to the Insurance Information Institute. But you still might be able to reduce your premiums even more. 

• Shop around. Even though renters insurance is fairly low-cost no matter where you go, rates can vary from one carrier to the next.
• Bundle your policies. If you already have auto insurance, consider bundling your policies for a discount. Nearly every major insurance company offers a multi-policy discount. 
• Increase your deductible. In general, insurance premiums go down as deductibles go up. If you’re not worried about a higher deductible, this can be a way to decrease your premiums.
• Install safety devices. Many insurance companies offer discounts to renters who have certain safety devices in their apartments such as a security system, smoke detectors or sprinklers. Check with your landlord, as your building may already have these features. 

Renters insurance coverage parts

How do you know what renters insurance to get? To know how much you’ll need, it’s helpful to know a little about the parts of your policy.

A careful reading of your policy document will tell you what your coverage consists of and what the maximum amount is that the company will pay out on a claim. Generally, of course, the higher the potential pay-out, the higher your premiums will be.

Although the types of coverage listed above are standard, your policy may differ and may include add-ons, or riders, that offer additional coverage. These add-ons won’t cost more than a few additional dollars per month, probably adding $20-$40 to your annual premium cost. Typical riders include:

• Replacement cost coverage: This does not take depreciation into account. If you have a couch, for example, that is ten years old and looking a little ratty, without replacement cost coverage you won’t receive much on a claim for it. With this optional coverage, however, you’ll receive enough money to buy a comparable couch at today’s prices.
• Valuable items rider: if you own items of particularly high value, such as jewelry, antiques, home electronics or fine art, you may want to get additional coverage for them to ensure you could replace them if they’re destroyed or stolen.
• Personal business property: If you sell on eBay or Etsy and keep your stock at your apartment, or have another home-based business, you will need additional coverage to ensure that your business items are covered.

  Things to consider

  • If you bundle your renters insurance coverage with auto, boat or another policy, you may save on your premium. Most major insurers offer a discount that varies from company to company, but doing this will decrease your premium costs and also make it easier for you to manage all your insurance needs with one company.
  • Renters insurance can cover you even when you are not at your apartment. For example, items in storage lockers are generally covered, as are items of value in your car or boat or other remote location. For example, let’s say you leave that pricey new laptop at your table while you go get a refill on your coffee at the local Starbucks. If it’s stolen, it should be covered by your renters insurance (if it’s worth more than your deductible).
  • You may want to consider renters insurance if you’re at college. You may be covered under your parents’ policy, if you’re listed as a dependent, but it’s worth checking to see if they have full coverage for remote locations. And if you live off-campus, you’ll definitely need a policy of your own.