It's standard practice for people who own property to buy homeowners insurance that protects them from financial losses. In fact, most of the time, you'll need homeowners insurance to qualify for a mortgage.
But what if you don't own a home, but instead rent your living space? Although you don't need homeowners insurance in that case (and don't even qualify for it), you should get renters insurance.
What is renters insurance?
As the name implies, renters insurance is an insurance policy designed for renters. Also known as tenants insurance, renters insurance will protect you from losses relating to your personal property in the event that there's damage to your home.
When you rent a home, your landlord is responsible for insurance that covers the actual dwelling, or structure. For example, if a pipe bursts and causes damage to your building, your landlord's insurance policy will cover that. But if that same issue somehow causes water to flow into your apartment, and your furniture gets damaged in the process, you're out of luck -- unless you happen to have a renters insurance policy.
What does renters insurance cover?
Renters insurance covers your personal belongings, but it does not cover damage related to the home you live in. If the items you own are destroyed or damaged by a fire, water leak, or electrical issue (such as a power surge, which can fry electronics), your renters insurance policy can pay to replace them. Renters insurance also protects you in the event that your belongings are stolen from your rental unit.
Keep in mind that like all insurance policies, the amount of coverage you get will vary based on the premium you pay. For example, you might get a cheaper policy that offers up to $30,000 in coverage for personal property, while a more expensive policy might offer a higher level of coverage. And, as with homeowners insurance, you should also be aware of the deductible, which is the amount you need to cover before your insurer will write you a check for your damaged belongings.
Additionally, renters insurance generally covers what's known as loss of use, which comes into play when damage to your rental occurs and you can't live there. For example, if you rent an apartment that's damaged by a fire, and it takes two weeks for your home to become habitable again, your policy might pick up the tab for a hotel stay during that time.
Finally, renters insurance generally includes liability coverage, which pays for damages caused by your acts of negligence. For example, if you leave a candle burning in your apartment that causes a fire, your renters insurance offers protection in the event that your landlord wants to come after you for those damages.
How to buy renters insurance
As is the case with pretty much all types of insurance, it's a smart idea to shop around for renters insurance to snag the best deal out there. You can do so by contacting individual insurance companies directly, or by using independent online insurance brokers to compare your options. As you go about the process, though, make sure you're comparing apples with apples. A policy that costs $100 less than another might offer far more limited coverage.
If you're renting a home, it's wise to get renters insurance to protect yourself from financial losses. The good news? Renters insurance isn't particularly expensive, with the average policy costing just $187 per year. And that's a reasonable fee to pay in exchange for the peace of mind you'll get.