Renters insurance

How it works

A policy sets a dollar limit for personal property, a liability limit, and a loss of use amount for hotel and meal costs when the home cannot be lived in after a covered event. Belongings can be covered at actual cash value, which subtracts wear, or at replacement cost, which pays what a new item costs and carries a higher premium. A deductible is subtracted from each claim. Jewelry, electronics, and bikes often have sub limits unless scheduled separately. Floods and earthquakes are usually excluded and need separate coverage. Liability pays when a guest is injured or the tenant damages another unit, such as a kitchen fire that spreads. Many landlords require a policy as a lease term. Premiums commonly run $10 to $30 a month, and bundling with an auto policy often lowers both.

What it gives

It is inexpensive relative to replacing a home's worth of belongings.

Loss of use coverage pays for somewhere to live during repairs.

The liability piece covers accidents that would otherwise come out of savings.

What it costs, or where the catch is

Actual cash value policies pay far less than it costs to replace items.

Floods, earthquakes, and some high value items are not covered without add ons.

A claim requires proof of what was owned, which few people have documented.

A worked example

Talia rents an apartment and owns about $25,000 of furniture, clothing, a laptop, and a bicycle. Her policy covers $30,000 of property at replacement cost, $300,000 of liability, and $9,000 of loss of use, for $18 a month, which is $216 a year. After a kitchen fire in the unit above ruins her belongings, she receives $22,000 after her $500 deductible and $3,400 for six weeks in a furnished rental.

Where it goes wrong

The common miss is assuming the landlord's insurance covers the tenant's belongings, when it covers only the building.

Who confirms it for you

For your own numbers, an insurance agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

USA.gov: Insurance. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.