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Imagine coming home to find all of your possessions destroyed in a fire or other catastrophe. Your landlord’s insurance policy won’t protect you; it covers only the building repairs, not your personal belongings. That’s when it pays to have the best renters insurance in place for your needs.
What renters insurance covers
- Personal belongings that are damaged or destroyed due to fire, tornadoes, theft, vandalism, explosions and other events. Think about how much it would cost to buy new furniture, appliances, clothing, jewelry and everything else. If that’s a scary thought, renters insurance is a wise choice. There are two types of reimbursement. “Actual cash value” reimburses you the cost of replacing your belongings minus depreciation. “Replacement cost” reimburses you the cost of replacing your stuff with new items. Go for a replacement cost policy if you want to avoid surprises in reimbursement if you have a claim.
Think about how much it would cost to buy new furniture, appliances, clothing, jewelry and everything else. If that’s a scary thought, renters insurance is wise.
- Your liability if you’re sued for damage or injuries that you or your family cause to others. Renters insurance also pays for your legal defense in these cases. Policies also provide some level of no-fault medical coverage, so if you cause other people injury, they can get their medical bills paid by your insurer without suing you. However, limits can be as low as $1,000.
- Extra costs if you have to live somewhere else because your home was damaged by a problem covered by your policy. This “additional living expenses” insurance pays for things like hotels and restaurant meals.
What it costs: The average renters insurance policy costs $190 a year, according to the latest data from the National Association of Insurance Commissioners. The most expensive state for renters insurance is Mississippi, with an average of $262 a year, and the cheapest is North Dakota, with an average of $115.
Picking the right policy: 6 common scenarios
|You have a roommate||Some insurers let roommates share a renters insurance policy, in states where it’s allowed. But just because you can share doesn’t mean it’s a good idea. Before you sign a policy, have a frank discussion with your roommate about how to share insurance payments — especially if your roommate has a lot of stuff that could drive up the cost of the quote. Be sure you agree, too, on the type of renters insurance coverage you’ll get.|
|You’re on a tight budget||To reduce the policy cost, consider increasing your deductible. That’s the amount deducted from your claim check for a property loss. But first ask yourself: How much can you pay out of pocket in the event of a damage claim?|
|You would want brand-new items if your stuff was destroyed||Buy a renters insurance policy with “replacement cost” coverage. It typically costs a bit more than an “actual cash value” policy, but it pays to replace your possessions with similar new ones. Lost your TV in a fire? Replacement cost coverage pays for a brand new one just like it.|
|You own expensive items like jewelry||Renters insurance typically caps the amount it pays for jewelry theft at $1,500. To add coverage, buy a “floater,” also called “scheduled” jewelry coverage. That way you can insure the jewelry for its full value.|
|You have a dog||A lawsuit against you over a dog bite could ruin your finances for years. If you want coverage for this, make sure dog bites are covered by the liability portion of your renters insurance policy.|
|You want more liability protection||Buy umbrella insurance, which gives you an additional layer of liability coverage above the limits of renters insurance.|
We used the following data, weighted equally on a 20-point scale, to evaluate large companies offering renters insurance and assign star ratings on a scale of 0 to 5:
- J.D. Power renters insurance satisfaction scores for 2017.
- Complaints to state regulators as tabulated by the National Association of Insurance Commissioners.