How Much Renters Insurance Do I Need?

Would you be sufficiently covered by the coverage limits of your renters insurance policy if something happened to your possessions?

The short answer? As much as you can afford.

A renters insurance policy is an inexpensive way to protect your belongings in the event the rental property you inhabit is damaged or destroyed. While renters insurance does not cover the actual structure of the rental (that's what your landlord's rental property insurance is for), it's a relatively affordable way to safeguard your personal possessions and stay protected if someone sues you after injuring themselves in your home.

The average annual cost of renters insurance is $188 — it's the cheapest type of insurance you can get and is a small price to pay should something happen to your valuables. A renters policy specifically protects you, the renter, while your landlord's policy operates independently and does not cover their tenants' belongings. This is why it's always encouraged — and often required by landlords — to purchase your own renters policy before signing a lease. See this guide to what's covered by renters insurance.

Let's examine how to determine just how much renters insurance coverage you should get for your situation by reviewing the individual parts of a typical renters insurance policy.

Renters insurance: how much coverage do you need?

1. Personal property coverage
2. Liability coverage
3. Additional living expenses
4. Medical payments to others
5. Renters policy deductibles
6. Additional coverage options


Personal property damage

If your clothing, furniture, and other personal items are damaged or stolen, this coverage will reimburse you for these possessions based on their actual cash value, which deducts depreciation from the total amount. The coverage limit for personal property is typically set for at least 10% of your liability coverage, but this depends on the policy and insurance company. For example, you can expect a $30,000 limit for personal property if your liability limit is $300,000. You can opt for lower limits if this much coverage isn't necessary. So how do you determine how much personal property coverage you need?

Take inventory of what you own

It's time to take inventory of your personal possessions. Tally the contents of every room — furniture, artwork, and even odds and ends — and note any valuables or items that could be expensive to replace. Develop a rough estimate of how much the items are worth. If you can, take photos of the contents of your home in its current state for reference if you end up needing to file a claim. A typical personal property limit is $10,000 — but it's up to you to decide whether this amount is enough coverage, adjusting as needed if you own valuable items.

Policyholders tend to severely undervalue their possessions. It typically does not cost much more in renters premiums to carry higher limits. If you can afford it, consider playing it safe and going for a higher limit for the added peace of mind.

Do you need extra coverage?

Do you have valuable items, like heirloom jewelry or electronics? There are special coverage limits imposed on certain items. Your policy documents should specify what these limits are. The below chart details common limits.

Sub-limitPropertyLimitations
$200Money, gold, coins 
$1,500Jewelry, watches, fursTheft only
$1,500Watercraft, trailersTheft only
$2,500Firearms 
$2,500Silverware 
$2,500Business propertyOn-premises
$500Business propertyOff-premises
VariesElectronics 

You can extend coverage for these valuables via floaters or endorsements to your renters policy.

Liability coverage

If someone is hurt on your property or you cause bodily injury or property damage, liability coverage is meant to cover the costs, which includes legal fees. Because a situation like this can quickly become very expensive — especially if you're sued for damages — liability has the highest limit as part of your renters insurance policy.

A typical liability limit is $100,000 and this coverage follows you outside of your home, as well. Once you decide your limit for your personal property, choosing your liability limit should seem easier by comparison — you might think being sued or you being the cause someone's injury is highly unlikely, and this may be true. But keep in mind that if something unfortunate and unexpected happens, the costs associated can rapidly get out of hand if you're at fault. Set your liability insurance high enough to put your mind at ease and protect your assets.

Additional living expenses

Also known as loss of use, the additional living expenses coverage will reimburse you if your home becomes uninhabitable following a covered loss. The insurance company will pay to cover your living expenses if you need to stay at a hotel. In some instances, it can also cover transportation and meals.

Coverage limits depend on your policy and insurer, but can typically range at about 30% of your personal property limit.

Medical payments to others

This coverage pays for the medical expenses of injuries sustained by people who were hurt on your property or accidentally hurt by you. Though it's hard to tell what the most appropriate coverage limit would be — since injuries are usually unexpected and insurance never covers intentional harm — you should go with what you're most comfortable paying in terms of premium.

Generally, medical payment coverage is a fraction of your liability limit but can be set higher. It typically starts at $1,000 and can be adjusted. 

Renters policy deductibles

You should choose a deductible that you can afford if you need to file a claim — this is the amount you'd need to pay first before the insurance company would cover the rest. It's generally only applicable for losses to your personal property. A typical deductible for renters insurance is $500, but this can be adjusted up or down. Note that the deductible you choose also influences how much premium you will end up paying — generally a higher deductible will lower your premium.

Additional coverage options

It varies by insurer, but you can add optional coverages to your renters policy to boost your coverage.

Replacement cost coverage

Usually renters insurance will reimburse based on actual cash value, which will always be less than replacement value since it deducts for depreciation. If you want a full payout for your damaged property, consider adding replacement cost coverage to ensure you're receiving the full worth of your possessions.

Sewer or drain backup coverage

This will cover water damage from sewer or drain backup, which normally is not covered under a renters policy. If a room in your rental floods due to a broken sump pump, this endorsement ensures coverage for your damaged things.

Endorsements/riders for valuables

If you have valuables like gold, silverware, and jewelry, there are limits set on these items if something happens to them. Adding a rider or floater to your renters policy will extend coverage for certain items if they're worth more than the limit and they need to be replaced after a covered loss.

Personal injury coverage

This provides liability coverage for personal injury (civil cases of slander and defamation) and covers the legal fees up to the coverage limit if you're held liable.

Vacancy endorsement

If you're going to leave your rental vacant for more than 30 days, this endorsement will cover your things if it's vandalized.

Identity fraud coverage

For an additional premium, you can add coverage for identity theft to your renters policy. This provides case management and reimbursement if your identity was stolen or used in a fraudulent manner.

 

Speak with a renters insurance expert!