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Renters insurance is a form of property insurance that covers losses to your personal property, guards against liability claims, and will pay for additional living expenses incurred if you lose access to your rental property temporarily due to a claim. 
Fire in a neighbor’s apartment spread to yours? Your landlord’s property insurance covers structural damage, but your renter's insurance will pay to replace your singed furniture. 
Neighbor suing you because they tripped on your stairs and broke their ankle? Renter’s liability coverage can cover the legal fees. 
Stuck with takeout for a month while the landlord fixes the burst pipe in your kitchen? Additional living expenses coverage from your renter's policy can help ease the financial burden

What renter’s insurance covers—and what it doesn’t

Briefly put, a typical renter’s insurance policy includes three basic types of coverage: 
  • Personal property: Covers your clothing, furniture, and other basic belongings against certain named perils 
  • Liability: Protects you from liability claims if you’re responsible for injury or damage to others’ personal property
  • Additional living expenses (ALE): Also known as loss of use, this coverage pays for things like hotel stays, alternate rental lodgings, or restaurant meals if you’re forced out of your home for repairs
When it comes to basic personal property coverage, renter’s insurance guards against the following named perils: 
  • Fire/smoke
  • Lightning
  • Vandalism
  • Theft
  • Explosion
  • Windstorm 
  • Water from a burst pipe or certain other plumbing problems 
  • Damage caused by aircraft 
  • Damage caused by vehicles
  • Riot or civil commotion
  • Hail
  • Volcanic eruption
  • Falling objects
  • Weight from ice, snow, or sleet
  • Freezing of certain household appliances
  • Certain damage caused by electrical currents
But not everything’s covered under renter’s insurance. For instance, floods and earthquakes are two major exclusions—if either of those natural disasters is common in your area, you might need separate coverage against them. You’re likely not covered for sewer backups, either. 
You may also need additional coverage in the form of a floater or personal property endorsement to cover valuable items like furs, jewelry, fine art, or collectibles. 

Actual cash value (ACV) vs. replacement cost value (RCV) 

Every renter’s insurance policy covers either the actual vash value (ACV) of your belongings or the replacement cost. What’s the difference? With ACV coverage, a claim will pay out the exact value of your possessions at the time of loss, whereas RCV coverage pays for the cost to replace the items, taking market changes into account. 
In other words, if your 10-year-old couch is damaged in a fire, ACV insurance would only cover its current value—maybe a few hundred dollars. Replacement cost coverage, on the other hand, would help you purchase a new couch of similar value. RCV insurance is typically 10% more expensive, which most experts consider more than worth the price. 

Do you need renter’s insurance?

Renter’s insurance isn’t mandatory in any state—that is, there’s no federal or state law requiring renters to purchase insurance. However, your landlord might require you to buy a policy before you move in. That’s legal, and you’ll need to comply with the requirement to live there. 
Luckily, renter’s insurance is also one of the cheapest types of insurance you can buy. Although the cost fluctuates each year, it’s typically between $150 a year and $300 a year—which works out to an average rate of just $18.75 a month! 
According to data from the
Insurance Information Institute (III)
has the highest average rate for renter’s insurance at $252 a year, while the cheapest rates can be found in
North Dakota,
with an average of just $126 a year
With rates as low as that, it’s a good idea to purchase renter’s insurance if you’ve got any room in your finances—even if it’s not a requirement from your landlord! After all, having a policy in place could turn a catastrophic repair bill of thousands of dollars into an expense as low as $500 (depending on the deductible you select).  
In this guide, we’ll cover the basics of renter’s insurance, from how the cost is determined to the best providers and the easiest ways to save money. 


How much should you pay for renter’s insurance?

In most states, the annual cost of renter’s insurance ranges from $150 to $300 a year. Although rates change yearly with market fluctuations, you should expect to pay an annual premium in that range. 

Is it worth it to get renter’s insurance?

Because it’s so cheap in comparison to the level of coverage it offers, renter’s insurance is almost always worth it. As long as you’ve got $20 to spare each month, you should be able to afford renter’s insurance—and the coverage is significant. 

What is the difference between homeowner's and renter’s insurance? 

Renter’s insurance is actually a form of homeowners insurance—technically, it’s an HO-4 home insurance policy

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