How does renters insurance work?

how does renters insurance work

There are pros to renting. If a pipe breaks in the bathroom above your apartment, you don’t pay to fix the ceiling or the carpet. The con? The apartment above you flooded and therefore, so did yours. That means you must pay to replace any possessions that are damaged by the water.

The same rule applies to a rental house or condo. If a fire damages a room, your landlord pays for repairs. But how will you pay to replace your burned, smoked or waterlogged furniture, clothes, books and TV?

Your landlord’s insurance covers the building—not your belongings, i.e., the “contents.” That’s where renters insurance comes in. So how does renters insurance work? Read on to find out.

How does renters insurance work?

Renters insurance covers damage from fire, broken pipes … and what other causes? Events that cause damage or loss are called “perils” in insurance lingo.

Most renters insurance policies cover losses from common perils, such as fire, smoke, lightning, windstorm, theft, water leakage and falling objects. If you lose property from riots, volcanic eruptions or an airplane hitting your apartment, your policy probably covers these less typical perils as well. Plus you have a good story.

What types of losses are covered?

A lot more than you might think. Most renters insurance policies include four types of coverage: contents, loss of use, liability and medical payments to others.


This helps you to pay to replace “normal household belongings,” like clothing, furniture, computer equipment and other covered items that are stolen, lost or damaged. Most people need at least $20,000 to replace an apartment full of property. Yep, your stuff is worth more than you think.

However, do you have “pride and joy” items like $4,000 hand-built skis, a $6,000 high-definition home theater or a coin collection inherited from your grandpa? You will need an add-on to your policy (sometimes called an “endorsement,” a “rider” or a list of “scheduled items”) for these high-value possessions. We’ll cover those separately in a different article.

But we digress. Another benefit to renters insurance: The coverage travels with you. Renters insurance can cover what you take on vacation—such as cell phones, tablets, cameras—as well as what you leave back home. Lose your necklace at the gym? Your policy may cover that loss as well.

Loss of use

After a fire or other disaster, your rental home or apartment may no longer be safe or inhabitable. Renters insurance will help cover the additional living expenses associated with this, such as paying for hotel rooms or moving to a new rental.


You accidentally start a kitchen fire and it scorches the ceiling. You crash your drone through the neighbor’s picture window.

Renters insurance covers this, too—because liability coverage is usually included in these plans. This coverage helps you to pay costs if you injure others or damage their property. It’ll even cover if you if you’re taken to court, including the associated legal fees. We hope you’ll never have your day in court but, if you do, renters insurance may be the fix. So if you’re wondering, “Is renters insurance worth it?” The answer is likely yes.

Medical payments to others

You throw a big party and a guest breaks her arm. Your dog bites your neighbor and sends him to the ER for stitches.

Liability coverage protects you in these situations, helping to cover medical bills which guests on your property might otherwise incur should something unpleasant happen.

Is renters insurance required? Maybe.

Some landlords require all tenants to carry renters insurance. It protects them and it protects you—a win-win.

Even if it is not required, renters insurance makes sense. The average policy costs less than $200 a year. And that monthly cost is nothing compared to the cost of buying new furniture, clothes, and appliances (or replacing the neighbor’s window).