If you are a millennial, there’s a 50/50 chance that you’re also a renter. 

Most people rent an apartment, condo, or home until they are in a position to purchase a home of their own. Millennials have largely been pushed out of the housing market thanks to the rising housing and rental costs, inflation, student loan debt, a lack of good jobs, the 2008 recession, and the pandemic. 

This generation is struggling to save enough for a downpayment, even if they earn six figures. 

According to a recent Census Bureau’s Current Population Survey, only about half of millennials (47.9%) are homeowners, leaving the rest of us with little choice but to rent. In fact, 18.2% of millennials have given up on the dream of homeownership and expect to rent forever.  

There are advantages to being a renter, though, such as having more flexibility, not paying property taxes, and not having to take responsibility for maintenance and repairs. 

Since the property doesn’t belong to you as a renter, the owner is also responsible for insurance, right? Wrong!

You need renters insurance! But what is renters insurance, and is it really worth having?

What is renters insurance?

When renting, the building owner must carry insurance on the structure only—not its contents. For your possessions to be protected, you must make the necessary arrangements yourself. 

Renters insurance will cover your personal property up to your chosen coverage limit. This goes for most of your belongings, no matter what they are and how much they are worth. The cost of renters insurance is much less than what it would be to replace all your belongings yourself.

What does renters insurance cover?

Renters insurance, also known as tenants insurance and personal property coverage, will help you pay to replace your stolen or damaged belongings both inside and outside your home. Yes, that means if something is stolen from your car or yard, you are covered. 

It also gives you liability coverage if someone else is injured while in your residence, even if you are found to be negligent.

If your apartment becomes unlivable for whatever reason and you have to be displaced, renters insurance can work to your advantage, too. Depending on your level of coverage, it can help cover the cost of moving and getting set up in a new environment or help you pay for temporary accommodations.

Policies will differ slightly from person to person, but most coverage insures the owner against:

  • Theft, crime, and vandalism 
  • Fire and smoke damage
  • Water damage
  • Damage caused by storms 
  • Accidental injuries to people in your home
  • Accidental damages to other’s property in your home
  • Temporary living expenses if your home becomes uninhabitable  

Like homeowner insurance policies, there is additional coverage that a renter can get that protects them against specific disasters such as flooding or water backups and earthquakes. Some policies will also include identity theft coverage! 

What’s not covered by renters insurance?

Certain things will be covered by the property owner’s insurance, like the roof, pipes, and yard. 

Other things that aren’t typically covered include your roommate’s belongings and damage caused by pests like rodents, bugs, or wild animals. Jewelry may also need its own insurance policy. 

Most importantly, though, renters insurance won’t cover things you can’t prove you own or provide a receipt for. You must hang on to receipts and document your possessions. (Don’t worry – there are tips on how to do this below!)

Who needs renters insurance?

Everyone who rents should have insurance. Some landlords demand that their tenants have renters insurance as a condition of their lease.

Even if your belongings aren’t worth much, think about how much it would cost you to replace everything you own. Buying all new clothes, furniture, electronics, bedding, and kitchenware adds up quickly! 

You also want to have liability coverage so that if an accident does happen, you’re not financially responsible for paying for repairs, medical bills, or lost wages. 

How much does renters insurance cost?

Renters insurance is very affordable, with an average cost of only $19 per month, or $228 per year. Your specific policy costs will depend on:

  • your location
  • the number of units in your building
  • coverage amounts needed
  • your deductible amount
  • your credit history
  • your previous insurance claims
  • the breed of your dog, if you have one 
  • whether or not you bundle your insurance policy

There are ways you can save on renters insurance. As mentioned, bundling it with your car insurance is one way. You can also get discounts by installing a security system, deadbolt locks, smoke alarms, and fire extinguishers. Setting up automatic payments or paying upfront will also lower the cost. 

Most insurance companies have an online calculator to give you an idea of what it’ll cost you. 

How does reimbursement work?

Renters insurance resembles homeowners insurance in the way that they reimburse you. There are two types of reimbursement possible for your belongings: replacement and cash value.

Replacement is the more expensive of the two coverages since it actually pays you what it would cost to replace your belongings with new ones, regardless of their age or condition.

Cash value pays you what your items are currently worth, taking into account age and depreciation. It might not cover the total replacement cost, so you might have to pay a portion. 

But regardless of the reimbursement option you use, getting your claims can be very difficult sometimes. And there have many instances of insurance companies failing or refusing to reimburse clients after damages or losses supposedly covered by their insurance policies.

Legal assistance will be helpful if you’re struggling to get reimbursement from your insurance provider. For example, if a hurricane damages your rental home, a hurricane lawyer can help you get the payment that is rightfully yours.

How to Document Your Property and Possessions

Making a claim will be difficult without proof of your possessions, and you might get denied.

Before purchasing a policy, it is best to videotape and take inventory of everything you own, including furniture. Doing so will help you choose the right amount of coverage. You don’t want to pay for more than you need or not have enough and be left paying for things out-of-pocket. 

Your video will also be an invaluable tool to use as evidence in the unfortunate event that you should have to file a claim.

There are apps and websites that you can use to create a virtual inventory, or your insurance company might have its own. You can also simply create a detailed list and save this on a flash drive or online. 

It’s a good idea to make at least one copy to keep in a secure location that you can access outside of your home. If there is major damage done, you don’t want your inventory to be lost, as well.

Regardless of what method you use, these tips will help to ensure you properly document everything:

  • Be as specific as possible
  • Record serial numbers and model numbers
  • Include when you purchased the item and what it initially cost you
  • Add an estimate of its current value 
  • Keep your receipts and keep them together in one place
  • Scan or take photo back-ups of receipts
  • Take clear photos or videos that show the condition of each item
  • If you have a roommate, indicate who owns what
  • Consider engraving things like your bike that are more susceptible to theft

Keeping your inventory up-to-date is essential, especially when buying expensive, big-ticket items. Otherwise, update your inventory once a year when renewing your policy to ensure you have sufficient coverage and accurate records. Don’t forget to remove anything that you no longer have.

Is renters insurance worth it?

Now, the question that all renters want to know: is renters insurance worth it? 

Yes, it is. Given the amount of protection that you receive, renter’s insurance is incredibly affordable, even if you have a lot of expensive possessions.

To justify its expense, take a look at all of your possessions and what it would cost to replace them. It’s substantially more than the $200 or so that a policy will cost you each year, making it unquestionably worth having.