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What’s the big deal with renters insurance? The landlord is responsible for the property, so it shouldn’t matter whether or not a renter has an insurance policy, right?
Many tenants assume the homeowner's insurance policy covers them when they move in, but it doesn’t. The landlord's insurance only protects them, not the renter.
Don't assume you're immune to rare accidents that could damage your property. Even renters who aren't concerned with the welfare of their belongings should know there’s more to renters insurance than protecting household goods.
What Is Renters Insurance?
Renters insurance is a type of insurance policy that protects tenants from financial losses related to their personal belongings, liability, and sometimes additional living expenses if their rented home or apartment becomes uninhabitable due to events like fire, theft, or certain types of water damage.
What Landlord’s Insurance Covers
The landlord’s insurance protects the property from damages caused by fire, lightning, hail, wind, etc. It doesn’t cover anything inside the home except for the landlord’s belongings left for the tenants to use, like a lawnmower. Beyond the basics, landlords can add extras to their policy, including protection against vandalism or theft.
It doesn’t typically cover the tenant's belongings or the maintenance and repair of appliances.
What Renters Insurance Covers
Renters insurance covers the renter's belongings. It helps ensure financial compensation for stolen or damaged property, liability should accidents happen, and a cushion should the property be unlivable and force the tenant out of the home.
These types of insurance policies do not interact or support one another. They act independently and serve individual purposes.
Why Should a Tenant Have Renters Insurance?
1. Financial compensation for stolen or damaged items.
For military families, renters insurance offers peace of mind by providing financial compensation when personal belongings are stolen or damaged, not just at home but in a variety of less traditional scenarios common to military life.
Coverage often extends to:
- Government-Approved Storage: If a service member's household goods are damaged or stolen while stored during a PCS move, renters insurance can supplement the limited government reimbursement through DPS, especially for high-value or sentimental items.
- Temporary Housing: Whether staying in a hotel, short-term rental, or on-base military lodging during a PCS move or transition, household goods remain protected under many renter's policies.
- Items in Transit: Belongings that are damaged or go missing while en route to a new duty station may be covered, regardless of whether the household goods are handled by military movers or the renter through a PPM/DITY move.
- Vehicle Theft or Break-Ins: If personal items are stolen from the car while traveling or temporarily parked, renters insurance may help cover the loss. Not that it covers the items, not the vehicle itself.
- Overseas Assignments: Some policies offer limited international protection or allow for extended coverage while a military member is stationed OCONUS. These help protect items shipped ahead or stored stateside.
In these scenarios, a good renters insurance policy can help military families recover financially from unexpected losses, no matter where military life takes them.
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2. Its protection extends beyond belongings.
Liability coverage in renter’s insurance protects tenants if they’re found legally responsible for accidentally causing injury to someone else or damage to someone else’s property.
Here’s what that means in everyday situations:
- Left the water running and flooded the apartment? If the overflow causes damage to the unit or a neighbor’s property, liability coverage may help pay for repairs. This is true as long as it’s considered accidental and not due to gross negligence. However, every policy is different, and water damage isn’t always covered, so it’s crucial to check each specific plan.
- The dog bit someone? Liability insurance can help cover medical bills or legal costs if a renter's dog injures someone. However, it's important to know that some policies exclude certain breeds or animals altogether.
- A friend got hurt in the apartment? If a guest trips and gets injured in the rental, liability or medical payments coverage can help with their medical expenses. Medical payments to others are often included for minor injuries, even if the tenant is not technically at fault. That said, if the injury is due to a structural problem, it falls under the landlord’s responsibility.
In each scenario, the renter’s insurance helps protect them from paying out-of-pocket for medical bills, repairs, or legal costs.
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3. Includes additional living expenses if your rental home is unlivable.
While the worst-case scenario bunny trail is no place to let your thoughts run rampant, it's wise to be aware. Here are a few situations no renter expects to find themselves, yet things happen.
Say that the home a military family is renting in southern California, but the dry climate and high temps cause wildfires, and one consumes the house. Even if the property isn’t rubble on the ground, it’s no longer structurally sound. It doesn’t have access to running water, it’s unlivable, and the family is out of a home. Renter’s insurance saves the day with additional living expenses (ALE) coverage.
What does this look like? ALE includes compensation for:
- Hotel or temporary lodging costs
- Increased food costs
- Laundry expenses
- Pet boarding
- Storage fees
It will probably only offer coverage for the shortest time necessary to repair or replace the damage or, if the named insured needs to relocate permanently, the least amount of time required for the household to settle at another location.
4. The landlord might require it.
It’s pretty standard at this point. Most landlords require tenants to have renters insurance. Why?
To mitigate a potential lawsuit. Landlords don’t want the blame if their tenant's belongings are damaged. And renters who don’t have insurance to cover such loss are more likely to seek compensation from the landlord.
Protect their deductible in the event the property gets damaged. Remember how renters insurance covers the tenant should they cause damage to the property? It also helps the landlord by covering the deductible they’d otherwise dip into to fund repairs.
Tenant screening. If the thought of renters insurance turns away potential tenants, it might mean that they can’t afford to rent a property anyway. A requirement for renters insurance can act as another step in a landlord’s screening process.
Eases their responsibility. While some landlords might look objectively at a worst-case scenario, others will feel responsible and help their tenants find another housing solution if their property is uninhabitable. Renters insurance provides support for renters in this way and, therefore, relieves the landlord of this feeling of responsibility.
“Armed Forces Insurance requires it for landlords who want an umbrella liability policy. Before AFI will insure landlords for a certain amount of homeowners and umbrella liability insurance, AFI wants the tenants to have a certain amount of personal liability insurance. That tenant's liability insurance usually comes bundled with personal-property insurance as the package of renters insurance.” -Doug Nordman, from The Military Guide and author of The Military Guide To Financial Independence And Retirement and co-author of Raising Your Money-Savvy Family For Next Generation Financial Independence.
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5. It’s more affordable than paying for damages.
Less than most phone, internet, and cable bills, $10 to $20 (or so) a month to protect belongings, renters insurance is more affordable than paying to replace things or repair the property out of pocket—not to mention the peace of mind associated with it, which, in this case, can most definitely be bought.
Shopping Around for Renters Insurance Policies
How does a renter decide which insurance policy is right for them? The answer is in the details.
While most plans offer protection over belongings, liability, and additional living expenses given any number of circumstances, many do not include coverage for flooding and earthquakes, while others do.
Those living in an area where an earthquake is more than a once-in-a-lifetime occasion or water tends to creep in after heavy rain may want to shop around to find a policy that has their back.
A few renters insurance providers to consider:
- Allstate
- Armed Forces Insurance (AFI)
- Farmers
- Geico
- Liberty Mutual
- State Farm
- USAA
Understanding what renters insurance is and does is key to helping military renters make an educated decision when searching for a policy. More than that, it helps them understand exactly what they're paying for.
By Danielle Keech
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