Be it an apartment, condominium or a house, renting offers flexibility and convenience without the long-term commitment of homeownership. Yet, in the excitement of finding the perfect rental property and settling into a new space, one crucial aspect frequently overlooked is renters insurance (or tenant insurance).

Many tenants venture into a rental agreement without the protection of insurance. Whether you're a first-time renter or a seasoned tenant, understanding the value of renters insurance can prove essential for protecting you, your belongings and your finances.

Renters insurance 101

Much like a homeowners insurance policy, renters insurance¹ provides coverage for those who are leasing or renting a home, condo or apartment. Instead of covering the structure – that’s where your landlord’s insurance comes in to play, renters insurance focuses on protecting your personal property.

Renters insurance covers your belongings – even if they are in your car or something happens while you’re traveling. Most renters policies cover losses due to theft, fire and certain kinds of water damage.

» Tip: Flood damage caused by weather or natural disasters is not covered by renters insurance alone. Thus, separate flood coverage² may be needed to protect against those losses. Although Texas law³ requires landlords to disclose flood risks (e.g., the location of the property on a flood plain), significant issues can develop due to broken water mains or drainage systems unprepared for current population demands.

A common misconception about renters insurance is its high price. According to the Texas Department of Insurance, the average renters policy⁴ in Texas costs about $20 a month. Rates vary, of course, depending on where you live and how much coverage you buy.

While not required by law, renters insurance is not always optional. Some landlords or property owners require renters to have insurance in order to qualify for a lease agreement. As property owners, they want to know that their tenants have some level of protection for their belongings – those items that are not covered by any policies the landlord holds.

The upshot? Renters insurance may not be required by your landlord or property management company, but there may be a financial benefit to having coverage. Let’s take a closer look at three potential advantages.

3 ways a renters insurance policy protects your finances (not just your stuff)

1. Renters insurance protects personal property

Should something happen to your apartment or rental home, your landlord’s insurance will cover structural damage to the property you are renting – but it won’t cover your belongings. For example, without renters insurance, if your belongings are stolen or damaged during an act of burglary, you are personally responsible for replacing or repairing your property.

That may not seem significant, but you may have more personal property than you realize. Everything you own is considered your personal property – even your cell phone.

Personal property includes items owned by you, such as:

• Clothing
• Furniture
• Electronics (computers, printers, televisions, stereo equipment)
• Appliances (washers, dryers, refrigerators)
• Decorations (pictures, curtains, knick-knacks)
• Housewares (sheets, towels, dishes)
• Toys, games and sports equipment (gaming systems, pool tables, bikes)

Without insurance coverage, the personal cost to replace your property could be significant. While policy coverage can differ, most basic renters insurance policies only cover replacing items at the current value, but you can opt for a policy that covers replacement value of your property.

For example: You originally paid $1,000 for your camera equipment. But the equipment has depreciated and is now only worth $600. A basic policy will only pay you the current value, not today’s cost to replace the equipment.

When reviewing personal property protection, know the limits of your policy as it relates to replacing or repairing your belongings. Most policies provide coverage up to a certain limit – or have specific limits for certain kinds of property, like jewelry or even cash. You may want to buy more coverage for high-value items like engagement rings or expensive jewelry or watches.

Personal property protection can be especially important if you work remotely. If your employer provides your office equipment, they will more than likely replace anything you lose. But if you are using your own computer, it will need to be covered by your insurance – and you’ll want to quickly replace it, so you don’t miss any work or business.

» Tip: Create a property inventory to know what you have and to estimate the value of your possessions. This will help you determine the amount of coverage you need to be sure you have enough to replace what you might lose. And if you have expensive collectibles,⁵ consider buying extra coverage to protect against their loss.

2. Renters insurance provides personal liability protection

Renters insurance goes beyond protecting your personal property. It can also cover damage to other people’s property or injuries for which you are deemed responsible. This is called “personal liability coverage,” and it’s a standard part of renters insurance.

How does personal liability coverage work? If someone is injured in your residence from a fall, cuts themselves on broken glass or something you do causes damage to another person’s property, personal liability coverage can protect your finances if you are found at-fault for damage or an accident.

This type of coverage can help protect you from damages related to:

• Injuries that occur on your property, such as someone slipping and falling
• Water or fire damage you cause to other apartments or homes – even something like a baseball hit through a neighbor’s window
• Dog bites – though coverage may be limited to certain breeds

Up to the limits of your policy, your renters insurance may cover medical expenses for the injured party or replacement costs for any damaged property – as well as legal costs and any judgment against you in court.

Personal liability coverage can be purchased at different coverage limits. Consider selecting a limit that matches or exceeds your net worth to fully protect your assets.

» Tip: It’s important to know that car accidents are not covered by your personal liability coverage – those are covered by auto insurance, while your own injuries are covered by your health insurance. And of course, any intentional harm or damage caused by you, or a member of your household, would be excluded from coverage.

3. Renters insurance helps with “loss of use”

The loss of your personal property and your home is difficult enough, but should something happen that makes your home uninhabitable, you have the added burden of finding – and paying for – somewhere to live while the damage is repaired.

Loss of use coverage offers financial support if you’re unable to live in your home by providing for some living expenses if you must relocate due to a covered loss. It helps take care of the costs associated with getting a hotel or a temporary residence while your rental property isn’t available. It can cover temporary housing – which could be more expensive than your current rent – and may cover additional expenses like laundry, furniture rental and eating out during your relocation.

» Tip: Loss of use coverage pays expenses that are beyond your normal cost of living – and depending on your policy, those additional expenses may only be covered for a certain length of time. Be sure to know what your policy covers and document your expenses as most insurance companies will reimburse you based on your receipts.

The takeaway

Just because you are renting your home doesn’t mean you shouldn’t protect the things inside those walls in the event of a disaster or break-in. Renters insurance provides an important level of protection for you and your possessions – as well as your wallet.

Ready to protect your possessions and your finances with renters insurance? RBFCU Insurance Agency can help you learn what renters coverage is right for you. Request an online quote today.*