What Renters Insurance Actually Covers (And What It Does Not)
The short answer
Renters insurance is inexpensive and widely misunderstood. Here is exactly what is covered, what is not, and how much coverage you actually need.
What Renters Insurance Actually Covers
Renters insurance is one of the most cost-effective financial products available — typically $10–20/month for meaningful protection. Most renters either skip it or do not understand what they have. Here is the full picture.
The Three Main Coverage Categories
1. Personal Property Coverage
Covers your belongings against covered perils (events) including:
- Fire or smoke damage
- Water damage from burst pipes (not flooding — that requires flood insurance)
- Theft (including theft from your car, in some policies)
- Vandalism
- Wind and hail
- Electrical surge
What it covers:
- Furniture, electronics, clothing, appliances you own
- Jewelry (usually up to a sub-limit; add a rider for high-value jewelry)
- Bicycles (up to a sub-limit)
- Musical instruments
- Sports equipment
What affects the payout: Policies pay either actual cash value (depreciated value) or replacement cost value (what a new item costs today). Replacement cost is worth the small additional premium.
2. Liability Coverage
Covers you if someone is injured in your home or if you accidentally damage someone else's property:
- A guest slips and falls in your bathroom → liability pays their medical bills and legal defense
- Your bathtub overflows and damages the downstairs neighbor's apartment → liability covers the damage
- Your dog bites someone in the hallway → covered (usually up to the policy limit)
Standard coverage: $100,000 is common; $300,000 or more is recommended. Umbrella policies provide additional coverage above this.
3. Additional Living Expenses (ALE)
If your apartment becomes uninhabitable due to a covered event, ALE pays for:
- Hotel costs
- Temporary rental costs
- Restaurant meals (above normal expenses)
- Storage costs
Example: A fire makes your apartment unlivable for 2 months. ALE pays for your hotel and meals while repairs are made.
What Renters Insurance Does NOT Cover
Flooding: Standard policies do not cover flood damage. Flood insurance is a separate policy through NFIP or private insurers.
Earthquakes: Excluded from standard policies; separate earthquake insurance required.
Your car: Car damage is covered by auto insurance, not renters insurance. However, theft of items from your car (laptop, bag) is sometimes covered by renters insurance.
Roommate's belongings: Standard policies only cover the named insured's belongings. Roommates need separate policies.
Business equipment: If you run a business from home, professional equipment above certain limits may not be covered. Add a home business endorsement.
High-value jewelry: Standard policies have sub-limits ($1,000–$2,000 for jewelry). A scheduled personal property rider covers specific high-value items.
Pest damage: Damage from rodents, termites, or bedbugs is excluded.
How Much Coverage Do You Need?
Personal property: Do a quick inventory — walk through your apartment and estimate the replacement cost of:
- Electronics: Laptop, TV, phone, gaming systems
- Furniture: Couch, bed, dresser
- Clothing: Estimate total wardrobe replacement cost
- Kitchen: Appliances, cookware
- Bicycle, musical instruments, sports gear
Most 1BR renters have $15,000–$30,000 in personal property. Insure for the actual amount.
Liability: $100,000 minimum; $300,000 recommended. The premium difference is small.
Best Renters Insurance Options
- Lemonade: Fully digital, fastest claims, typically lowest prices
- State Farm: Strong financial stability, local agents available
- USAA: Best rates and coverage for military and families — eligibility required
- Allstate: Good for bundling with auto
- Nationwide: Competitive for mid-range coverage needs
Average cost: $10–20/month for $30,000 personal property + $100,000 liability. Less than a streaming subscription.
Many landlords require renters insurance before move-in. A Settl Verified Passport helps you prepare everything a landlord needs — from income and identity to proof of renters insurance — all in one place at settlhome.com.
Settl Team
Settl Editorial
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