How Much Renters Insurance Do I Need?

family of three sitting on a couch holding a cardboard roof above their heads

Renters often have little control over catastrophic incidents that can damage their living spaces, such as faulty pipes flooding an apartment or poorly maintained electrical work starting a fire. Renters insurance—which covers situations like theft, water damage and fire—is a no-brainer purchase for many renters. But how much do renters really need?

There are two key elements to deciding how much renters insurance you need: How much personal property you need to cover and how much liability you're willing to be exposed to. Here's a look at how to figure out just how much coverage you should buy.

How to Determine How Much Renters Insurance You Need

Renters insurance policies consist of several elements that can protect you against accidents and lawsuits. These include:

  • Property damage: If there is damage done to your rental property that ruins your personal belongings, coverage can help you cover your losses. Property damage can extend beyond your home to protect your belongings stored elsewhere. Some rental insurance policies also come with coverage for items outside of your home, such as a lost cellphone or belongings kept in a storage unit.
  • Personal liability: Accidents happen, and accidents that happen in a rental property can be expensive. If a friend is injured at your rental, renters insurance can help mitigate the costs of paying their medical bills. If a food delivery driver sues after slipping on your icy sidewalk, renters insurance can cover your legal costs.
  • Loss of use: A fire in your apartment is a disaster in itself, but it also means you'll now have to pay for temporary shelter while you wait for repairs or look for a new place. When you have renters insurance you can get covered for loss of use which will provide funds for a temporary living space.

The amounts for each part of coverage can be adjusted up or down to give you more coverage at a higher price or less coverage at a lower price. Liability coverage typically starts around $100,000 and can be increased. You'll also need to calculate the amount needed to cover your belongings before shopping for renters insurance.

What Does Renters Insurance Cover?

Before calculating your target coverage amount, get familiar with which kinds of items you can include in your calculations. Some of the common items that are generally covered by renters insurance claims include:

  • Furniture
  • Jewelry
  • Art
  • Musical instruments
  • Appliances
  • Electronics
  • Sporting equipment

Think about the items that would be most difficult to replace like a full set of skis or an engagement ring. Adjust your coverage amount accordingly.

How Do You Estimate the Value of Personal Property?

When deciding on a renters insurance policy, decide if you want a policy that covers the full replacement cost, or the actual cash value of your losses.

  • Full replacement cost is the price you'd pay to buy your laptop, bedding and couch new today if your apartment had a fire.
  • Actual cash value coverage pays out the value of your belongings at the age and condition they are in today. Policies that cover replacement cost more but offer better coverage on payout.

Replacement coverage can be expensive, but actual cash value coverage can fall short in the event you wind up using it. You'll want to figure out the minimum replacement cost as well as the actual cash value of your personal property to determine the right level of coverage.

Start by documenting your belongings by making a list of all the possessions in your rental. You can also take photos or videos that you store somewhere other than your apartment or in the cloud so you'll have them even in the event of a disaster. These records will also help you in case you ever need to file a claim with your renters insurance.

Keep careful records of items that are important to you like jewelry or electronics. When possible, record the date you purchased the item, its model and serial numbers. Consider adding extra coverage for jewelry or antiques if it's available. If the jewelry or antiques have appraisal documents, keep those secure and maintain digital copies.

From your list, add up the replacement cost and the actual cash value (considering depreciation) of your depreciated items. This can help you decide how much renters insurance you need based on the value of your personal property.

The Bottom Line

You'll want enough renters insurance to reasonably mitigate your losses should something like a theft or fire occur, but take the time to find an affordable insurance premium in the meantime. Speaking to an insurance agent or broker can help you find this balance.

While you're shopping for renters insurance, remember to keep an eye on your credit report. In some states a credit-based insurance score is used to help decide premiums, so you may get a better deal by staying on top of your credit.