Renters Insurance: What It Actually Covers

A renters policy — form HO-4 — contains three distinct coverages. Most renters are aware of one of them.

The three parts

Personal property

Your belongings, typically on a named peril basis: fire, theft, vandalism, certain water damage, wind, and a defined list of others. If a cause is not on the list, it is generally not covered.

Coverage usually extends beyond the apartment — belongings stolen from your car or while travelling are commonly covered, often at a reduced percentage of your limit.

Liability

This is the part people do not think about, and it is often the more consequential coverage.

It responds when you are legally liable for injury to someone else or damage to their property. A guest injured in your apartment. A bathtub overflow that damages the unit below. A dog bite, subject to breed restrictions many policies contain.

Liability follows you rather than the apartment, so it can respond to incidents elsewhere too, depending on the policy definitions.

Loss of use

If the unit becomes uninhabitable after a covered loss, this pays the additional living costs while you are displaced — hotel or temporary rent above your normal rent, and additional meal costs.

What the landlord's policy does not do

The most common misunderstanding, and it is worth being blunt about.

The landlord's policy covers the building and the landlord's liability. It does not cover your belongings, and it does not cover your liability. If a fire destroys the contents of your apartment, the landlord's insurer pays to repair the building — not to replace what was inside your unit.

Actual cash value versus replacement cost

Renters policies come both ways, and the difference is significant on contents.

On an actual cash value policy, a five-year-old laptop is settled at what a five-year-old laptop is worth, not what a new one costs. On a replacement cost policy, you receive the cost of a comparable new item — typically with the depreciation withheld until you actually replace it and show proof.

The premium difference is usually modest relative to the difference in outcome, but that is arithmetic for you to do with your own numbers.

Sublimits

Standard policies cap certain categories regardless of your overall limit: jewellery, watches, furs, firearms, silverware, cash, and securities. The caps are frequently far below what people own, particularly for jewellery and electronics.

Individually scheduling an item raises its limit and often removes the deductible for it, at the cost of an appraisal and a higher premium.

What is excluded

• Flood. Requires separate coverage, and renters can buy NFIP contents coverage.
• Earthquake, unless added.
• Your roommate's belongings, unless they are named on the policy. Roommates generally need their own policies.
• Damage to the building itself from ordinary use — that is between you and the landlord under the lease.
• Your vehicle and its permanently installed equipment.
• Business property above a small stated limit.

Working out a limit

Most people substantially underestimate what they own, because they price it as a used-goods total rather than as a replacement cost.

A room-by-room inventory is the reliable method: photograph each room including inside wardrobes and drawers, list anything of significance with a rough replacement figure, and keep the record somewhere outside the home — cloud storage or email to yourself. That record is also what supports a claim if you ever make one.

What we are not saying

We are not telling you to buy renters insurance or at what limit. We do not sell it and receive nothing if you do.

What we are saying is that a renters policy contains three coverages rather than one, that the liability portion is frequently the more significant of them, and that the landlord's policy does nothing at all for your belongings or your liability.