Buying Renters Insurance Through Your Apartment Landlord? Shop Around First

Some apartments are now partnering with insurance companies to offer renters insurance to new tenants and stipulating that they must have some sort of renters insurance coverage before signing the lease. Are they worth the money?

Nearly all lenders require homebuyers to purchase homeowners insurance − but for renters, insurance was typically optional until recent years.

More and more, rental communities are requiring tenants to purchase renters insurance  and some apartment complexes are even partnering with insurance companies to offer coverage.

CHECK OUT: Learn the Hidden Secret of Homeowners Insurance

Whether you opt to go with the policy offered by your landlord or purchase renters insurance on your own, it’s a good idea to shop around for renters insurance to make sure you’re covered in case of events like theft or fire.

Don't assume your apartment complex is connecting you with an insurance company that will offer you the best coverage for the lowest price.

What does renters insurance cover?

“Imagine the footprint of your apartment,” says Michael Barry, vice president of media relations at the Insurance Information Institute. “If you turned it inside out, what would fall out? That’s what’s covered.”

Virtually all renters insurance policies cover a tenant’s personal belongings in case of a burglary or fire.

“Renters are often surprised that the landlord isn’t responsible for damage to personal property within a unit if there’s a fire,” Barry says.

Renters insurance also covers:

  • Wind damage, such as a tornado or hurricane
  • Vandalism or damage caused during a break-in
  • Personal liability if the tenant is sued by someone who is accidentally injured in the apartment
  • Additional living expenses like hotel costs or off-site meals if the tenant is displaced by a covered incident

“You’re entitled to additional living expenses if the apartment is unlivable,” Barry says. “Sometimes it’s capped at a dollar amount or a number of days.”

Water damage  whether it’s caused by a burst pipe or by firefighters putting out a fire  is the landlord’s liability, Barry said.

How much does renters insurance cost?

As for whether you should take advantage of the policy offered by your rental community, it depends on the cost. Before you buy a policy, make sure you’re getting the best deal.

According to the National Association of Insurance Commissioners (NAIC), the average renter pays about $188 per year for renters insurance.

“What’s going to drive the cost is the value that’s put on personal possessions,” Barry says. “What are they going to have to pay to replace your personal items in the event of a total loss?”

RELATED: Renters Insurance Explained

Similar to homeowners insurance, rental insurance companies often offer additional floaters to cover big-ticket items. For expensive items, such as jewelry, “you might want a separate policy,” Barry says.

If your rental community has a partnership with an insurance company, shop around with other insurers to make sure it’s not overpriced.

While it’s important to make sure you’re not overpaying, you also don’t want to skimp on coverage. Consider the value of your personal items when determining which policy  and policy limit  to purchase. Personal liability limits can range from $100,000 to $300,000 or even higher.

Barry recommends choosing a renters insurance policy that will also pay you the replacement cost value rather than actual cash value for items that are lost or stolen.

“Even though it costs a little more, that’s something to look for  it’s going to be more expensive, but it’s cost-effective," he says.

For example, if your older TV is stolen, a policy that offers actual cash value will take into account the age of the TV and factor in typical wear and tear, paying out a depreciated value  meaning that if the renter wants to buy a brand-new TV, it’s going to come at additional out-of-pocket cost.

A policy that offers replacement cost value will let you replace your lost or stolen TV with a comparable model at current market value  meaning you get a new TV at no cost to you.

How can you save on renters insurance?

According to the Insurance Information Institute, there are a few ways you can cut costs when it comes to renters insurance.

Some insurance companies offer discounts for renters who have:

  • A security system
  • Smoke detectors
  • Deadbolts
  • Good credit
  • Multiple insurance policies with the same company

Discounts are also sometimes available to renters over age 55.

Why renters insurance is required

“Landlords are increasingly insisting on (renters insurance),” Barry says.

As for why that’s the case, “The short answer is, so there’s no dispute over who is responsible for insuring the renter’s personal property,” he says.

AMLI Residential, one of the largest multi-family rental companies in the United States, began requiring renters insurance in 2008. The company has partnered with eRenterPlan to offer coverage to tenants.

“Once people understood the costs associated (with renters insurance) … it was easy to make that transition,” says Kisha Donahue, AMLI’s vice president of IT Implementation and Supply. She said tenants were surprised to find renters insurance was affordable.

“People are surprised how much less expensive it is than homeowners insurance,” adds Barry.

The average cost of homeowners insurance in 2013 was $1,096 per year, compared with less than $200 for renters insurance, according to the NAIC.

“That’s why it’s so cost effective,” Barry says.

Even in communities without mandatory renters insurance, tenants are increasingly seeing the benefit of coverage.

According to a 2015 poll conducted by ORC International, 40 percent of renters said they had insurance. While that’s far less than the 95 percent of homeowners who are insured, it’s a big leap from 2011, when 29 percent of renters had renters insurance.