Many people rent homes at some point in their lives, from college students in their first off-campus apartments to retired couples who are downsizing. If you’re a new renter, you might not be clear on what renters insurance is and whether you need it.

Find out what a renters policy covers and how it can protect you in unexpected (and important) ways.

The basics of renters insurance

Renters insurance has three main components:

• Personal property coverage. Renters insurance covers the contents of your residence including clothes, furniture, dishes, (most) bicycles, TVs, computers and other electronics.
• Liability coverage. The liability component might be the biggest reason to get renters insurance because it can protect you from huge financial losses. Renters insurance can cover you if you’re sued by someone injured in your home or if your dog bites someone outside your home.
• Additional living expenses coverage. If you cannot stay in your apartment after a fire, a burst pipe or another disaster, this coverage will pay for temporary lodging.

Here are 11 other key facts you should know about renters insurance:

1. Renters insurance costs less than $25 per month — The average renters insurance premium is $179, according to NerdWallet. Your specific premium will depend on a number of factors, including where you live and the type of coverage you choose.

2. Named perils — Standard renters policies cover named perils, or events that may damage your possessions. These include fires, lightning, windstorms, hail, smoke, vandalism, theft, freezing, and damage from aircraft, vehicles and riots.

3. Deductibles — Deductibles for renters policies tend to start at around $500 and can go up to $1,000 or $2,000, according to the finance site The Simple Dollar. Higher deductibles tend to mean lower premiums but also higher floors before coverage kicks in.

4. Belongings away from home — Your belongings are covered away from home for the perils listed on your policy. If a thief swipes your luggage from a hotel room, you are covered. This off-premises coverage is usually limited to a portion of your total coverage for personal belongings, such as 10%, according to Nerdwallet.

5. Car interior — If you keep personal belongings like books in your car, your renters insurance policy may cover them.

6. Landlord requirement — A landlord’s insurance covers their property (the building and grounds), but not your belongings in it. A growing number of landlords require tenants to purchase their own renters insurance policies to reduce potential liability at the landlord’s end.

7. Actual cash value versus replacement cost value — Something to take into consideration is actual cash value (ACV) or “replacement cost value” (RCV) coverage for your belongings. ACV is what the item is worth right now. ACV is generally less than the amount it would cost to replace the item. For this reason, RCV coverage tends to be more expensive. But RCV also provides you with more protection than ACV coverage.  

8. Roommates must be named — A renters insurance policy will not extend coverage to any of your roommates unless their names are specifically written in the policy. Though it's not recommended, sharing a renters insurance policy with your roommate is possible. However, most insurance professionals suggest getting your own customized policy to fit your particular needs.

9. Floods aren't automatically covered — Standard renters insurance policies exclude damage to your possessions from flooding (this is true of homeowners policies, too). You can get a separate flood coverage policy from the National Flood Insurance Program (NFIP) and from some private insurers.

10. Earthquakes aren't automatically covered — As with flooding, standard renters policies do not cover earthquake damage. You can get earthquake coverage from a private insurance company; renters in California can get coverage from the nonprofit California Earthquake Authority (CEA).

11. Floater — A floater is a separate policy that provides additional coverage for more costly valuables if they are lost or stolen. If you have expensive jewelry, collectibles, sports equipment or musical instruments, consider adding a floater to your policy to protect against their loss.

Know the facts

Don’t make the common but costly mistake of thinking your landlord’s insurance protects you and your belongings. It doesn’t. The time to secure your renters insurance is now, before a major calamity occurs.

Talk to your Rathbun Account Manager to determine the correct type and amount of renters insurance coverage for you.