How Much Renters Insurance Do I Need?

How much renters insurance you need depends on the value of your personal belongings and your asset value. Getting enough personal property coverage to cover all your stuff helps ensure you can replace everything in a catastrophic claim situation like a fire. Having enough personal liability to match your assets or net worth can help protect you financially if you’re sued for injuries or property damage you unintentionally cause to others. Here’s what you need to know about determining how much renters insurance you need in New Jersey.

What does renters insurance cover?

Knowing what renters insurance covers can help you determine how much renters insurance you need. Although policy coverage can vary, most standard renters policies include personal property coverage, liability, loss of use and guest medical payments. Here’s some more detail on each of those coverages.

Personal property coverage

The most significant difference between a homeowners insurance policy and renters insurance is dwelling coverage. When you rent, the building owner has a landlord’s policy that covers the building. You’re responsible for protecting your belongings, which is what personal property coverage does. This coverage can also be called contents coverage.

You should buy enough contents coverage to replace all your stuff in the extreme event you lose everything from a covered claim, like a fire or windstorm that levels your unit. Personal property coverage will protect your clothes, electronics, kids’ toys, kitchen utensils and other belongings. 

Sub-limits and what renters insurance won’t cover

Most renters insurance policies include sub-limits for high-value belongings, like jewelry, fine arts, coins, firearms and hobby equipment. The sub-limit is the maximum the insurance company will pay towards a loss. For example, if you have a $1,500 sub-limit on jewelry and discover $5,000 worth of jewelry is missing after a break-in, the most you’ll get for the claim is $1,500.

If you have high-value items, it may be worth getting either a rider or a floater that will provide more coverage for these items. Or you can discuss a scheduled personal property policy with your insurance agent. It will cover each high-value item at its actual value, but requires an appraisal or other valuation document.

Renters insurance doesn’t cover all losses. Common losses your renters insurance will cover include:

• Fire.
• Theft.
• Vandalism.
• Windstorms.
• Lightning strikes.
• Damage from the weight of snow, ice or sleet.

Floods, earthquakes and other types of earth movement are some events that renters insurance won’t cover. Be sure you read your renters insurance policy or speak with your agent to understand what is and isn’t covered.

Personal liability coverage

The personal liability coverage on a renters insurance policy covers legal claims made against you for accidental injuries or property damage, you, your household members or your pet cause to others. 

Here are some examples of reasons someone may file a liability claim against you:

• Your dog bites a guest after entering your yard or home.
• Your child kicks a ball into your neighbor’s window, breaking it.
• During a party, a guest trips down your stairs, injuring themselves.

Personal liability will cover a settlement or judgment award if someone sues you and wins, but only up to the policy limit. Most renters insurance policies offer liability coverage between $100,000 to $500,000.

Additional living expenses

Also called temporary living expenses or “loss of use,” additional living expenses pay for the increased cost of staying somewhere else temporarily while your rental is repaired or rebuilt. Expenses can include higher grocery costs, hotel stays and pet boarding.

Guest medical payments

Medical payments to others will cover guests' medical expenses if they get hurt on your property. It doesn't matter who is at fault, as long as it was accidental. Policy limits typically range from $1,000 to $5,000. 

How much does renters insurance cost on average?

The average cost of renters insurance depends on several factors, including your: 

• ZIP code.
• Age.
• Prior claims history.
• Coverage choices and limits.
• Deductible.
• Total units in your rental building.
• Applicable discounts.
• Credit score.

On average, renters insurance costs around $173 annually, or roughly $14 monthly, according to data from the National Association of Insurance Commissioners (NAIC). In New Jersey, the average cost of renters insurance is lower than the national average, costing $154 per year, or almost $13 per month.

How to estimate your renters insurance cost

Estimating your renters insurance cost starts with adding up your belongings' value to determine how much everything is worth. Although it can seem daunting, there are ways to make it easier, like creating a home inventory.

How to value your personal property

A home inventory not only helps you estimate your renters insurance premium, but it can also make it easier if you have to file a claim. Here are some tips on creating a home inventory from the Insurance Information Institute that can also help you determine how much personal property coverage you need:

• List recent purchases first.
• Record serial numbers and other identifying information for appliances, electronics and other valuable items.
• Create general categories for similar things, like jeans, shoes, shirts, kitchen silverware and books.
• Keep valuation proof, like receipts, appraisals and purchase orders.
• Pick one spot to start so you don’t get overwhelmed.

If you prefer not to write everything down, you can create a spreadsheet or walk around your rental, recording a video to capture what you have and other details. You can also download a free home inventory app from NAIC or another company to your phone. 

You should also consider if you want actual cash value (ACV) or replacement cost coverage. With ACV, you'll only get the depreciated value of your damaged belongings. If you have a 5-year-old couch to replace, you'll only get the depreciated value of a 5-year-old couch. Although replacement cost coverage on contents costs more, you’ll get enough to buy brand-new belongings to replace your old stuff if damaged or destroyed by a covered loss.

How much renters liability insurance do I need?

Not having enough liability insurance can cause financial devastation, since you can be held personally liable for legal fees and settlement or judgment awards over your coverage limits. Having enough coverage to protect your assets or net worth is a good place to start. There are free calculators online to determine your net or asset worth and your minimum coverage needs.

Consider a personal umbrella insurance policy if you need more liability protection than your renters insurance policy offers. An umbrella policy will automatically cover the amount that exceeds your renters insurance liability for a covered claim, up to the policy limit. It will also extend to your auto policy.

How much coverage do I need for additional living expenses?

Additional living expenses coverage typically defaults to a percentage of your personal property coverage or a flat amount, depending on the insurance company. You can usually buy more coverage if you need more than the policy includes.

Choosing a deductible

The deductible is the amount you pay towards a covered loss. For a renters insurance claim, insurance companies typically deduct the deductible from the claim check. 

Although personal property has a deductible, liability, loss of use and guest medical payments typically do not require a deductible.

Most renters insurance companies offer deductibles from $500 to $2,000 or more. Although you can save some if you choose a higher deductible, you’ll get a lower claims check after a covered loss. Consider getting quotes with different deductibles to see how much choosing a higher deductible will save.

When should you get renters insurance?

You should get renters insurance if you are renting space and aren’t covered by any other policy. Even if you have all hand-me-down furniture and clothes and can afford to replace your stuff, the liability and additional living expenses coverage can be worth the cost of the policy.

Renters insurance is an affordable way to protect your belongings and yourself financially. If you have a car, most insurance companies offer a bundling discount when you insure your auto and renters with the same insurer, which can help you save on both policies.

Where to buy renters insurance

You can buy renters insurance through an agent, over the phone or online. Most major renters insurance companies offer quotes online, which can help you compare coverage options and rates to find the company that will best meet your needs at an affordable rate. When comparing quotes, get an accurate comparison by getting the same coverage limits and deductibles. 

Companies like Lemonade use AI to help get quotes and coverage fast. According to Lemonade's website, you can get covered in as little as 90 seconds. You can file claims virtually using the Lemonade app.

Frequently asked questions (FAQs) 

What is renters insurance?

Renters insurance is a type of home insurance that provides coverage to tenants living in a building, unit or home they don’t own. It covers your belongings, protects you against liability claims and provides additional living expenses if you cannot live in your rental after damage from a covered loss. 

What is the most common amount for renters insurance?

The most common amount for renters insurance is between $14,000 and $19,999, according to a data analysis by the National Association of Insurance Commissioners (NAIC). For this coverage amount, the average national cost is $143 per year or almost $12 per month. The average price of New Jersey renters insurance for this amount is $120 yearly, or $10 monthly. 

Why should college students have their own renters insurance policy?

College students should have their own renters insurance policy to cover their belongings in case of a covered claim, to provide liability protection and additional living expenses if a covered loss requires them to stay elsewhere during renovations or rebuild. If they live in a dorm, there may be some coverage under their parents’ homeowners insurance, but it’s usually a small amount of personal property coverage that extends to belongings away from the home – around 10 percent. This may not be enough to cover their belongings, and the parents’ home policy deductible will apply, which may be higher than a renters insurance policy deductible. Landlords renting to students off-campus may require the student to have renters insurance before renting to them.

Do you need renters insurance before moving in?

Having renters insurance in place before moving in can be a cost-effective way to protect your belongings while moving. Unless your landlord requires renters insurance, you don't have to have it before moving in. But if you don't have renters insurance in place and your belongings get damaged while moving in, or something else occurs that would be claimable, you would lose out on having coverage and the ability to file a claim. If you're using a moving company, check to see what type of moving insurance coverage they have to protect your stuff during the move.