7 Tips for Calculating How Much Renters Insurance Coverage You Need

happy african american girl carrying a moving box with her parents in the background

When you rent a house or apartment, your mind is probably focusing on moving costs and exploring your new neighborhood. But one thing you should not forget about is renters insurance. It’s an important tool for protecting your possessions in the event of an accident. It also covers your liability if someone has an accident on your property, as well as pays for your living expenses if your home becomes unlivable.

But how much renters insurance coverage do you need? Use the following guide to help you calculate the perfect amount of coverage for you.

1. Add Up Your Possessions

The best tip for knowing how much renters insurance you need is to think about the value of your possessions. This can vary greatly between individuals, so figuring out the exact worth of your property can go a long way in knowing how much coverage to buy.

Renters insurance covers a wide range of items, including things like:

  • Appliances
  • Dishes
  • Clothing
  • Furniture
  • Electronics
  • Jewelry
  • Media
  • Tools
  • Sports equipment

Since this is a long list of things, you probably don’t know offhand the value of everything. That’s why you’ll need to take some time to categorize your possessions before choosing your policy. Once you have that total, it makes sense to buy a policy around that number. This may seem like an arduous process, but we recommend the following steps to make it a little easier.

  • Go room by room. Don’t try to add up the value of everything at once! It will make your head spin. Instead, go room by room so you can stay focused. Look for any major items that could be of worth.
  • Make a list. This should go without saying, but make a list of all the items you find. This will make it far easier to keep track of everything. When you do this, also write down the price you paid for the items and when you purchased them. This can simplify your life if you do ever need to make a claim.
  • Take pictures and video. While this can help during the calculation process by giving you visual records to refer to, it’s also helpful if you ever need to make a claim. Having photos of everything can show the insurance company the condition of your items prior to the accident.
  • Find your total. Once you’ve written down the value of everything, now’s the time to whip up your calculator. Add up everything, and you should have a rough total of the value of your items.

2. Does Your Insurance Company Use Actual Cash or Replacement Cost Value?

While the retail value of your possessions might seem high, keep in mind this isn’t necessarily the value you’ll receive from a claim. If an insurance company uses the actual cash value method, they’ll consider depreciation, especially if you bought something several years ago. This is particularly a problem with electronics, which can lose their value quickly due to new innovations every few months. Instead of receiving what you paid for an item originally, you’ll receive the item’s current value.

If you know your insurance company uses this method, then you may not need as much coverage as you think. For example, if you have a five-year-old laptop that costs $2,000 new, it may only be worth $500 now. That means you can trim $1,500 off your possession value total and reduce your coverage by that amount.

That said, if your insurance company uses the replacement cost value method, it means you’ll get the full original cost of the item back. Using the example above, you’d get the full $2,000 back, as long as your coverage limit is high enough. In that case, you’d want to keep that higher coverage in place.

3. Do You Need a Floater?

While a renters insurance policy does cover things like jewelry and electronics, this is usually only up to a certain amount. This is especially true if your items are stolen. The average policy only has a low liability limit for theft of just $1,500. This means if someone breaks in and cleans out your jewelry cabinet filled with expensive pieces, you won’t get the full value back. Even if your items aren’t stolen, many policies limit how much they pay out for individual items. So even if you have $30,000 in personal property coverage, you might be limited to $2,000 per item, which might not be enough for a diamond ring or expensive computer.

Floaters are a way to ensure you get full reimbursement for particularly expensive items. You pay to add on extra coverage just for these specific items. They add a little extra peace of mind if you have one or two items that have a higher value than the rest of your possessions.

4. Think About How Often You Have Guests Over

Renters insurance isn’t all about protecting your personal possessions. It’s also about protecting others when they visit your home. Liability coverage foots the bill for expenses if someone tries to sue you after getting injured on your property. As an example, if they slip and fall on your porch because you didn’t salt it after a snowstorm, you could be responsible for paying for their medical bills. Liability insurance would cover this, so you don’t have to worry.

While it’s great to have this coverage, you should think about how often you have guests over. If you’re a frequent entertainer, having high liability coverage in your renters’ insurance is a good idea. That way, you can have peace of mind whenever you gave guests over. However, if you don’t usually have people at your home, you may consider going a little lower with this coverage.

Usually, an average policy has around $100,000 in liability protection. You’d only want to go higher or lower than this if you consider yourself a social butterfly or a homebody, respectively.

5. Follow the Guidelines From Your Landlord

An african america women calculating how much renters insurance coverage needs while she use her computer

When you sign the lease for your new place, it’s common for your landlord to put in certain stipulations about renters insurance. This is to protect them in case you cause damage to the property. It also protects them from having to pay for your damages if a fire or other disaster destroys the building and your personal property.

Usually, landlords don’t specify a specific amount of coverage — they just want you to have a policy. However, if they do stipulate a certain coverage amount, you’ll need to get this at a minimum, so you don’t break the terms of the lease.

6. Consider the Average Renters Insurance Amounts

The average renters’ insurance premium cost varies greatly between states, but nationally, it was $179 a year in 2018. When calculating your own policy, you should keep that amount in mind.

Having a higher level of coverage will cause the premium to go up. But you don’t want to go too low with your coverage just to save a few dollars. Keep in mind, the average property damage and liability claim amount between 2014 and 2018 was $13,814. That’s just an average — for bigger events like fire and lightning, the cost of a claim could be as high as $79,000. So you may want to take these numbers into account when planning your insurance coverage amounts.

7. Think About the Size of Your Emergency Fund

Everyone should have an emergency fund they contribute to on a regular basis. This fund is important because it protects you in unexpected circumstances. For example, if you get into a car accident and need to pay for repairs, this money can be there as a cushion.

If you have a robust emergency fund, you may be able to get away with less renters’ insurance coverage. That said, don’t rely entirely on your emergency fund to foot the bill if you ever suffer property loss. While that would qualify as an emergency, it’s something that insurance could cover for you. It’s better to save that money for true emergencies where you need fast cash.

Find Affordable Renters Insurance Coverage From InsureOne

No matter what size policy you’re thinking about for renters insurance, InsureOne is here to help. Get your free quote today to see just how affordable our renters’ insurance really is.