Quick answer: Set your personal property limit by adding up what it would cost to replace your belongings, using a home inventory. Choose a liability limit that protects your savings and future income and meets any amount your lease requires, with $100,000 as a common minimum and $300,000 or more for many households. In the standard ISO HO-4 renters form, loss of use is set at 30% of the personal property limit. Choose replacement cost coverage if it is available, check the special limits for jewelry, cash and other valuables, and pick a deductible you could pay without strain.
Renters insurance is one of the least expensive policies most households carry, but the default limits a website suggests may not fit your situation. Too little coverage leaves you replacing belongings out of pocket after a fire or theft. Too much costs extra each month for protection you do not need.
This guide walks you through each part of a renters policy and how to choose a limit for it. If you are new to renters coverage, start with our overview of what renters insurance covers, and for the broader home insurance picture see our homeowners insurance guide.
Sources: Insurance Services Office (ISO) Homeowners 4 Contents Broad Form (HO 00 04), including Coverage C special limits of liability and Coverage D loss of use; ISO Personal Property Replacement Cost Loss Settlement endorsement; National Association of Insurance Commissioners (NAIC) consumer guidance on renters insurance and home inventories; Insurance Information Institute (Triple-I) consumer guidance. Insurers may use their own forms and limits, and rules vary by state. This is general information, not insurance advice.
The Parts of a Renters Policy
A standard renters policy, often written on the ISO HO-4 form, includes four main coverages:
| Coverage | What it pays for |
|---|---|
| Coverage C: Personal property | Your belongings, for listed perils such as fire, theft, windstorm and certain water damage |
| Coverage D: Loss of use | Additional living expenses if a covered loss makes your home unlivable |
| Coverage E: Personal liability | Claims and legal defense if you are responsible for injuring someone or damaging their property |
| Coverage F: Medical payments to others | Small medical bills for guests injured at your home, regardless of fault |
Each has its own limit, and each deserves a separate decision.
Step 1: Estimate Your Personal Property
Your personal property limit should reflect what it would cost to replace your belongings. Many people underestimate this because they think about what they paid years ago or about a few big items, and forget the hundreds of smaller things they own.
The most reliable way to estimate is to make a home inventory. The NAIC and Triple-I both recommend listing belongings room by room, with photos or video and receipts where possible. Do not forget closets, kitchen cabinets, bathroom supplies, storage units and items you keep in your car.
As you add things up, consider what it would actually cost to buy each item new today. Clothing, cookware, small electronics and furniture add up faster than most people expect. Our guide to making a home inventory includes a room-by-room checklist.
Once you have a total, round up to a convenient limit. If your inventory comes to just under a common limit, choosing the next step up gives a little room for items you missed.
Step 2: Choose Replacement Cost or Actual Cash Value
The HO-4 form settles personal property losses at actual cash value unless you add a replacement cost endorsement. The difference can be significant:
- Actual cash value pays what the item was worth at the time of loss, after depreciation. A five-year-old sofa may be worth a fraction of what a new one costs.
- Replacement cost pays to replace the item with a new one of similar kind and quality, often after you actually replace it.
Replacement cost coverage usually costs somewhat more, but for many renters it is the difference between being able to refurnish an apartment and not. Our comparison of replacement cost vs. actual cash value explains depreciation in more detail.
Step 3: Check the Special Limits
Renters policies place special limits on certain categories of property. In the 2011 edition of the ISO HO-4 form, examples include:
| Category | Special limit (ISO HO-4, 2011 edition) |
|---|---|
| Money, bank notes, coins and similar | $200 |
| Securities, accounts, deeds and similar papers | $1,500 |
| Watercraft, including trailers and equipment | $1,500 |
| Trailers not used with watercraft | $1,500 |
| Theft of jewelry, watches, furs and precious stones | $1,500 |
| Theft of firearms and related equipment | $2,500 |
| Theft of silverware, goldware and similar | $2,500 |
| Property used primarily for business, on premises | $2,500 |
| Property used primarily for business, off premises | $1,500 |
These special limits are the most the policy will pay for that whole category, not per item. If you own an engagement ring, a valuable watch, collectibles or professional equipment, the standard policy may fall well short.
The fix is usually a scheduled personal property endorsement or floater, which insures listed items for agreed values and often covers more types of loss. Our guide to scheduled personal property coverage explains how it works.
Step 4: Choose a Liability Limit
Personal liability is often the most valuable part of a renters policy. It pays for injuries or property damage you are legally responsible for, along with legal defense costs, up to the limit. Examples include a guest slipping in your kitchen, your dog biting someone at the park or water from your overflowing bathtub damaging the unit below.
Insurers commonly offer liability limits such as $100,000, $300,000 and $500,000. To choose:
- Check your lease. Many landlords require a minimum liability limit and may ask to be listed as an interested party.
- Consider your assets. If you have savings, investments or significant income, a lawsuit could put them at risk. A higher limit adds protection.
- Consider your risks. Dogs, pools at the complex you use regularly, frequent guests and roommates can all increase exposure.
- Look at the price difference. Raising liability limits often costs relatively little compared with the added protection.
If you need more than about $500,000, a personal umbrella policy can add another layer. Many umbrella insurers require specific underlying limits on your renters and auto policies. Our guide to umbrella insurance basics explains how they fit together.
Step 5: Understand Loss of Use
Loss of use pays additional living expenses if a covered loss makes your home unlivable. That can include hotel bills, higher rent for temporary housing, extra meal costs and laundry. In the ISO HO-4 form, the Coverage D limit is 30% of the Coverage C limit. If your personal property limit is $30,000, loss of use would be $9,000.
Consider how long it might take to find and move into a new place, and what short-term housing costs in your area. If the default seems low, ask your insurer whether you can increase it. Loss of use also has time limits in many policies, so ask how long payments can continue.
Step 6: Medical Payments to Others
Medical payments coverage pays small medical bills for guests injured at your home, regardless of fault, and can help avoid a lawsuit. Limits are usually modest, such as $1,000 to $5,000. Choose a higher amount if you often have guests or children visiting.
Step 7: Pick a Deductible
The deductible is what you pay toward a personal property claim before insurance pays. Higher deductibles lower your premium but increase your out-of-pocket cost. Choose an amount you could comfortably pay from savings. If you would only file for a large loss, a higher deductible can make sense. If even a modest theft would strain your budget, a lower deductible may be better.
Note that the property deductible generally does not apply to liability claims.
Why Your Landlord's Policy Does Not Protect You
Many first-time renters assume the landlord’s insurance covers them. In general, a landlord’s policy insures the building and the landlord’s own liability. It does not pay to replace a tenant’s furniture, clothing or electronics, and it does not defend a tenant who is sued for causing an injury or damaging someone else’s property. If a fire starts in your unit because of something you did, the landlord’s insurer may even seek to recover its costs from you. Your own liability coverage is what responds in that situation.
Students and Young Adults
Families often ask whether a college student needs a separate renters policy. In the ISO homeowners and renters forms, the definition of an insured includes a full-time student who was a resident of your household before moving out to attend school, if the student is under age 24 and your relative, or under 21 and in the care of a resident relative. Belongings a student keeps away at school may be covered under a parent’s policy, but property usually away from the residence premises is typically limited to 10% of the Coverage C limit in the ISO forms. If the student’s belongings are worth more, or the student rents an off-campus apartment and needs their own liability limit, a separate renters policy may be the better choice. Ask the insurer how it applies these rules.
Coverage That Renters Often Miss
- Flood: Standard renters policies exclude flood. Contents coverage is available through the National Flood Insurance Program and private insurers.
- Earthquake: Excluded in standard policies and available by endorsement or a separate policy in many areas.
- Water backup: Damage from sewer or drain backup is excluded unless you add an endorsement.
- Roommates: A renters policy covers you and resident relatives, not unrelated roommates. Each roommate generally needs their own policy.
- Identity theft: Some insurers offer identity theft expense coverage as an add-on.
A Worked Example of Choosing Limits
The figures below are hypothetical and show the process only.
A renter completes a home inventory and finds it would cost about $27,000 to replace everything. They round up to a $30,000 personal property limit and add replacement cost coverage. Their engagement ring is worth more than the $1,500 theft limit for jewelry, so they schedule it separately. Their lease requires $100,000 in liability, but because they have some savings and a dog, they choose $300,000. The policy’s loss of use is set at 30% of personal property, or $9,000. They choose a deductible they could cover from their emergency fund.
Review Your Coverage Every Year
Renters often buy a policy when they sign their first lease and never look at it again. Review your limits each year or after major life changes: a move, a new job with higher income, marriage, a new pet, a big purchase or new valuables. Update your inventory at the same time.
Questions to Ask Before You Buy
- Is personal property covered at replacement cost or actual cash value?
- What are the special limits for jewelry, electronics and other categories?
- What liability limits are available, and what does each cost?
- What is the loss of use limit, and can it be increased?
- Are flood, earthquake and water backup coverage available?
- Does the insurer offer discounts for bundling with auto, security systems or paying in full?
Frequently Asked Questions
How much renters insurance do I need for my belongings?
Enough to replace everything you own at today’s prices. A room-by-room home inventory is the most reliable way to estimate the amount.
How much liability coverage should renters have?
At least what your lease requires. Many renters choose $100,000 to $300,000 or more, depending on their savings, income and risks such as pets.
Is replacement cost coverage worth it on renters insurance?
For many renters, yes. Actual cash value subtracts depreciation, which can leave a large gap when replacing older belongings.
Does renters insurance cover my roommate's belongings?
Generally no. A renters policy covers you and resident relatives. Unrelated roommates usually need their own policies.
How much loss of use coverage does renters insurance include?
In the standard ISO HO-4 form, loss of use is 30% of your personal property limit. Some insurers offer different amounts.
The Bottom Line
The right amount of renters insurance starts with a home inventory for your personal property limit, a liability limit that protects your assets and meets your lease, and replacement cost coverage where available. Check special limits for valuables, consider a scheduled endorsement or umbrella if needed, and review your coverage each year.
