It's standard practice for people who own property to buy homeowners insurance that protects them from financial losses. In fact, most of the time, you'll need homeowners insurance to qualify for a mortgage.
But what if you don't own a home and instead rent your living space? Although you don't need homeowners insurance in that case (and don't even qualify for it), you should get renters insurance.
What is renters insurance?
As the name implies, renters insurance is an insurance policy designed for renters. Also known as tenants insurance, renters insurance will protect you from losses related to your personal property in the event that there's damage to your home. When you rent a home, your landlord is responsible for insurance that covers the actual dwelling or structure. For example, if a pipe bursts and causes damage to your building, your landlord's insurance policy will cover that. But if that same issue somehow causes water to flow into your apartment, and your furniture gets damaged in the process, you're out of luck -- unless you happen to have a renters insurance policy.
What does renters insurance cover?
Renters insurance covers your personal belongings, but it does not cover damage related to the home you live in. If the items you own are destroyed or damaged by a fire, water leak, or electrical issue (such as a power surge, which can fry electronics), your renters insurance policy can pay to replace them. Renters insurance also protects you in the event that your belongings are stolen from your rental unit.
But it can and does go beyond simply covering personal possessions. Most policies will also include additional living expenses coverage, which will pay for extra expenses incurred for insured events that temporarily remove you from the property. Going back to that pipe bursting, it will take your landlord time to fix the pipe, potentially repair drywall, perhaps replace flooring, and more. Because this event is covered and insured by your policy, you can utilize the additional living expenses coverage to pay for a hotel room or other accommodations as well as food or other related items beyond your normal expenses while repairs are being completed. Keep in mind that there are both time and dollar limits depending on your policy.
You also gain some liability protection with most renters insurance policies. The amount varies, but this can offer you coverage if someone is injured on your property or is filing a lawsuit against you for a property-related claim. By having this coverage, the person can file a claim directly with your insurance policy rather than having to go through an actual lawsuit. It can cover both legal defense fees and medical bills depending on the scenario. This includes paying for damages caused by your acts of negligence. For example, if you leave a candle burning in your apartment that causes a fire, your renters insurance offers protection in the event that your landlord wants to come after you for those damages.