Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 16, 2021

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“Is renters insurance required” and “is a renters policy necessary” are two very different questions, but the answer to both is pretty simple.

Before we get to that, it’s important to understand what renters insurance is in the first place.

If you are currently renting, stop reading this article immediately and call a local independent insurance agent to get a policy. We’ll give you 10 minutes.

That’s about how long it takes to ensure you don’t have to repurchase everything you own in the event it’s all destroyed by an insurable loss, or that you don’t go bankrupt from being sued (and losing) for any injury someone suffers in the apartment or home you rent.

Time’s up. Doesn’t it feel better to be covered? And for about only $200 per year.

[How much is renters insurance?]

Is renters liability insurance required/ mandatory?

You may have to show proof of insurance that will cover your own personal property. It’s becoming far more common for a landlord to require a renters insurance policy in order to move into the property they own/manage. Why?

Landlords (or more commonly corporations who own the rental property) are tired of wasting their time and money defending themselves in court…and winning almost every single time when a tenant sues them for damages of any kind.

So yes, you may have to have this kind of personal property coverage as additional living expenses, but it protects you and is worth it overall.

If you read your lease agreement in any detail, you may have noticed that you likely signed a hold-harmless agreement, which more or less states the landlord is not responsible for any property damage or lost personal items or financial loss you incur as a result of bodily injury or property damage (of other people’s property) you are found liable for as a result of your negligence.

This means if you accidentally break something while cleaning out the fridge, and then sue the landlord because he didn’t warn you about the broken glass, you won’t win. You can still file suit against him, but you’re going to lose.

But if you had renter’s insurance, you could potentially collect some compensation for the cost of replacing those things.

In plain English; the landlord isn’t responsible for ANYTHING that happens to your stuff or anyone else’s stuff (including bodily injury) that results while you are staying in their property.

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What can go wrong?

Good question. Here are two common examples of “losses” an uninsured renter suffers – thousands of times every single day in the United States.

1. Property Damage: Your apartment is hit by a tornado, burns down, has water damage, or is broken into and everything you own is stolen.

Result: If you don’t have a renter’s insurance policy, you go to the mall and spend $20,000 or more to repurchase everything you own.

2. Liability: Someone slips on your wet kitchen floor at a small get-together in your apartment and breaks their ankle, resulting in a $4,500 medical bill and $5,000 in lost wages for missing work for two months while it heals.

Result: Your “friend” sues you to recover the damages. You are found negligent for having a wet floor (perhaps a spilled cocktail) and have to write a $9,500 check, plus court costs if you bothered to “fight it” in court. Note: Add $100,000 to your bill if the slip results in a head injury.

What is our final word?

As more individuals and families are forced to rent as a result of the deteriorating economy, renters insurance is becoming more and more prevalent.

It is one of the most under-purchased insurance policies out there and also happens to be one of the cheapest insurance policies you can get your hands on.

If you’re renting because you can’t afford to buy, you probably don’t have enough cash in the bank to repurchase everything you currently own or pay for a HUGE medical bill you may be “responsible” for as a result of negligence.

Do yourself a favor and spring for the $200 or so it costs to cover $20,000 worth of stuff and virtually unlimited liability exposure.