Living With a Roommate? Here’s How Renters Insurance Works

Renting a home and living with roommates can offer several advantages and opportunities. You may choose to rent and share your living space to alleviate the financial burden by splitting the cost of rent and utilities.

Likewise, renters insurance has numerous benefits, from protecting you against theft and property damage to covering liability and offering additional living expenses in times of crisis. But did you know renters insurance might be more than just a good idea? In many cases, it may be a requirement.

What is Renters Insurance?

Renters insurance is a policy designed for individuals who rent their homes or apartments, including those with roommates. It offers financial protection in the event of a covered incident, like a fire, flood or burglary.

Actual Cash Value (ACV) policies cover the cost of damaged or stolen belongings after accounting for depreciation. In the event of a claim, the insurance company considers the current market value of the items, which may have depreciated over time. 

As a result, the payout may be lower than the item’s original purchase price. ACV policies generally have lower premiums.

Replacement Cost Value (RCV) policies cover the cost of replacing damaged or stolen belongings with new items of similar kind and quality without factoring in depreciation. In the event of a claim, the insurance company reimburses the amount needed to replace the items at their current market value. RCV policies usually have higher premiums than ACV policies but provide more comprehensive coverage.

4 Reasons to Have Renters Insurance

1. Protect Personal Belongings: Renters insurance covers your belongings, including furniture, electronics, clothing, and other valuable items, in case of theft, fire, vandalism, or other covered events.
2. Liability Protection: It protects roommates from potential legal and financial consequences if someone is injured on the property and holds the roommates responsible.
3. Additional Living Expenses: Renters insurance may cover other living expenses if the rented property becomes temporarily uninhabitable due to a covered event.
4. Requirements: Several entities or situations may require you to have renters insurance, such as:

• Landlords: Many landlords and property management companies require tenants to have renters insurance as a condition of their lease agreement. This requirement is intended to protect both tenants’ and landlords’ interests in the event of property damage, liability claims, or other covered perils.
• Property Management Companies: Besides individual landlords, property management companies that oversee rental properties often require renters insurance as part of their standard lease agreement. This requirement helps mitigate potential risks and ensures tenants have coverage in place.
• Homeowners Associations (HOAs): If you live in a community governed by an HOA, they may mandate that tenants have renters insurance as part of their rules and regulations. This requirement helps protect the overall community and its residents from potential liability claims.
• Colleges and Universities: Students living in on-campus or off-campus housing provided by colleges and universities may be required to have renters insurance. This requirement is typically in place to protect the student’s personal belongings and the university’s property and have liability coverage.

Average Costs of Renters Insurance

The cost of renters insurance can vary depending on location, coverage limits, deductible amount, and individual circumstances. On average, renters insurance costs around $15 to $30 per month, but this can differ based on the aforementioned factors and the insurance provider.

Here’s a list of popular companies that provide renters insurance:

1. Lemonade offers affordable renters insurance with a user-friendly digital platform. Their policies are backed by trusted insurance carriers, providing comprehensive coverage. Lemonade operates on a peer-to-peer model and donates a portion of unclaimed premiums to charitable causes.
2. State Farm is a well-established insurance company offering competitive rates for renters insurance. They provide various coverage options to suit individual needs and offer discounts for policy bundling.
3. Geico is known for providing affordable insurance options, including renters insurance. They offer competitive rates and discounts, especially for those who also have auto insurance through Geico.
4. Progressive offers affordable renters insurance policies with flexible coverage options. They provide customizable coverage limits and offer discounts for bundling multiple policies.
5. Allstate offers affordable renters insurance policies with various coverage options. They provide discounts for safety features, bundling policies, and a claims-free history.
6. Nationwide offers renters insurance with affordable rates and comprehensive coverage options. They provide additional coverage options such as identity theft protection and personal umbrella policies.
7. Farmers Insurance offers competitive rates for renters insurance with customizable coverage options. They provide flexible deductibles and discounts for home security features and policy bundling.
8. USAA provides affordable renters insurance primarily for military members, veterans, and their families. They offer comprehensive coverage options and exceptional customer service.
9. Liberty Mutual offers renters insurance with affordable rates and customizable coverage options. They provide discounts for policy bundling, safety features, and a claims-free history.
10. Travelers Insurance offers renters insurance with competitive rates and comprehensive coverage options. They provide additional coverage options such as valuable items coverage and identity fraud expense coverage.

How Renters Insurance Works for Roommates

Each roommate typically needs their own renters insurance policy to cover their personal belongings. Each policy will cover the individual’s possessions, regardless of who owns them.

Some policies may cover shared spaces, such as the living room or kitchen, but review the policy terms and conditions for specific coverage details.

Sharing/Calculating Costs Among Roommates

Each roommate typically needs a separate renters insurance policy, as it covers individual possessions. However, roommates can discuss sharing the costs by determining how to divide the total cost of renters insurance. This can be done equally among roommates or based on factors such as the value of possessions or income levels.

All roommates should agree on the splitting method and be documented clearly to avoid misunderstandings or conflicts in the future. Consider discussing the options with your roommates and selecting a method that works best for your situation, considering the value of possessions, income levels, and individual preferences.