What Is Tenant Insurance?

When you rent property from someone else, you may feel that you do not need insurance. While you don't need a homeowner's insurance policy, it might be wise to get renter's insurance, and your landlord may require it.


One of the primary functions of a tenant policy is to limit your liability for damage. If you inadvertently damage the property that you rent, it could be your responsibility to pay for the damage. For example, if you leave your curling iron plugged in and it starts a fire, you might have to cover the damage. If you purchase a renter's policy, this damage can be covered by your insurance policy.


Besides providing you with liability protection, this kind of insurance can also help protect your possessions. Many people underestimate how much it will cost to replace everything they own. Even if you only have some clothing and a few electronics, replacing them out of your own pocket can cost more than you have. If the house is destroyed, your renter's policy can pay to replace all of the possessions that you had inside.


When you buy a tenant policy, you can also get liability coverage. This type of coverage is important so that you will not be responsible if someone is injured while on your property. For example, if one of your friends comes over, falls down and is injured, you will not have to deal with the medical bills. Your insurance policy will provide benefits and help pay for the damages that were caused by the fall.

Actual Cash Value or Replacement

When purchasing a renter's insurance policy, you have two choices: actual cash value and replacement cost. With an actual cash value policy, your possessions will be paid for based on the current market value of the property minus depreciation. If you have a replacement cost policy, the insurance company will pay to replace the items at the current market value. The actual cash value policy will typically pay less than what you will get from a replacement cost policy.