Ask yourself whether you could afford to replace all your possessions if they were lost, damaged or destroyed. If the answer is no, renters insurance is a smart buy.

The average annual renters insurance premium in the U.S. is only $188, or a little more than $15 a month, according to the Insurance Information Institute. Renter’s insurance is a good call considering the alternative would be paying out of pocket to replace all your possessions: your jewelry, flat-screen TV, computer, furniture, clothing and so on. On average, most people need at least $20,000 to replace an apartment full of property. Seems high, but your things are worth more than you think. Yet only 40% of renters said they carry insurance, according to a 2015 Insurance Information Institute study.


What Does Renter’s Insurance Cover?

1. Your property – Renter’s insurance covers the cost of replacing lost or damaged items. A policy typically covers “perils” – which is insurance speak for bad luck – including fire, lightning, windstorm, hail, smoke, vandalism, theft, freezing, damage from aircraft or vehicles, and riots, to name a few. If your neighbor goes to sleep with a cigarette and a fire destroys your stuff, you’re covered.

2. Loss of use – If that fire damaged your rental, it may no longer be safe or inhabitable. It will need to be repairs, but where will you stay while it’s under construction? Most renters insurance policies will cover hotel and some living expenses while you wait. Or if the damage is too extensive, renters insurance can help with the cost of moving to a new rental.

3. Personal liability – Your policy is designed to protect you. If you host a party and someone is hurt, your liability coverage will kick in for both medical and legal fees. You’ll also be protected if you accidentally damage your neighbor’s property.


What Doesn’t Renter’s Insurance Cover?

There are a few things that are not usually automatically covered: earthquakes, floods, and other “acts of God.” If you live in an area where these are possible risks, you’ll need to add a ‘rider’ or ‘endorsement’ to include coverage. Same goes for high-value items like fine jewelry, musical instruments, or art and antiques; you may need to purchase additional coverage. Renter’s insurance policies also do not cover losses caused by the tenant’s own negligence or intentional acts.

The bottom line: renter’s insurance keeps accidents from becoming financial disasters. Things happen, but only you can protect yourself.