A renters insurance policy is a group of coverage’s designed to help protect you and your belongings. A typical renters insurance policy includes liability coverage, protection for your belongings and coverage for additional living expenses, should the home you’re renting become temporarily uninhabitable. While you may not always be able to prevent certain situations, such as a break-in or visitor’s injury, renters insurance, sometimes referred to as “tenant insurance,” may help minimise the impact, whether you’re renting a single-family home or an apartment.

These are some of the common misconceptions, according to the National Association of Insurance Commissioners (NAIC). While including renters insurance in leases is an effective way to cover everybody in the event of an apartment loss, the concept can at times be hard for residents to swallow. For some prospects, the mere mention of mandatory renters insurance could be enough to lose a potential lease.

Renters’ insurance, often called tenants’ insurance, is an insurance policy that provides some of the benefits of homeowners’ insurance, but does not include coverage for the dwelling, or structure, with the exception of small alterations that a tenant makes to the structure. It provides liability insurance and the tenant’s personal property is covered against named perils such as fire, theft, and vandalism. It also pays expenses when the dwelling becomes uninhabitable. Due to renters’ insurance existing mainly to protect against losses to the tenant’s personal property and provide them with liability coverage but not to insure the actual dwelling, it’s significantly less expensive than a homeowners policy. The owner of the building is responsible for insuring the dwelling itself but bears no responsibility for the tenant’s belongings.

Many large and medium-sized rental properties include a requirement in their lease that tenants hold renters’ insurance. If the tenant damages the premises, the landlord and other tenants can recover against the perpetrator’s insurance. It is important to know what type of damage your insurance covers. Essentially, there are three types of coverage available: loss of use, personal property, and personal liability.

Most insurance providers have online calculators that help determine the actual cash value or replacement cost of personal possessions. Most people think only their TVs or electronics are their most valuable possessions, but items like furniture, bedding, jewellery, appliances, clothing and tools can also add up. Completing an online calculation takes only a few minutes and gives the resident a good baseline for coverage. Cash value is based on the cost of the item less depreciation. Replacement value is based on the cost to buy the item new. Most deductibles range from $250 to $1,000 and will help the resident stay within a budget. The higher the deductible, the lower the premium. Liability coverage includes bodily injury, medical payments to others and property damage to others, and is relatively inexpensive. Explain that the apartment’s insurance is for structural damage to the building. Even though the policy might cover damage by tenants, it does not protect the resident from being liable for damages caused (like a kitchen fire or busted water pipe while hooking up the washing machine). Most insurance companies recommend a $100,000 policy, and in most cases, the cost per month is less than $20.

In most cases, the resident can purchase additional coverage up to $3 million that will pay for expenses that exceed normal liability limits, like medical payments. Medical payments, which can become extremely costly, for guests or roommates injured in the resident’s home will be covered. According to a February 2012 NAIC survey, more than half of Americans didn’t have a home inventory of their possessions, which put them at risk of inadequate home insurance coverage. Of those who did, about half didn’t have receipts and many lacked photos of personal property or a backup copy of the inventory outside their residence. Your residents should document their possessions and remember to keep an updated list. In the event of a loss, this information will come in handy when working with an insurance company.

Rent guarantee is a form of insurance where, for a relatively small annual fee, landlords can protect against loss of rent. Normally, ‘Landlord Rent Guarantee Insurance’ is combined with ‘Legal Assistance Insurance’ whereby a landlord’s legal costs of recovering rent and/or evicting a non-paying tenant are covered.

According to Bagrat Bayburtian, Vice President of Product Solutions for CoreLogic, there are approximately 2.2 million landlord-tenant court cases filed every year (this does not include those disputes that were negotiated by the landlord and tenant outside of court).[citation needed] With an estimated 40 million rental units across the United States, that means 5.5% of all rental units in the U.S. go through a landlord-tenant court action every year.

Generally, the insurance payout starts only after one month. It is usually a condition of such policies that landlords ensure their tenants are professionally credit-checked before handing over keys. This product was traditionally offered in the UK and has now expanded to the USA with players such as Lloyd’s of London backing companies for the last 3 years.

All companies underwriting such policies in the United Kingdom must be registered by the Financial Services Authority.

Rent Guarantee insurance is different from a Guaranteed Rent scheme, which is a service that manages a residential property in return for a fixed portion of the rent. The owner is paid his share, even if the property is empty or tenants default on the rent: in that sense, it functions as a form of insurance.