If you’re anything like me, you dream of owning a home one day. But in the meantime, I rent an apartment to keep expenses low. Plus, I love the convenience and flexibility of moving to a new place each time my lease ends.
Renting can be a great solution for many Millennials who are saving up for their first home, or are trying to decide where they want to put down roots. But even though renters don’t own their homes, they still face certain liabilities.
To protect yourself legally and financially, having personal liability renters insurance is very important. I’m going to go over what personal liability renters insurance covers, who needs it, how much it costs, and where you can get it.
What is personal liability renters insurance?
Personal liability renters insurance is the portion of your policy that protects you legally and financially if you are:
- Accused of damaging someone else’s property.
- Accused of unintentionally causing an injury to someone in your home.
Every standard renters insurance policy includes this type of coverage.
When you purchase a policy, you will be able to choose the policy limit and the deductible. Stay tuned, because I’ll talk more about that later.
What personal liability renters insurance covers
The personal liability portion of your renters insurance covers lawsuits around two things:
- Bodily injury claims. When a guest accidentally gets injured and you are responsible.
- Property damage claims. You unintentionally cause damage to someone else’s property or personal belongings.
Specifically, personal liability renters insurance covers your legal and financial responsibility in the event of a bodily injury or property damage lawsuit.
That means if you get sued by another person, your insurance will help pay for your legal fees and court costs. It will also cover a settlement with the other party if you are found responsible for their losses.
Here are some of the situations that a personal liability renters insurance policy will cover:
- Dog bites. If you have a dog and it unexpectedly bites your mailman one morning, your bodily injury liability coverage would pay for the mailman’s medical bills.
- Slip-and-fall injuries. If a guest slipped on a wet floor in your apartment and twisted their ankle, your bodily injury coverage would pay for their treatment. It would also cover your legal bills if they sued you for negligence.
- Falling objects. If your air conditioning unit fell out the window and onto the car parked below, you could use your property damage liability coverage to help the driver cover the repair costs.
- Fires. If you started a small fire in your kitchen and it partially damaged the unit next door, your property damage insurance would pay for any losses that your neighbor faced.
What isn’t covered by personal liability renters insurance?
Personal liability renters insurance doesn’t cover everything. To avoid surprises, you should know what this policy will not cover.
When you buy renters insurance, your policy will come with liability insurance, plus personal property coverage, medical payments coverage, and loss of use coverage (also called additional living expenses insurance).
So, personal liability renters insurance will not provide:
- Any protection for your personal items.
- Injuries you sustain at home.
- Temporary living expenses if your unit gets damaged and you have to relocate.
The other policies I mentioned above will cover those things.
Additionally, personal liability renters insurance does not offer any protection for things like:
- Injuries or damage that occur in common areas of your apartment building.
- Liability claims related to your home business.
- Car accidents or damage caused by your vehicle.
- Damage to the physical structure of your apartment building.
- Intentional acts that cause property damage or injuries.
How much coverage should I have?
If you rent your home or apartment, having renters insurance is key. But it’s also important to make sure you have enough coverage to protect you in the event of a lawsuit.
Ultimately, every renter has different coverage needs. The amount of coverage you need might not be the same amount of coverage your neighbor needs.
To determine how much personal liability renters insurance you should get, here are two things I recommend considering:
- Your lifestyle. If you frequently have guests over at your home, throw parties, have a dog, or have young children, it’s probably a good idea to get a policy with high coverage limits. These factors can increase the chance that someone could get injured at your home, or that your dog or child could damage someone’s property unexpectedly.
- Your personal assets. If you have a high net worth of personal assets, including savings, retirement accounts, and investments, I recommend purchasing more coverage than you think you may need. If you get involved in a lawsuit, these assets will be at risk if you don’t have enough coverage to pay for the claim in full.
Most insurance providers offer a minimum of $100,000 in personal liability coverage for renters insurance. However, you usually have the option to raise your coverage limits to $500,000 and sometimes even higher, depending on the insurance company.
For example, Lemonade offers renters insurance with personal liability coverage limits of up to $1 million. So, if you need a high amount of coverage, Lemonade is a good provider to consider.
How personal liability renters insurance works
Personal liability renters insurance works like most other types of property insurance. There are two main components that I want to explain first:
- Premium. Your premium is the monthly (or annual) payment you make to keep your policy in force.
- Policy limit. Your policy limit is the highest amount of money your insurance company will pay out towards a covered loss.
One important thing to know is that personal liability insurance does not have a deductible, which is the out-of-pocket cost you are required to pay toward a covered loss before insurance money will kick in.
The only portion of your renters insurance policy that has a deductible is personal property insurance.
With personal liability insurance, the person who has suffered the loss is usually the one who is responsible for filing the claim.
However, you should still notify your insurance company of the incident, as you may need to provide your side of the story.
Say you throw a birthday party and a guest slips on a loose cord. They end up fracturing their ankle and need treatment.
In this case, the injured guest can file a claim with your insurance company. When the claim is settled, they will receive the compensation directly.
Imagine that you’re throwing a ball to your dog outside, and the ball accidentally hits a neighbor’s window and breaks it.
The neighbor would be allowed to file a property damage claim with your insurance company and would be given the money to repair it once the claim was settled.
Who needs personal liability renters insurance?
Let me start by saying, personal liability renters insurance is not legally required.
Some landlords might ask you to carry renters insurance before signing a lease, but you’re not breaking the law if you rent without renters insurance.
My recommendation? Every renter should purchase renters insurance
Not only does renters insurance protect your legal and financial responsibility in the event of a lawsuit, but the other portions of your renters insurance also provide valuable protection for your personal belongings, like electronics, furniture, and clothing.
Will my roommate’s policy cover me?
Even if your roommate has renters insurance with personal liability coverage, their policy will not automatically cover you. The only exception is if you are a named insured on their policy, in which case you would be jointly covered.
However, I strongly advise against relying on a roommate’s policy to provide adequate protection against liability claims. If your roommate got involved in a liability claim and a few months later you had to deal with a similar situation, your insurance company may not cover it.
Will my landlord’s policy cover me?
This is a common misconception, and it’s false.
The building owner does have their own insurance policy, but it doesn’t cover your liabilities as a renter, nor will it cover your personal belongings or loss of use.
Landlord insurance only covers damage and injuries that occur to common areas of the building, as well as damage to the structure of the building itself.
So, if someone slipped and fell down the main staircase, it’s on your landlord to make things right.
The bottom line is, don’t rely on your landlord’s insurance policy to protect yourself from lawsuits. Unless the landlord did something negligent that led to an injury or property damage within your unit, you will be directly responsible for the claim.
Cost of personal liability renters insurance
Insurance policies can be notoriously expensive. So for all the renters who are concerned about the cost, I have good news for you: renters insurance is probably the cheapest type of insurance you can buy.
According to the Insurance Information Institute (III), the average renters insurance premium is just $179 per year, which includes your personal liability coverage. If you pay on a monthly basis, that breaks down to less than $15 per month.
Everyone’s premium is different
The premium you pay is dependent on a number of personal factors. It’s possible that you could pay more or less than average based on things like:
- Where you live.
- Your age.
- Your credit score.
- Your insurance claim history.
- Your policy limits.
- Your deductible.
You can take advantage of discounts
Not only is renters insurance cheap, but some insurance companies offer discounts that can help you save even more. The specific discounts vary between insurance providers, but here are some of the most common ones you might be able to find:
- Policy bundling discount. You can usually get a discount if you buy your renters and auto insurance policy from the same company.
- Safety equipment discount. If your apartment is equipped with safety equipment, like fire alarms or a burglar system, some insurance companies will lower your rate.
- Claim-free discount. Renters who have no insurance claims on their record within the last few years often qualify for a cheaper premium.
Personal liability renters insurance is invaluable for anyone who rents their home or apartment. It offers important protection and peace of mind in the event of an unexpected incident.
Fortunately, renters insurance is pretty cheap and a standard policy comes with all the coverage you will probably need. Just make sure to assess your personal situation before setting your personal liability insurance limits.
Remember—personal liability renters insurance is only worth it if you have enough coverage to protect you in the event of an injury or property damage claim. Otherwise, you’ll be paying for it out-of-pocket.