Is renters insurance worth it?

Imagine a leak in your bedroom ruins your clothes, fries your laptop and forces you to spend a few nights in a hotel while repairs are made.

If you own your home, you probably have homeowners insurance. But if you're a renter, you'll need a good renters insurance policy to be covered.

Here's why renters insurance is almost always worth it — and how you can make it even more affordable.

Renters insurance covers tenants' personal property and personal liability. If you experience a covered loss, you can file a claim and should be reimbursed up to your coverage limit once the expense exceeds your deductible.

For example, if that leaky pipe damages $2,500 worth of furniture in your apartment and you have a $500 deductible, you should be reimbursed $2,000.

Renters insurance covers three areas:

• Personal property: Covers the replacement cost or reimburses you for the value of things such as clothing, furniture, electronics, jewelry and other personal belongings
• Personal liability: Pays for legal fees or medical expenses when someone is hurt in an accident or their property is damaged and you're found at fault
• Loss of use: Pays for additional expenses (hotel, restaurants, etc.) when you can't live in the apartment because of a covered event, such as fire, vandalism or water damage from leaky pipes

You can also add additional coverage for items that aren't covered, like high-value jewelry, camera equipment and artwork.

Of course, your policy won't cover everything. Renters insurance typically won't help you out with earthquakes, floods, damages to the home itself, pest infestation or liability for a home business.

Pay attention to your coverage limits, since adding more coverage will increase your premiums.

There are many reasons renters insurance is a smart bet

1. Standard coverage is affordable

Most renters policies are under $25 a month, and Lemonade offers coverage starting at $5 just month, about the price of a cup of coffee. Many companies offer discounts if you bundle policies: USAA, which is available to military families, will knock 10% off if you take out both renters and auto insurance.

2. Replacing items out of pocket costs more

Costly damage to or theft of personal belongings can force you into debt to replace or repair. A rental policy helps you avoid footing the entire bill for a new laptop or television.

3. It's probably required by your landlord

Many landlords require tenants to sign up for renters insurance. Their homeowners policy covers the physical structure of the building, not its contents or your personal liability.

4. It can cover medical or legal bills if someone gets hurt

If someone else gets hurt while in your apartment (or on your property) and incurs medical bills, your renters insurance coverage typically helps you pay the costs. This can save you from having to reach into your own savings to pay for the entirety of someone else's medical care (even if it was just an accident).

5. It can pay for a place to stay if you have to vacate your apartment

If your apartment is being repaired after a fire or other covered event, your renters policy can pay for hotel accommodations, food and more until you're able to live in your unit again. This is called loss of use coverage and it makes temporarily relocating far more affordable.

1. Look for bundling discounts: Buying renters insurance from the same insurer you have another policy can usually score you a nice-sized discount — whether it's auto insurance, boat insurance or RV insurance.

2. Only get the coverage you need: Taking on too much coverage or getting coverage for add-ons that don't apply to your circumstances can inflate your monthly premiums. On the other hand, you don't want to pass on coverage for high-value possessions just to save a few bucks.

3. Improve your credit score: In most states, insurance companies can factor your credit history in when assessing your premiums. Bad credit can result in higher rates. 

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every renters insurance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of renters insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best renters insurance providers.

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