Renters insurance protects your belongings and your liability. A rent guarantor protects the landlord if you don't pay rent. They are completely different products, and an NYC landlord may ask you for both.
When I rented my first apartment here, I thought my renters policy would make me look like a safer tenant. The broker was polite about it, but it didn't help at all. Landlords see these two products very differently, so it's worth knowing which one does what before you apply.
What renters insurance covers
Renters insurance is for you. A standard policy covers three things.
Your stuff. If there's a fire, a break-in or a burst pipe, the policy pays to replace your laptop, your bed and your clothes. Your landlord's insurance covers the building. It doesn't cover anything you own.
Your liability. Say your bathtub overflows and ruins the ceiling of the apartment below. Or a friend trips over your rug and breaks a wrist. The policy pays those claims so you don't have to.
A place to stay. If a covered event makes your apartment unlivable, the policy helps pay for a hotel and meals while it's repaired.
Does renters insurance cover unpaid rent?
No. The "place to stay" coverage only pays the extra cost of living somewhere else after a disaster. Your regular rent is not covered.
So if you lose your job and can't pay rent for two months, your renters policy pays nothing. That gap is what a guarantor is for, and it's why landlords care much more about the guarantor.
Related: PandaGuarantee Adds PandaRenters Insurance in New York State
What a rent guarantor does
A rent guarantor promises your landlord that the rent will get paid, even if you can't pay it. There are two kinds.
A personal guarantor is usually a parent or relative. In NYC, most landlords want this person to earn 80 times the monthly rent in annual income. For a $3,000 apartment, that's $240,000 a year. Many landlords also want them to live in the U.S. and send tax returns and bank statements. Plenty of people don't have someone like that. If that's you, you have other options.
A third-party guarantor is a company that takes that role. You pay a one-time fee, and the company guarantees your lease. PandaGuarantee, for example, is a surety bond, which is a type of insurance product. The landlord gets the protection, and you get the apartment.
Honestly, this next part surprises people. A guarantor protects your landlord, not you. If you stop paying and the guarantor covers your rent, you still owe that money. The guarantor gets you approved, but it won't erase your debt.
How much does each cost, and who pays?
You pay for both. Your landlord pays nothing.
Renters insurance costs New York renters about $14 a month for $20,000 of coverage. In Brooklyn it's closer to $20. For most people that's under $250 a year.
A personal guarantor doesn't charge you a fee. The cost is time and risk: collecting documents, waiting for approval, and sometimes losing the apartment to a faster applicant.
A third-party guarantor charges a one-time fee, usually a percentage of one month's rent. With PandaGuarantee, tenants pay about 20% less than with competing guarantor services. It's also free for your landlord, which makes it easier for them to say yes.
One fair point: if you have a parent who earns 80x the rent and is happy to sign, that's the cheapest route. The company option is for everyone else.
Is renters insurance required in NYC?
Not by law. No New York State or New York City law requires you to have it. But your lease can require it, and many do, especially in bigger buildings.
Can my landlord require renters insurance?
Yes, if the requirement is written in your lease. The rules are a little different in rent-stabilized apartments. According to Manhattan attorney Adam Leitman Bailey, a landlord can put it in a new lease but can't add it when you renew.
If your lease requires it, here's what landlords usually ask for:
- Proof of coverage before you get your keys
- A minimum amount of liability coverage, written in the lease
- Your landlord listed as an "interested party," so they're notified if your policy ends
This takes about ten minutes online. Buy the policy before move-in day, not the night before.
Can my landlord require a guarantor?
Yes, if you don't meet their income or credit requirements. Most NYC landlords use the 40x rule: your yearly income should be 40 times the monthly rent. For a $3,000 apartment, that's $120,000.
There's one important exception. If you have a housing voucher that sets your share of the rent based on your income, a landlord can't require you to find a guarantor or co-signer under the NYC Human Rights Law.
Renters insurance vs. rent guarantor, side by side
Renters insurance
Protects: you and your belongings
Pays: you, or someone you accidentally hurt
Covers unpaid rent: no
You pay: monthly or yearly
Required by NYC law: no
Landlord can require it: yes, in the lease
Rent guarantor
Protects: your landlord
Pays: your landlord
Covers unpaid rent: yes, coverage can include unpaid rent
You pay: a one-time fee (third-party) or nothing (personal)
Required by NYC law: no
Landlord can require it: yes, unless the voucher exception applies
Which one do you need?
Get renters insurance either way. It's cheap, and it protects the things you'd have to replace yourself after a fire or a flood.
You only need a guarantor if you miss the landlord's income or credit bar. That usually happens if you're a student, new to the U.S., self-employed or starting a new job. If that sounds like you, get it sorted before you start touring. NYC apartments can be gone in two days.
Not sure if you'll qualify on your own? Get a PandaGuarantee pre-approval before your first showing, so you're ready to sign when you find the right place.