Owning a home is still the American dream for many, but renting has benefits — you don’t have to pay for building upkeep, risk getting underwater on a mortgage or be stuck in one place for too long.

But you still need to think about financially protecting yourself and your stuff. Renters insurance is the way to do that.

With the U.S. homeownership rate at its lowest point in 51 years, more American households need renters insurance. Yet only 40% of renters have policies, versus 95% of homeowners who have home insurance, the Insurance Information Institute says.

The homeownership rate, which peaked at 69.2% in 2004, hit 62.9% in the second quarter of this year, according to the U.S. Census Bureau, the lowest point since 1965, when the bureau began tracking rates.

Why buy renters insurance

Your landlord’s property insurance won’t help you if disaster strikes. It covers the structure, but not any of your things. Renters insurance covers your belongings from all the possible bad events that are listed in the policy, such as fire, smoke, water damage, windstorms, lightning, theft and vandalism.

Even if you don’t think your stuff is worth that much, renters insurance is a good idea. The cost of replacing just a basic wardrobe and only a few pieces of furniture adds up quickly.

Plus renters insurance covers more than your personal belongings at home. Here are seven other things a policy covers:

1. Hotel costs after a disaster

You don’t have to couch surf while your apartment is undergoing repair after a disaster like a fire. Renters insurance includes “additional living expenses” coverage if your place becomes uninhabitable after a disaster and you need to find somewhere else to live temporarily. The coverage would reimburse you for extra expenses, such as the cost to stay in a hotel or rent another apartment.

2. Medical expenses for injured guests

If a visitor is injured at your apartment, renters insurance would pay the medical bills up to the policy’s limit. A typical policy includes $1,000 to $5,000 worth of medical coverage, according to the Insurance Information Institute.

3. Damage your kid causes others

Renters insurance provides liability insurance to cover injuries or property damage you and your family members cause others. So if your kid breaks a neighbor’s rare antique vase, your policy could pay to replace it.

4. Legal costs if you’re sued

If someone gets injured in your apartment or you accidentally hurt somebody and are sued, the liability coverage on a renters policy would pay your legal costs and court awards, up to the policy’s limit. You choose the amount of liability insurance when you buy a renters policy. Limits usually start around $100,000.

5. Dog bites

Most renters insurance policies provide coverage if your dog bites someone, either at your home or off the property. Check the policy, though. Occasionally insurers exclude or limit coverage for dogs.

6. Stuff you’ve rented or borrowed

A renters insurance policy covers things “in your possession,” the Insurance Information Institute says. That means property you own or that you borrowed or rented.

7. Belongings away from home

Your things are covered away from home, too, for the perils listed on the policy. So you’re covered if a thief steals stuff out of your car or swipes your luggage from a hotel room. This “off-premises” coverage is usually limited to a portion of your total coverage for personal belongings, such as 10%.

Shopping for coverage

1. Decide how much renters insurance coverage you need before you buy.
2. Purchase enough insurance to replace all of your belongings, and choose a liability limit high enough to protect any savings and property you could lose if you were sued.
3. Then get quotes from several insurers, including the company that provides your car insurance.
4. You likely will score a discount if you buy renters and car insurance from the same company.

Barbara Marquand is a staff writer for NerdWallet, a personal finance website.