8 Factors Affecting Your Renters Insurance Cost
Renters insurance is a smart investment to protect your belongings from unexpected disasters. It can also help cover expenses if you need to temporarily move out due to property damage.
National averages vary, but there are a few things you can control to reduce your rates. Learn more about these factors to help you choose the right coverage for your needs and budget:.
1. Your Credit Score
When you’re a renter, getting your personal property insured against theft and damage can protect you from the financial impact of losing or damaging valuable items. Many people choose to get a policy from the same provider they insure their cars or homes through to save money on premiums and coverage. But, how much you pay for your renters insurance depends on several factors including whether the policy provides replacement cost or actual cash value coverage and whether it includes a deductible.
In addition to evaluating your risk, insurance companies use credit scores when they’re setting your rates. These are different than your regular FICO or VantageScore credit score, which are based on information in your credit report. When you apply for renters insurance, your landlord may run a credit check to evaluate your risk as well. Generally, these checks are considered “soft inquiries” and don’t lower your score. But, you’ll still want to keep your credit score high to qualify for the best premiums. You can do this by paying your bills on time and taking other preventative measures to reduce your risk.
2. Your Claims History
A history of theft, fire or other property damage claims will drive up your renters insurance rate. Having a few small claims can also increase your premium, as insurers believe you’re more likely to file future ones. On the other hand, a clean claim record can save you money since insurers expect you to be less risky.
Many states use a credit-based insurance score to help set homeowners, renters and condo insurance rates. These scores are similar to FICO credit scores, but the companies that check them typically don’t report them to the consumer’s credit reports. They can also be used to determine your policy’s deductible, which is the amount you pay out of pocket on each claim before the insurer pays up.
Your policy’s deductible is one of the biggest factors in your monthly premium, and you can lower it by choosing a higher coverage limit or increasing your deductible. Some other ways to reduce your insurance costs are by installing a security system, bundling your policy and taking advantage of safety features like deadbolt locks, smoke detectors and sprinkler systems.
3. Your Home’s Location
The location of your home or apartment can affect how much your renters insurance costs. The insurance company may charge more for policies in areas that are prone to natural disasters or have higher rates of theft and other crimes.
The type of construction and safety features in your building will also influence your premium. For example, the more secure a building is, the lower your rate will be. Insurers typically offer discounts for buildings with security protection devices like smoke detectors and deadbolt locks. They may even offer larger discounts for installing fire suppression systems or a full-time door person.
Another factor affecting your insurance rate is the amount of personal property coverage you choose. Choosing higher coverage limits will typically cost more, but it’s important to choose the right level of coverage to protect your belongings. A standard renters policy generally pays enough to replace stolen or destroyed items, up to a specific limit. However, it doesn’t cover the damage to your actual rental dwelling or its structural elements.
4. Your Coverage Amounts
The amount of personal property coverage in a policy is one of the biggest factors in your renters insurance cost. Ideally, you want to have enough coverage to replace all of your belongings in the event of theft or fire. A common way to determine the value of your possessions is to take a home inventory, and make sure to include serial numbers, appraisal documents and receipts.
Another important factor is the deductible you choose for your policy. Higher deductibles result in lower premiums, but also mean that you’ll be responsible for more out-of-pocket costs if you file a claim.
Typically, the standard limits for additional living expenses (ALE) and guest medical payments included in a renters policy are enough for most people. However, you can pay extra to increase these coverage amounts if necessary. Raising your liability limit, for example, might only cost you $1 more per month on average, according to NerdWallet.
5. Your Deductible
Your deductible is an important factor in how much your renters policy will cost. The higher your deductible, the lower your premium will be. However, make sure you choose a deductible that you can afford to pay in the event of a claim.
Another way to reduce your rate is to increase the amount of personal property coverage on your policy. This covers items like furniture and electronics against loss or damage. It’s important to take an inventory of your belongings and note their current value.
You can also reduce your rate by choosing actual cash value rather than replacement cost coverage on your policy. Generally, the replacement cost option will provide you with more money in the event of a claim, but it may cost more than the actual cash value option. Finally, you can save by bundling your renters insurance with other policies offered by your insurer, such as car or home insurance. These discounts can often be significant. Be sure to ask your VIU by HUB Advisor about the available discounts on your policy.
6. Your Policy’s Exclusions
The primary component of renters insurance is personal property coverage. This portion of your policy reimburses you if your belongings are stolen or destroyed by a covered peril, like a fire or hurricane. It can also cover off-premises theft, such as if your laptop is stolen while you’re riding the bus. It’s important to take inventory of your belongings and estimate their value so that you don’t under- or over-insure them. Over-insuring items can increase your premium, while under-insuring them could leave you unprotected in the event of a loss.
Other aspects of your policy will affect your rate, including the amount of liability coverage you choose and if you add any endorsements or a deductible. Additionally, your location may impact your premium, with rates higher in cities and lower in rural areas. You can help lower your renters insurance rate by taking measures to reduce the risk of a loss, such as living in a gated community and installing a security system. You can also save on your rate by quoting in advance and paying your annual premium upfront.
7. Your Security Measures
Many renters skip insurance, but a policy is an inexpensive way to protect your possessions from theft and other disasters. But how much you pay will depend on several factors, including the type of coverage, limit, deductible and location.
For instance, if you live in a state that’s prone to natural disasters, your rates will be higher because there’s a greater risk of damage to apartment buildings. The same goes for areas with high crime rates, since they increase the chances of theft and vandalism.
You can lower your rates by choosing a building or complex with theft-prevention features. Basic deadbolt locks or a security system that’s monitored by a third party will usually earn you a discount.
You may also want to consider a policy that includes “medical payments to others” coverage, which pays small medical bills for guests who are injured in your home. This is in addition to the liability coverage that’s standard in a renters policy. You may be able to add additional coverage, like identity theft protection, for an extra fee.
8. Your Policy’s Limits
Another factor that affects the cost of your policy is the limit you choose for your personal property coverage. Taking an inventory of your belongings and estimating their value can help you determine how much coverage you need. Expensive items such as jewelry and electronics might require high limits or a separate policy. You can also save by bundling your policies with other insurance policies and by paying on time. In addition, completing security measures like installing smoke detectors and dead bolts may help lower your rates.
Other factors that are out of your control include the state and city where you live, the home’s location and construction style and crime rates in the area. In general, renters insurance costs more in states that are more prone to natural disasters and higher crime rates. This is why it’s important to do your research and shop around for the best deal on your policy. Fortunately, you can often find ways to reduce the price of your policy, including discounts for having multiple policies with one insurer and loyalty rewards.