13 Renters Insurance Rate Factors
A number of factors determine how much you pay for a renters insurance policy. Here's everything you need to know about them and how they impact your monthly premiums.
Renters insurance has such a reputation for being cheap that a lot of people surely buy the first policy they come across.
The thing is, as inexpensive as this type of insurance tends to be, you can still save money on it if you shop around and compare quotes before settling on a particular plan.
That's because a number of factors affect the price of a renters insurance policy. Which ones? Keep reading to find out--and to learn about how (and even why) they impact premiums in the ways they do.
Where You Buy the Policy
Although insurance companies refer to most, if not all, of the factors discussed here when calculating renters policy premiums, that doesn't mean they wind up charging the same amount.
In other words, you could approach three insurers about a renters policy, give them exactly the same information (claims history, amount of coverage, rental location, credit score, and more.), and receive three entirely different quotes.
The moral of the story here: shop around. Get quotes from multiple insurance companies before you settle on a specific plan.
Yes, renters insurance is cheap, and you may save only a few dollars per month as a result of all your legwork, but even that can add up over time.
Your Claims History
If you've ever filed a claim on any of your many insurance policies, you already know the joy of seeing your monthly premiums increased as a result.
Well, get ready to experience a similar kind of joy if you have any kind of history of filing renters insurance claims. Basically, if you've filed one or more claims on previous renters policies, you may pay more--in the form of higher premiums--for plans you purchase down the road.
Amount of Coverage
This probably sounds like another no-brainer. After all, of course you're going to pay more for renters insurance if you have to increase the coverage it provides in any way.
The thing is, most people only think about increasing the coverage for their belongings. For example, if you have a lot of possessions, especially valuable ones like jewelry or antiques or art, you'll want to buy extra coverage--usually through a rider or endorsement--to protect them from disasters or thieves. (Your standard renters policy probably won't provide enough coverage replace all those items if someone steals them or if a fire or storm damages or destroys them.)
That alone will impact how much you pay for renters insurance. It's not the only way to increase your coverage, though. Another option is to increase your liability limits.
Liability coverage protects you if you accidentally damage or destroy someone else's property. It also protects you if someone is injured in or around your rental home.
Many people just stick with the standard amount of liability coverage their renters policy provides. To learn why you might want to pay for more, keep reading. The "Frequently Asked Questions" section below addresses the topic.
Also, do you have a lot of "stuff"? You should catalog all of it before you purchase a renters insurance policy. Doing so will be a snap after you check out our article, "Create an Inventory of Your Possessions for Renters Insurance Claims."
Location (Where You Live)
Some of the factors that determine how much you pay for renters insurance are under your control. Others are not.
Unfortunately, this is one of the factors that's probably out of your hands. Sure, you could shop around and get renters insurance quotes before you settle on your next apartment, condo, or house, but most people leave that kind of thing until after they've moved into their new home.
The problem with that tactic: insurance companies look at where you live when they come up with your renters policy premiums.
So, if you live in an area with little to no crime and with little risk of natural disasters, your premiums should be on the low side. If you live in an area with a lot of crime or with a history of tornadoes, earthquakes, or floods, however, your premiums will be higher.
Why? Because insurers assume people in the second situation discussed above are more likely to file claims. Raising your rates protects them from that reality.
That's not the only way your location impacts what you pay for a renters insurance policy, by the way. Another way: insurers also tend to charge higher premiums to people who live in densely populated areas.
For more information on this subject, see our article about how location impacts your renters insurance rates. You may also want to read our write-up about flood insurance for renters.
The Size of Your Building or Unit
For some strange reason that only insurance companies can explain (don't hold your breath waiting for them to do so), the size of your building--if you live in an apartment or condo--affects what you pay for a renters policy, too.
Specifically, insurers usually offer lower monthly premiums to people who live in larger buildings with a lot of units. And they often charge higher premiums to those who live in smaller builders with only a few units.
Is your house, condo, or apartment made out of something sturdy, like brick or masonry? You're in luck. Insurance companies should charge you less for a renters policy than they would if your rental was constructed using a less "stable" or solid material.
Once again, there's no official explanation as to why this is the case. The most likely reason is fires, earthquakes, or other disasters are less likely to damage or destroy properties made using brick or masonry.
Fire Detection and Prevention
The vast majority of homes, condominiums, and apartments in the U.S. are equipped with smoke detectors to protect inhabitants from fires. Many American apartments and condos are equipped with overhead sprinkler systems for the same reason.
Should your rental unit not feature either or both of those fire detection and prevention devices, though, expect to pay more for this kind of insurance than you would otherwise.
Thankfully, installing your own smoke detectors is cheap as well as easy, so at least make sure they're in place before you buy a renters policy. It could save you a few dollars a month, if not more, and it'll also provide you with some peace of mind.
Living in a high-crime area usually means higher renters insurance rates. One way to combat that: living in an apartment, condo, or house with ample security features or systems.
For instance, you'll pay less for a renters policy if your apartment or condo building has one or more of the following:
- gated entry
- in-unit security equipment (such as alarms)
- front-desk security
- onsite security
Installing alarms or other kinds of security equipment in your rental home should have a similarly positive impact on your monthly premiums.
Before you do that, though, see if the property owner will pick up the bill. After all, he or she will benefit from it, too, as it'll likely make the place far more appealing to future renters.
First, here's a little primer for anyone who doesn't know much--or anything at all--about renters insurance deductibles:
A renters insurance deductible is the amount of money you agree to pay, or contribute, toward a covered personal property loss. To put it another way, whenever you file a claim on your renters policy, you are responsible for the deductible amount. Once that's taken care of, the insurance company sends you a check so you can fix or replace whatever was damaged, destroyed, or stolen.
Most people who buy renters insurance choose deductibles of $500 or $1,000. It isn't unheard of, though, to go higher than that--such as up to $2,500 or more.
How does your renters insurance deductible impact your policy's premium? In general, having a higher deductible means a lower premium, or monthly payment. On the flip side, having a lower deductible often means a higher premium.
Given that, if you're trying to keep costs down, ask for a higher deductible when you buy renters insurance. Just remember: your deductible applies to every claim you file on your renters policy. So if you file three separate claims in a year, your insurer will subtract your deductible amount from all three of the resulting claim payments.
To learn more about this topic, see our article, "Renters Insurance Deductible Frequently Asked Questions."
Whether You Choose an Actual Cash Value or a Replacement Cost Value Plan
Are you clueless as to the differences between actual cash value (also known as ACV) and replacement cost value (or RCV) renters insurance policies? No worries, we've got you covered.
Basically, if you choose ACV coverage, your insurance company will pay you what your belongings are actually worth today should someone steal them or should a fire or other catastrophe damage or destroy them. And if you choose RCV coverage, your insurer will send you a check for an amount that allows you to replace your damaged, destroyed, or stolen possessions with ones that are of the same or similar type and quality.
As you probably can imagine, replacement cost value policies tend to cost more--come with higher monthly premiums--than actual cash value policies.
RCV policies don't cost that much more than ACV policies, though. In fact, the Insurance Information Institute estimates ACV policies are only about 10 percent cheaper than RCV ones.
Don't take that as gospel, though, if money is tight or even if you just want to spend as little as possible out of pocket for a renters insurance policy. Shop around and get quotes from a number of insurers to see if an ACV or an RCV policy will be kinder to your wallet.
Want to learn a lot more about this subject? Check out our "Actual Cash Value vs. Replacement Cost for Renters Insurance" article.
One of the best ways to save money on any kind of insurance is to "bundle" policies. Well, that tactic works when buying renters insurance, too.
So, when you go to purchase one of these plans, see if the company behind your car insurance will give you a discount if you buy renters coverage from them as well.
Although it isn't unusual for people to save between 5 and 15 percent when they bundle policies, don't assume that will be the case for you, too. You'll still want to shop around and compare quotes from a handful of insurers before you settle on a specific plan.
As you shop around for renters coverage, don't just ask insurance companies if they'll give you a discount for bundling policies. Ask about other discounts they offer, too.
Some of the discounts you may hear about during that conversation include discounts for:
- automatic payments and paperless billing
- burglar alarms
- dead bolts on all exterior doors
- fire extinguishers, smoke detectors, or sprinkler systems
- smart-home technology
Speaking of smart-home technology, you can get an idea of how insurers treat these devices and systems by reading through this article on smart-home technology and homeowners insurance.
Your Credit Score
Just like your claims history can negatively impact your renters insurance premiums, your credit score can do the same if it's not up to snuff.
In particular, people with bad credit should expect to pay more for a renters policy than people with good credit.
Why do insurance companies care about your credit score? They care because they've found that people with good credit are more likely than people with bad credit to pay their monthly premiums on time--or pay them at all.
Insurers protect themselves from the worst-case scenario by charging higher rates to those with low credit scores.
See our article on how your credit score impacts renters insurance to learn more about this subject.
Frequently Asked Questions
Q: Why do I pay more for renters insurance than my neighbor does? We live in the same building! Shouldn't our policies cost the same?
A: First of all, congratulations on being good enough friends with your neighbor to know how much he or she pays for renters insurance.
Second, there are many reasons you may pay more than your neighbor does for renters insurance. Here are the most likely possibilities:
- you bought your policies from different insurers
- you bought more coverage than your neighbor
- you chose a lower deductible (which results in a higher premium) than your neighbor
- you have a replacement cost value policy while your neighbor has an actual cash value policy
- you and your neighbor didn't qualify for the same discounts
- your neighbor has a higher credit score than you do
If you're not happy with what you're paying for renters insurance, pick up the phone or go on line and shop around. Check out a number of insurance companies and compare the quotes they send you. Taking the time to do this could save you money.
Q: What can I do to save money on renters insurance? Or how can I lower my renters insurance premiums?
A: If you read the answer above, you already know one of the best pieces of advice related to saving money on renters insurance--shop around and compare quotes.
That's far from the only thing you can do to lower your renters insurance costs, though. Some other things you should try:
- lower your coverage amounts or limits
- raise your deductible
- switch to an actual cash value policy (if you currently have a replacement cost value policy)
- bundle your renters policy with your auto policy
- ask your insurer if you qualify for any other discounts
Before you plow ahead with one or more of these suggestions, think about how they could affect you down the road. For example, lowering the amount of coverage your policy provides could lower your monthly premiums, too, but it also could put you in an awkward (at best) financial position if someone breaks into your home or if a disaster damages or destroys a lot of your possessions. The same is true if you decide to switch from an RCV plan to an ACV plan.
Q: Why would I want to increase the liability coverage limit on my renters insurance policy?
A: As was mentioned earlier liability coverage protects you if you accidentally damage or destroy someone else's property. And it protects you if someone is injured in or around your rental home, too.
Why would you want to increase the amount of liability coverage tied to your renters insurance policy? Probably the best reason would be if you've got a lot to protect.
This is about more than how much "stuff" you own, by the way. It's also about your savings, your retirement, your car, and more. That's the kind of thing you want to protect with your renters plan's liability coverage.
Will the $100,000 liability limit currently associated with your policy cover all of the above if someone is injured in your apartment, condo, or house? If not, consider raising that limit to $300,000 or more.
The good news here: raising your renters insurance policy's liability limit--even by a few hundred thousand dollars--shouldn't have much of an impact on your monthly premium.
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