Renters Insurance Rate Factors

Renters insurance usually isn’t very expensive, but it still makes sense to look for ways to save money on premiums. In general, your renters insurance rate is determined by some things that you can fully control and others that you can’t control very much. Here’s a closer look at the factors that affect your renters insurance policy costs and potential ways to save.

Which renters insurance cost factors can I control?

The most common renters insurance cost factors that you can control include the amount and types of coverage you choose and your deductible.

How coverage limits affect your renters insurance costs

One of the the key factors that affects your renters insurance costs is the amount of personal property, or contents, coverage you choose. This is the amount of money you’d receive if all your belongings were stolen, destroyed in a fire or lost due to any other covered peril, up to the limit you set.

You don’t want to skimp on personal property coverage just to get a lower rate. On the other hand, overestimating your property’s value leaves you paying for coverage you don’t need.

In our analysis of renters insurance rates, QuoteWizard found that a renters insurance policy with a $50,000 personal property limit costs, on average, about $5 more per month than a $25,000 policy. A $100,000 policy costs about $22 a month more than one with a $25,000 personal property limit.

The best way to determine how much personal property coverage you need is to create an inventory listing all your possessions and add up their total value.

Insurance companies tend to standardize the limits for the additional living expenses, guest medical payments and personal liability coverages in their renters policies. The standard limits are usually enough, but if you need more coverage, you can usually pay extra for higher limits.

For example, renters insurance frequently includes a $100,000 personal liability limit. If you have a high net worth, you can buy a higher liability limit to better protect your assets.

How the type of coverage you choose affects your renters insurance costs

Renters insurance typically covers your belongings at their actual cash value, but you can often pay more to upgrade to replacement cost coverage.

Actual cash value is the depreciated value of an item. Replacement cost is the price of replacing a stolen or destroyed item with a new one of the same kind and quality.

For example, the actual cash value of a 5-year-old flat-screen TV may only be $250 after depreciation. However, if it’s destroyed in a fire, it may cost $500 to buy a new one with the same model number or specifications.

With actual cash value coverage, the difference between your items’ depreciated value and their current prices comes out of your pocket, if you have to replace them after a covered loss. With replacement cost coverage, the insurance company covers this difference for you.

How your deductible affects your renters insurance premium

Choosing a higher deductible can usually shave a few bucks off your renters insurance premium. On the flipside, a lower deductible reduces your out-of-pocket costs on any claims you may need to file.

Your deductible is the amount of money you pay on a personal property claim before insurance funds kick in.

For example, if a fire destroys $5,000 worth of your property and you have a $1,000 deductible, you would be eligible for up to $4,000 from the insurance company. With a $500 deductible, you’d be eligible for up to $4,500.

Which renters insurance cost factors do I not control?

Aside from the fact that you can choose the home you rent, the renters insurance cost factors you do not control typically include your home’s location, construction style and safety features.

Location

Renters insurance tends to cost more in locales susceptible to extreme weather and wildfires, as well as those in areas with high crime rates.

Your premium reflects the insurance company’s estimate of how likely you are to file a claim, as well as the potential costs of any claims. The greater the likelihood of claims, particularly expensive ones, the higher your premium.

Construction features

Since the age and construction features of a home can contribute to the likelihood and potential costs of claims, they also affect your renters insurance premium.

In the eyes of an insurance company, the risks of a fire, burst pipes or other claim-generating incidents tend to be greater in older buildings than in newer ones built with flame-retardant materials and modern electrical and plumbing fixtures.

How can I reduce my renters insurance costs?

Regardless of the style and location of your home, taking steps to make it safer, bundling your insurance, paying your bills on time and avoiding claims may help reduce your renters insurance costs.

Safety features

Many insurance companies offer discounts to those in apartments or other rented homes with certain safety and security systems. Devices as simple as smoke detectors and deadbolt locks may qualify for small discounts. More elaborate systems, such as monitored security and fire suppression sprinklers, often lead to more savings.

Let the insurance company know about your home’s safety and security features. If your home does not include any, consider working with your landlord to get some installed.

Discounts

You’ll often get the biggest discounts for bundling your renters policy with your car insurance and/or any other policy you may need, such as coverage for a boat or motorcycle. Ask your agent or the insurance company about these and any other discounts you may be eligible to receive.

Credit, payment and claims histories

Maintaining good credit, paying your bills on time and avoiding claims may also help you save on renters insurance.

In many states, insurance companies use credit insurance scores to help determine your rate. These typically pull data from your credit report to help determine your insurance risk under the premise that those who manage their credit responsibly are less likely to file claims.

If you have a history of paying your bills on time, you are likely to qualify for lower rates.

In states that ban credit scoring, insurance companies can usually still charge higher rates to customers with recent claims or missed insurance payments.

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