Renters Insurance: Average Cost and Options

·5 min read
Renters Insurance: Average Cost and Options

Tenants may assume their property is protected by their landlord’s home insurance policy, but that’s not the case.

Whereas a homeowners insurance policy covers the structure of the home and any contents that belong to the owner, you’ll need renters insurance to protect your belongings.

Because it doesn’t cover the structure of the property, renters insurance is quite affordable compared to a homeowners insurance policy.

Here’s what you can expect to pay for renters insurance plus the factors that affect your insurance rate:

  • How much is renters insurance?

  • Factors that determine your renters insurance rate

  • How to compare renters insurance options

  • How to lower your renters insurance cost

How much is renters insurance?

The average cost of renters insurance ranges from $127 per year in South Dakota (the state with the lowest premiums) to $252 per year in Mississippi (the state with the highest premiums), according to the latest data from the National Association of Insurance Commissioners.

The exact amount you’ll pay for renters insurance depends on risk factors and the type of coverage you choose.

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Factors that determine your renters insurance rate

Your renters insurance premium is based on the likelihood of you filing a claim as well as the amount of any claim you might file. Insurance companies consider a number of factors when calculating the cost of your premium.

Factors determined by your circumstances

These factors are based on your situation rather than choices you make when purchasing your renters insurance policy.

Location of the home

A rental property’s location plays a major role in determining the risk of damage to your property. High-crime areas, for example, increase the risk of vandalism and theft. As a result, you’re more likely to pay a higher premium by living in these areas.

Areas susceptible to natural disasters, like earthquakes and hurricanes, are also risky.

Value of the insured items

Insuring a few thousand dollars’ worth of belongings poses less risk for an insurance company than insuring tens of thousands of dollars’ worth of items.

The type of items you’re insuring also influences your premium. You’ll have to purchase extra protection, called a rider, for pricey items like electronics, furs, jewelry, and art, because standard policies limit coverage for them.

Insurance score or credit score

Some states allow insurance companies to base premiums on an insured’s credit score or its insurance equivalent — an insurance score. Lower scores are associated with higher risk and result in a higher insurance premium.

Factors determined by your choices

The following factors are based on the choices you make when selecting coverage.

Type of coverage

You’ll choose between two types of rental insurance coverage:

  1. Broad: A broad policy insures your belongings against specific perils like fire, lightning, smoke, and theft. It’s the most common type of coverage, but it provides the least amount of coverage.

  2. Comprehensive: Comprehensive coverage covers anything not specifically excluded by the policy. Whereas broad coverage wouldn’t cover water damage unless the policy specifically said water damage was covered, a comprehensive policy would cover it as long as the policy didn’t specifically exclude it. This coverage is typically more expensive.

Amount of coverage

While you wouldn’t want to purchase less insurance than you need to protect your belongings, a tight budget might leave you second-guessing how much coverage to choose.

In that case, you might elect to reduce your coverage limit — for example, by selecting $10,000 worth of coverage even though you have $12,000 worth of belongings — or doing without a rider that would cover your electronics beyond the coverage limits allowed by a standard policy.

How much liability coverage you select also factors into your premium. Liability coverage pays for your legal fees in the event a family member, pet, or guest causes injury or property damage resulting in a lawsuit.

Actual cash value vs. replacement cost

Part of selecting renters insurance is deciding what you want reimbursed: the actual cash value of your belongings minus depreciation, or the amount you’d have to pay to replace them. Replacement cost coverage is more expensive, but it ensures you get reimbursed in full in the event your property is destroyed.

Deductible

A deductible is an amount you’re responsible for paying before your renters insurance kicks in – $500 or $1,000, for example. Selecting a higher amount reduces your premium.

How to compare renters insurance options

Rental insurance policies include several types of coverage. You’ll want to review those coverages and gather renters insurance quotes from a few different insurers to see how the costs compare.

The standard types of coverage offered with a renters insurance policy include:

  • Personal property: Personal property coverage insures your personal belongings, up to a coverage limit you select.

  • Additional living expenses: Covers temporary housing and living expenses in the event you’re displaced from your home due to a covered emergency.

  • Personal liability: Protects you against lawsuits in the event you or someone in your home injures someone or damages property.

  • Medical expenses: Provides direct reimbursement to a person accidentally injured on a property you rent.

Create an inventory list of your possessions before you begin shopping, along with photos and estimates of the items’ depreciated and replacement values. That way you can experiment with different coverage limits and deductibles to find the best balance between affordability and protection.

Tip: Ask the insurers you’re considering about any special discounts they offer. American Family Insurance, for example, reduces your deductible each year as your policy renews.

How to lower your renters insurance cost

Renters insurance premiums aren’t set in stone. Here are some ways to reduce yours:

  • Ensure that your smoke detectors meet local codes.

  • Ask the property owner to install deadbolts and a security system, or ask for permission to install your own.

  • Improve your credit score.

  • Consider purchasing a renters insurance policy from an insurance company you already use, such as your auto insurance company, and asking for a bundle discount.

  • Stay with the same insurer to qualify for loyalty discounts and discounts for not filing claims.

  • Increase your deductible, but not to more than you could afford out of pocket if you had to file a claim.

  • Avoid over-insuring. Coverages are capped, so there’s no benefit to insuring your belongings for more than they’re worth.