Factors that influence the cost of renters insurance
Understanding what affects renter’s insurance costs might help you feel more comfortable choosing coverage to build a policy that fits your needs and budget. This information can also help you to make strategic choices about which types of coverage you want and at what levels.
Coverage limits
Renters insurance policies are made up of several standard coverage options. You can often choose higher or lower limits to fit your needs. The standard renters coverage types include:
- Personal property coverage: This is the main coverage type in a renters insurance policy and covers your belongings, like clothing and furniture.
- Loss of use coverage: Also called additional living expenses, this coverage pays for expenses incurred while you cannot live in your home due to a covered loss. Such expenses may include hotel bills or other temporary housing, laundry fees and even pet boarding fees in some cases.
- Liability coverage: Liability pays for expenses related to guest injuries that occur on your property that you are found negligent for, as well as damage to others’ property that you cause. However, liability might not cover damage caused to your rental unit itself.
- Medical payments to others coverage: Medical payments to others coverage is designed to help pay for the medical expenses of guests injured on your property. In cases where a guest is injured, but you are not legally liable for their medical expenses, medical payments to others can extend to help cover their bills.
Optional coverage types
You can also add optional coverage types that will increase your financial protection but will also increase your premium. Some common coverage options are:
- Contents replacement cost: This endorsement means you will be paid for the replacement cost of your damaged or destroyed personal property rather than its depreciated value.
- Scheduled personal property: If you have any high-value items, such as jewelry, collectibles or musical instruments, this option broadens your personal property coverage to include specific items that are more costly to replace.
- Water and sewer backup coverage: This coverage pays for the water damage to your belongings following a sewer or drain line back-up. Not every company offers this option for renters, but it is available.
- Identity theft coverage: Identity theft tends to occur more commonly as our world becomes increasingly digital. This endorsement can help pay for the costs associated with restoring your identity if it is stolen.
There are numerous other optional coverage types, and each renters insurance company offers a different suite of endorsements. A licensed insurance agent can help you choose coverage that is appropriate for your situation.
Deductible
Your deductible is the amount of money you will pay out of pocket if you file a claim. This is called the “assumption of risk.” You are assuming — taking on — the responsibility of paying part of a claim. Because of this, your deductible impacts your premium.
Generally, the higher your policy deductible, the lower your premium. Many renters insurance policies have a standard deductible of $500, and with many insurers, this may be the lowest deductible that you can choose. You should always choose a deductible that you feel comfortable paying to ensure that you don’t find yourself in financial trouble after a claim.
Claims history
If you have filed property claims in the past, your premium will likely be impacted. An insurance company views you as more likely to file claims in the future, and they compensate for the increased risk by charging you a higher rate.
Even if you lived at a different location, had a different insurer or filed a claim under a different policy type, like a homeowners or condo policy, your new insurance company will see your past claims on your CLUE report. Generally, only claims filed in the past five years will affect your premium, although this varies by company.
Source: thesimpledollar.com