- Renters insurance covers your property inside your rented residence in the event of a natural disaster, accident, theft and more. Renters insurance also covers your property when you travel, and provides you with liability protection.
- The cost of renters insurance varies greatly from state to state but is almost always affordable.
- You can take a number of steps to reduce the cost of renters insurance, including reducing your deductible, bundling your insurance, and paying ahead.
More than a third of people in the United States rent their home or property, rather than owning it. Maybe you’re currently in a rental as well — do you have renters insurance? If not, you’re not alone: Only 37% of renters have a renters insurance policy. There’s a common misconception that renters insurance is too expensive, but it’s one of the more affordable kinds of insurance available. What exactly is renters insurance and why do you need it in the first place?
What is Renters Insurance?
Almost every rental property has some kind of insurance tied to it. This insurance, however, is more for the owner of the property, and it will only protect the building itself, not the contents owned by renters.
A renters insurance policy protects your personal property in the event of loss due to a disaster, accident, theft, or injury on the premises of your rental or with you while you travel. More specifically, renters insurance covers damage to you or your property when caused by:
- Rain, flooding, and other water damage
- A tornado or windstorm
- Graffiti or other vandalism
- Vehicular impact
Renters insurance can also offer personal liability coverage, which protects you and any visitors in the event someone is injured on the rental property. For example, if someone is visiting and your normally docile dog bits your guest, liability protection will cover medical expenses and legal fees incurred as a result of the incident. Much like car insurance, renters insurance will only offer the coverage amount you pay for. If your policy covers only the replacement cost of $5,000 in goods, and you lose more than that, you’ll be left with the cost of replacing those items.
How much coverage you get depends mostly on the extent of coverage in the renters policy you purchase, and from whom. Insurance companies offer a number of policies, and in some cases they can even help you assess the value of your home inventory before you purchase a policy. Having a larger amount of insurance coverage could bring you peace of mind. Factor in how much rent you can afford and include rental insurance as part of that monthly housing expense.
Factors that Affect Renters Insurance Cost
The cost of renters insurance can vary from plan to plan and state to state. There are a number of factors that affect renters insurance rates, so be aware of the following when you start shopping for coverage.
Your State of Residence
When it comes to policy costs, the state you live in plays a huge role. Natural disasters, like an earthquake or fire, can cause a lot of property damage. As a result, states that are more prone to certain disasters generally have higher monthly insurance premiums.
Furthermore, renters insurance will cost more in these states as you’ll likely need a separate policy or additional coverage to specifically cover damage related to disasters. If you live in a state with a high cost of renters insurance, there’s little you can do to affect the cost. Instead, build this into your budget.
Actual Cash Value vs. Replacement Cost
When it comes to rental insurance, there are two primary differentiators between the type of coverage you can get: actual cash value or replacement cost. Actual cash value coverage will only replace the item lost for its depreciated value. So if you have a television that was purchased for $500 several years ago and it’s only valued at $100, the insurance company will pay you $100. These plans have lower premiums, so you can save up more each month and keep it in an emergency fund for such cases. Renters insurance coverage that offers replacement cost will have a higher premium, but will replace the item at a rate that allows you to repurchase it right now. With this type of coverage, the insurance company will determine the item’s current market value and pay you that amount. This is especially worth considering if you have numerous high-value items.
The more you own and the more expensive items you have, the more coverage you will likely want—and the more expensive your coverage will be. Most renters don’t realize how much their property is worth until they lose them in a fire or incident. Renters insurance will reimburse you for the loss of your personal possessions up to a certain dollar amount, so you’ll want to consider this amount carefully.
Completing a home inventory is a good way to determine how much property coverage you need. With a list of your personal possessions, along with details about their age, purchase price or current value, you can best decide the amount of coverage that adequately protects the value of your property.
Just like medical or auto insurance, renters insurance comes with a deductible that must be met before the insurance coverage fully kicks in. A deductible also prevents you from filing smaller claims with the insurance company for any damages below the deductible. A higher deductible will result in lower monthly premiums but will also require you pay more out of pocket first. If you go with a low deductible plan, you’ll have to pay more in monthly premiums but will have insurance that kicks in sooner.
While not as large a factor as the other criteria, your credit score can play a role in the cost of your renters insurance. Insurance companies have determined certain correlations between credit score and incidences of claims and may factor in your credit score when determining your insurance premium. If you’re concerned about your credit score, make sure you work on improving it.
While dogs have been called “a man’s best friend,” insurance companies look at them as potential risks. Lawsuits have been filed due to dog attacks, and certain breeds may raise your renters insurance premiums or even disqualify you from getting a policy. Some insurance companies broadly deny coverage for animal liability, so ask about this type of coverage if you have a pet.
Average Cost of Renters Insurance
Before purchasing renters insurance, it’s helpful to know what the average cost is. If you haven’t yet picked a spot to live and you’re planning on moving, this information can also be useful for picking a rental home.
The national average for renters insurance cost currently sits at roughly $197 per year, which comes out at only $17 per month. When broken down by state, this number does fluctuate quite a bit. Below are the five most expensive states, as well as the five states with the most affordable renters insurance.
|Most expensive states||Most affordable states|
|Mississippi: $275 per year||North Dakota: $113 per year|
|Louisiana: $252 per year||South Dakota: $114 per year|
|Oklahoma: $247 per year||Wisconsin: $132 per year|
|Alabama: $245 per year||Nebraska: $141 per year|
|Texas: $241 per year||Utah: $141 per year|
How to Save on Renters Insurance
Even in the more expensive states, renters insurance is fairly affordable at $23 per month on average. Still, every penny counts. Reducing the cost of your renters insurance is a good goal to have when searching for a plan or revising an existing one. The following are ways you might be able to reduce your renters insurance cost.
- Bundle your insurance: If you already have an insurance agent that provides you with auto, medical, or life insurance, see if they offer a discount for bundling in renters insurance. In many cases, insurance agencies will be happy to give you a discount for getting another insurance plan through them.
- Split the cost if possible: Some insurance companies will allow you to get a plan that covers you and your roommates, in which case you can split the cost of the insurance. This can greatly reduce the amount you’re paying each month, while ensuring you’re all covered and safe.
- Pay ahead: It’s not uncommon for insurance companies to offer discounted rates if you pay a year in full. While this up front cost can feel like a lot, especially when you’re faced with rental costs, the monthly savings can add up quickly. Check if your insurance provider offers a yearly discount, and calculate how much it will save you over the course of a year to see if the upfront cost is worth it.
- Avoid claims: You can’t prevent natural disasters, but when possible, avoid making claims if you can afford to pay for the damage yourself or if you don’t have to. Often, insurance providers will give you a discount for not having any claims on file for a set period of time. This is true for many insurance types, so be sure to check in with your other insurance providers if you haven’t had a claim, as you just might be owed a discount!
- Raise your deductible: If your monthly premium is or looks to be undoable for the time being, increase the deductible to lower your monthly premium. While this means you’ll have to pay more out of pocket before coverage takes effect, you’ll still have coverage in case of loss while being able to afford necessities or build your savings.
Staying Safe with Renters Insurance
There are some things you simply can’t prevent, like natural disasters or theft. With renters insurance, you can at least be protected against the unexpected. The monthly cost is almost always feasible and pales in comparison to the loss as a result of not having renters insurance. Examine your budget and see where you can squeeze in renters insurance. The small cost may be worth the peace of mind it will bring you, even if you’ve only got sunshine and smooth sailing ahead.