How Much Does Renters Insurance Cost?
Effective and surprisingly inexpensive, renters insurance can protect the investment you’ve made in personal property and belongings in your rented residence.
- Typical Range: $101 to $262
- National Average: $168
Everyone who buys a house has the importance of homeowners insurance impressed upon them. But what about renters? Placed in a position where often the security of their dwelling isn’t fully in their hands, renters are in a precarious spot when it comes to protecting their property and belongings.
Renters insurance is designed to provide financial protection against losses due to accidents, weather, theft, and vandalism, just as homeowners insurance is. In fact, without insurance, renting an apartment is a risk, as renters don’t often have control over the safety measures in place to protect their belongings.
Policies are set for a period of time, usually a year, and include an up-front premium and a deductible before the renter is recompensed for the loss, but in the case of a significant burglary or disaster, it can make the difference between being able to replace critical possessions and not.
Renters insurance does, however, come at a cost, which can vary based on a number of factors. Understanding the components of the coverage and cost can help you decide if it’s right for your situation.
Factors in Calculating Renters Insurance Cost
Insurance for renters doesn’t come in a one-size-fits-all policy; the cost and benefits of carrying a policy will depend on a number of factors. Some of these factors are within your control, such as the building in which you choose to live, your credit history, and the coverage you choose to purchase. Other elements, such as the state in which you live and the potential for severe weather in that area, can also affect the cost of the policy.
Location or State
In areas where the risk of severe weather is greater, rental insurance rates are higher to compensate for the greater likelihood of expensive claims. This risk varies by state but also within individual states; areas within a state that are prone to flooding, fire, or wind conditions will have rates higher than areas of the state with less risk, and neighborhoods with older buildings or high-crime areas can have higher rates than the surrounding areas. In general, states with exposed coastlines that are in the paths of hurricane-force winds have the highest rates, including Louisiana, Georgia, Mississippi, and Alabama, along with Kansas, where the threat of tornadoes keeps rates high. Interior and northern states (states that have less severe coastal wind and that are at higher elevations, reducing flooding) such as Wyoming, Iowa, Vermont, North Dakota, and Pennsylvania have some of the lowest rates nationwide.
Hurricanes are expensive events for insurance companies. Large swaths of a state can be washed out, flooded, blown over by winds, shattered by tornadoes within the hurricane, and left without power for weeks. All insurance operates on a gamble that the insurance company will collect more dollars in premiums than it has to pay out in claims over time, so when extreme weather strikes, that careful balance sheet can tip. The kind of total destruction that can be caused by hurricanes, wildfires, and tornadoes means the insurance companies have to pay out to rebuild properties from the ground up, replace the belongings of all their clients, and pay for the housing and keeping of any clients who need to live elsewhere while their home is rebuilt. As a result, apartment insurance companies charge higher rates in areas where this kind of destruction has happened in the past or where it may potentially happen in the future.
Credit History and Score
Studies show that people with poor credit scores file more claims, and so insurance companies see them as higher risks. While most companies don’t run your actual credit report, they use another tool called a credit-based insurance score, a metric that estimates how likely you are to file an insurance claim. Calculations vary by company, but in general this score includes your payment history, outstanding debt, the length of your credit history, recent credit applications, and the types of credit you have. These details combine to create a score that indicates your likelihood to file a claim, so the higher your score, the better your rates will likely be. Because so many of the same factors make up your credit-based insurance score and your credit score, the two often go hand in hand, so if your credit score is good, it’s likely that your insurance score will be as well—unless you have a significant history of filing large and small insurance claims. Some states, including California, Maryland, Massachusetts, and Washington, forbid the use of credit in setting insurance rates.
Dog Ownership and Dog Breed
Renters insurance coverage provides liability coverage to policyholders, including liability if someone is injured by the policyholder or their dog. As a result, owners of larger-breed dogs or dogs with a reputation for being aggressive can expect to pay a larger premium to protect the insurance company against additional claims should the dog bite a neighbor. Unfortunately, some insurance companies may refuse to cover larger or aggressive-breed dogs, so if you have a large dog or a breed that’s known to be aggressive, you may need to shop around to find a company that will offer you a policy.
Type of Building
Do you live in a newer building with modern smoke alarms, integrated sprinkler systems, smart security systems, and up-to-the-newest-code egress options? Renters insurance companies love this kind of building, where the building owners have taken great pains to reduce the risk of loss, and therefore, insurance companies will likely offer you a reduced rate. Living in a charming older building with quirks and bits of history has its rewards, but insurance companies see those charming quirks as risks: Older buildings are less likely to have safety features that meet modern standards and are more likely to have older pipes and electrical systems, so rates will probably be higher.
Coverage Amount and Limits
One of the first actions you’ll need to take when you consider renters insurance is a full inventory of your belongings. Once you’ve figured out what you have, you’ll need to decide what you’d like covered, and for how much; surprisingly, most people undervalue their possessions and don’t insure for as much as they should. The insurance company will set general limits as to how much they’ll pay out in the case of a loss, and if you choose to limit your coverage further, you may be able to lower your premium. However, you’ll also have the option to add endorsements, or specific coverage extensions with higher limits, for certain items that have higher value than the policy would otherwise pay out. Expensive jewelry, musical instruments, or heirloom artwork are some examples of items that may be covered under endorsements. Because endorsements increase your payout in the event of a loss, they’ll cost more up front. While these endorsements will add to your cost, it’s important to consider adding them for items that would be a genuine and devastating financial and personal loss so that you can be recompensed by the insurance company.
When you’ve paid your premium, you’ve paid to insure your property. However, insurance companies would prefer that their insured customers don’t take up a lot of their time with nuisance claims that cost more to process than they pay out. For example, if a pipe leaks under the sink and destroys a set of towels, you could file a claim to replace the towels. The claim might be $125. But if every customer filed a claim for every potentially covered event, the insurance companies would be swamped; they would need to pay extra employees just to handle the volume of claims, and they would lose money. To impress upon customers that renters insurance is intended for serious claims with substantial financial loss, your insurance policy will state that there is a deductible on your policy—an amount of money you’ll have to contribute to the repair of damage before your insurance will begin to pay. Typically this is between $500 and $2,000. You can control, to an extent, how much you pay for your insurance by adjusting the deductible. A lower deductible will result in a higher premium, because you’re expecting the company to assume more of the risk and pay out more. A higher deductible can reduce your premium, but it can also leave you at risk of not having enough coverage if you have a sizable claim. You’ll want to ask for renters insurance quotes from insurance companies so that you can see how much the deductible affects the premium cost and how much you’ll be in a position to pay if you need to file a claim that is more than your deductible but still outside of your ability to pay. Then balance the up-front cost of the insurance premium against the deductible you’d need to pay in the event of a claim, and adjust these figures until you feel comfortable that you’re not paying more than you can afford in premiums but still feel protected with a deductible that is manageable.
Another reason not to file small claims is this: Having a history of previous claims can raise your rate. This may sound unfair—after all, you’re paying a premium for access to coverage, so it seems unfair that you might be punished for using it. From an insurance company’s perspective, it makes perfect sense: You’ve filed a claim before, so you are more likely to file one again, and it may decide that the claim suggests that you’re not taking safety seriously. Having a claim on your record in the previous 3 to 5 years can result in a rate hike of as much as 20 percent. Certainly, file claims when you need to, but especially if the claim amount will be close to your deductible, consider whether what you’ll get back is worth the potential rate hike.
Do I Need Renters Insurance?
More and more often, your landlord will want you to carry a renters insurance policy but won’t necessarily require it. In some cases this may be your landlord’s decision, but in others it may be a requirement positioned by the landlord’s own insurance company. Your landlord carries insurance on the property itself, which will cover physical damage to the building in case of a covered event, and may also have a home warranty on the property to help cover the cost of maintenance and repair. The landlord’s insurance will also cover their liability in case someone is injured on the property. A requirement that tenants have their own policies—and can prove it—can reduce the landlord’s total claim and keep their premiums lower.
Benefits of Getting Renters Insurance
Maybe your possessions and furniture are a motley collection of hand-me-downs left over from a string of college apartments and you don’t think they’re worth much. They probably aren’t—but the cost to replace them would be significant. Really consider the expenses that can be incurred as a result of a fire that destroys not only your personal items but the building in which you live; they add up fast. Insurance for rented spaces provides a host of benefits for a relatively low cost.
Personal Property Protection
If an event covered by your policy occurs, the insurance company will cover the cost of the damage beyond your deductible. Your individual policy will spell out how much the company will pay; each company has a slightly different formula that helps determine the payout to replace or repair covered items. Having a good inventory of your possessions, including photographs and, where possible, receipts, will help this process along and maximize the payout.
This coverage protects you financially. If an accident occurs in your rented residence, the victim of the accident can sue you to pay for their medical bills and other financial damages because you are liable, or responsible, for what happens in your home. These claims can mount to thousands of dollars: Without insurance, renters can be bankrupted by liability claims, so it’s worth investing in insurance that covers your liability by paying for these costs up to the policy limit.
Additional Living Expenses Coverage
After an event that damages or destroys your residence, you’ll sometimes need to move out of the space for a period of time while the residence is repaired and rebuilt. You’ll likely still be paying rent, so the costs of living at a hotel can really mount up quickly. Renters insurance will cover the cost of these expenses.
Loss of Use
In addition to paying for a place to live during the repairs after a major claim, you’ll incur other expenses faster than you might imagine. Even if your hotel has a kitchenette, you’ll pay more for food because the fridge is tiny and there’s minimal storage space. You may have to pay to park your car, or commute farther, or pay to have your children transported to school. The Loss of Use benefit in your renter’s insurance covers these extra costs that add up because you can’t be in your own home. Loss of Use and Additional Living Expenses are sometimes combined under one name or the other, but in the case of a claim that requires you to move out, you’ll want to look for these benefits.
Perhaps you’ve heard others talking about the heavy expense of homeowners insurance and assumed that renters insurance was too expensive, especially if you’re in a situation where your rent is high compared to your income and you’re trying to save up for a house. Remember, though—homeowners insurance covers the building, the occupants, and the property surrounding it. Renters insurance covers you and your rented space. With an average cost of $168 per year, renters insurance is a great investment to protect your possessions, your liability, and your savings: If everything you own is wiped out by a fire, the amount you’ll lose in replacing everything is far more than the premium you’ll pay to protect yourself.
How to Save Money on Renters Insurance
Even though renters insurance is competitively priced, it’s always a good idea to look to see where you might be able to save a few dollars. In the case of renters insurance, there are actually quite a few ways to reduce your premium.
- If you also have auto insurance, ask your agent about bundling your renters and auto insurance for a multi-policy discount.
- Look for, install, or check with your landlord about installing safety features such as smoke detectors and alarm systems in your unit and the building, as these can qualify you for discounts.
- Renters insurance companies have discounts available for seniors, members of the military, teachers, first responders, and other program members. It doesn’t hurt to ask.
- Many insurance companies offer a cost reduction if you set up automatic payments, so check whether that is an option.
- Raise your deductible. A higher deductible means a lower premium, and if you never need to file a claim, you’ll save significant money by choosing the higher deductible. Once you need to file a claim this can backfire, but choosing a balance between the deductible and the premium is a good option.
Questions to Ask About Renters Insurance
Not all rental insurance companies are the same; procedures and access can vary. In addition to collecting all the information you’ll need on costs and basic coverage questions, there are a few specific things you’ll want to ask your agent before signing your policy.
- Will my policy cover my roommate as well? Some renters insurance companies require roommates to purchase separate policies, but others permit renters to share a policy as long as they agree on all the terms.
- Will my pets affect the cost or coverage of my policy? Often the answer is yes, but it’s important to pin down exactly how much.
- Do you provide cash value or replacement coverage? This is important: Cash value coverage pays out how much your property is worth, so the original cost minus an amount based on how long you’ve owned it and the condition it was in. Replacement cost pays out what it will cost to purchase a new item to replace the loss.
- How do I file a claim? Some companies do this exclusively through a mobile app, while others staff a call center.
- Can I take my policy with me if I move? For renters who move annually, this is a key question. The answer is usually yes, but you’ll want the details on how to move the policy and what costs might be associated.
Many people don’t even realize that renters insurance exists until they’re told that they need to get a policy, but the product provides real protection for renters who have existed without the handy umbrella of insurance for years. With insurance, rental units are as protected as they can be from accidents, natural disasters, and theft or vandalism. These are some of the questions we hear most frequently, along with their answers, and they should get you started thinking in the right direction.
Q. How much does renters insurance cost on average?
The current nationwide average for renters insurance is $168 per year, plus the cost of meeting the deductible prior to the payout of a claim. This can be paid annually, semiannually, or monthly, in most cases.
Q. Is renters insurance cost lower if I have a home security system?
Yes! Insurance companies love security systems because they significantly lower the likelihood of theft and can function as an early-warning system in case of fire, reducing the overall cost of a loss. You’ll want to check with your renters insurance company before choosing a security system to see what parameters the system must meet to qualify for a discount. For example, some companies only offer discounts if the system is professionally monitored.
Q. Does renters insurance cover theft of my personal property?
It does—and the property doesn’t even have to be in your rented property when it’s stolen to qualify. If items are stolen from your home or while you’re at work, school, or out on the town, they will likely be covered. In addition, items kept in a rented storage unit may be covered, but you’ll want to check with your insurance carrier to see if that applies to you. Some companies also have a requirement that you file a police report before items can be covered and provide them with a copy, and many policies have coverage limits for stolen items to help avoid fraudulent claims.
Q. How long does a renters insurance claim process take?
This depends on the type of claim and the steps you’ve already taken. For a property damage or loss claim, things can move along quickly, especially if you’ve taken an inventory and have receipts and photos of your belongings. The claim will be filed in 48 to 72 hours and will be processed quickly, especially if accompanied by information from the police or first responders.
Liability claims take longer, because the injured party has to file the claim, which starts an investigation by the insurance company. Often the discussion of the case has to be run through lawyers for both insurance companies and the renter, and then based on the merits of the case, it might go to a judge or a trial to be settled, which can take an indefinite amount of time.
Q. Can I pay the renters insurance premium quarterly?
In most cases, yes, and you may even get a discount for doing so. Insurance companies like annual payments and quarterly payments because they reduce the risk of taking on a client. To encourage more people to do so, insurance companies often offer incentives to pay ahead.
Q. Does renters insurance cover items in my backyard?
Yes, as long as the items belong to you and are damaged or lost due to a covered event. Whether your items are in your car, a locker, a desk drawer, or the backyard, they’ll be covered by your policy as long as the damage occurred during an event that is covered by your policy.