The Average Cost of Renter's Insurance

Factors That Increase or Lower Rates

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The Average Cost of Renter's Insurance. Photo:

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When you purchase a home, you also purchase homeowner’s insurance to protect this valuable asset. When tenants rent a home, however, most do not purchase renter’s insurance. According to ValuePenguin, only 40% of renters have renter’s insurance. Learn what the average cost of renter’s insurance is and the factors that can increase or decrease the cost.

What Is Renter’s Insurance?

Renter’s insurance is a type of insurance that is offered to individuals who rent out, rather than own, property. Unlike traditional homeowner’s insurance policies, this type of insurance does not offer any protection for the physical property structure, since the tenant does not have any ownership in the structure. It is insurance for what the tenant does own: their possessions.

What Does Renters Insurance Cover?

Every renter’s insurance policy will differ based on the insurance company and the type of coverage you are looking for. A renter’s insurance policy may include coverage for the following:

  1. Personal Property: The main reason most tenants will purchase renters insurance is to protect their personal property. A renter’s insurance policy may protect personal property losses for the following reasons:
    1. Aircraft
    2. Explosion
    3. Falling Objects
    4. Fire
    5. Frozen Plumbing
    6. Hail
    7. Lightning
    8. Riots
    9. Smoke
    10. Theft
    11. Vandalism
    12. Vehicles
    13. Water Discharge From Plumbing or Appliances if It Is Sudden and Accidental
    14. Weight of Ice or Snow
    15. Wind
  2. Loss Of Use: Most renter’s insurance policies include coverage if the actual dwelling is damaged and uninhabitable. The policy will pay for your living expenses until the property is repaired or will pay for you to live somewhere else. Most policies will pay this expense for a maximum of two years. 
  3. Inflation Coverage: Your renter’s insurance policy may include automatic adjustments for inflation. Your insurance coverage on personal property is increased as the cost of living increases based on the inflation index.
  4. Liability Coverage: An important part of a renter’s insurance policy is personal liability coverage. If a guest slips and falls inside your apartment, they could try to sue you. Coverage may also include court costs and attorney’s fees.
    Many tenants believe they are covered by a landlord’s liability coverage, but if the accident was caused by a tenant’s possessions or neglect, the tenant will be held responsible. This is why it is so important to have personal liability coverage.
  5. Medical Payments for Injuries to Others: If an invited guest is injured on your property, your renter’s insurance policy will cover the medical bills for the individual, up to the coverage limit.

Understand What the Policy Excludes

An equally important part of any insurance policy is to understand what is not covered. Most policies list what is specifically excluded from coverage so that there is no confusion or grey area.

Examples of exclusions could include:

  • Losses due to tenant’s negligence
  • Losses from flood
  • Losses from earthquakes or landslides
  • Losses from nuclear hazards

How Much Renter’s Insurance Do I Need?, states that the average renter’s insurance policy includes coverage for $40,000 worth of personal property, $100,000 in personal liability coverage and a $1,000 deductible. If you need more coverage than this average, you will pay more for your policy and if you need less, your premium amount will be lower.

You can tailor a policy to your individual needs, adjusting the coverage amounts up or down depending on your assets. If you have a lot of valuable personal property, you may want $100,000 in personal property coverage or if you have additional assets and your net worth is above $100,000, you may want to increase your liability coverage to cover yourself in the event of a lawsuit.

Average Renter’s Insurance Cost

According to ValuePenguin, the average renter’s insurance policy costs $187 a year. This figure is meant to give renters a ballpark on price because there are endless factors that could cause a policy to be more or less expensive than the national average.

Factors That Could Increase Your Rate

There are several reasons you may pay more for renter’s insurance:

  • The Area of the Country In Which You Live – Living in an area with high crime or many natural disasters will cause you to pay more for renter’s insurance.
  • Amount of Personal Property Protection – If you want additional coverage for personal property, your policy will cost more.
  • Amount of Liability Protection – If you want increased liability protection, you will pay more for renter’s insurance.
  • Additional Riders –There are numerous riders you can purchase in addition to a basic renter’s insurance policy. You can add earthquake coverage, jewelry coverage for high-value items, additional liability protection, coverage to restore identity or coverage to insure additional business property.
  • Lower Deductible – If you chose a policy with a lower deductible, your monthly premiums will be higher.
  • Multiple Claims – If you have had multiple insurance claims or there have been multiple insurance claims at the property where you live, your premium may be higher.
  • Bad Credit – If you have a poor credit history, you will likely pay more for an insurance policy.
  • Replacement Cost Policy – This type of policies reimburses you for an item that is comparable to the item that was lost. This policy is generally more expensive than an actual cost policy because you will be compensated closer to the original price you paid for the item.

Factors That Could Lower Your Rate

There are several factors that could lower your renter’s insurance rate:

  • Higher Deductible – If you chose a policy with a higher deductible, say $1000 instead of $500, your monthly premiums will be lower.
  • Actual Cost Policy – This type of policy reimburses you for what the item would be worth now, not when you purchased it. Therefore, they are typically less expensive than replacement cost policies.
  • Burglar Alarms or Additional Safety Features – Safety features such as a security system, deadbolts, and smoke and carbon monoxide detectors can help lower your rate.
  • Good Credit – Having a strong credit history can get you a better rate on your insurance policy because you are seen as less of a risk.
  • Living in Lower Crime Areas – Lower crime areas have reduced risks of break-ins and theft, so your premium will be lower than if you lived in a higher crime area.
  • Living in Area With Fewer Natural Disasters – You can get better rates for renter’s insurance if you live in an area that does not see such extreme weather conditions.
  • Discounts for Members – You may be able to get a lower rate by being a member of an organization such as Triple-A or a wholesale club, such as Costco.
  • Discounts for Multiple Policies – If you already have an insurance policy with a carrier, such as car insurance, they may be able to give you a better rate when you purchase a second insurance policy through them.

7 States With The Lowest Renter’s Insurance Rates

Based on data compiled by ValuePenguin, on average, the following seven states have the lowest cost for renter’s insurance:

  1. North Dakota – $115 a year
  2. South Dakota – $118 a year
  3. Wisconsin – $130 a year
  4. North Carolina – $134 a year
  5. Montana – $145 a year
  6. Utah – $145 a year
  7. Iowa – $147 a year

7 States With Highest Renter’s Insurance Rates

On average, the following seven states have the highest cost for renter’s insurance:

  • Mississippi – $244 a year
  • Louisiana – $242 a year
  • Alabama – $239 a year
  • Oklahoma – $234 a year
  • Texas – $228 a year
  • Georgia – $226 a year
  • Hawaii – $221 a year
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