How Much Is Renters Insurance?
But having renters insurance can be a lifesaver if your apartment gets damaged or destroyed. Renters insurance protects your personal possessions in the event of certain perils like fire, explosions, theft and vandalism. Most renters insurance plans also protect tenants against liability from accidental injury to guests. So, when you’re budgeting for the cost of an apartment, make sure you factor in renters insurance premiums. Luckily, renters insurance is one of the most affordable kinds of insurance.
Some tenants assume that their landlord’s insurance will cover damage to their personal belongings because they own the building. However, landlords have their own type of insurance that generally only covers the physical property and personal property used to maintain the building, not your belongings inside. Landlord insurance does include liability coverage in the event that a tenant was injured on the property and the landlord was found to be at fault, but it won’t protect your own liability.
In short, your landlord’s insurance won’t cover your needs. To protect your stuff and to avoid legal fees and a settlement in the event of an accident at your rental, you’ll need your own renters insurance policy.
Average cost of renters insurance
How much will renters insurance and the protection it brings cost you? Rates for renters insurance vary, but you don’t need to worry about this adding a huge amount to the overall cost of an apartment. Renters insurance is affordable for most people, especially considering what you get for your premium.
According to the Insurance Information Institute(III), the average cost of renters insurance in the United States was just $180 a year in 2017, the most recent year with aggregate data to study. Let’s look at how that affects your budget on a monthly, weekly and daily basis.
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For literally quarters a day, you can make sure that you’re not on the hook for replacing all of your furniture, clothes and electronics after a covered peril. It’s a pretty small amount to pay to give yourself peace of mind.
Some insurance providers allow tenants to choose when they pay their renters insurance premium. You might be able to choose monthly, quarterly or yearly payments. In many cases, providers will offer a small discount on the premium if the entire sum is paid in full for the year. If you choose to pay monthly, you might be required to pay a small processing fee on top of your monthly premium rate. Also, remember that the higher your deductible is, the lower your premium will be, regardless of your payment schedule.
Average cost of renters insurance by state
Just like average apartment rent varies by location, renters insurance costs fluctuate depending on where you live. To give you a better idea of what you can expect to pay for your renters insurance policy, here’s a breakdown of cost by state based on the III’s data:
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How to budget my renters insurance
As you can see from the price breakdown above, renters insurance is very affordable in every state. The weekly price of renters insurance is actually less than other things you might spend money on, like coffee or breakfast on the go.
An easy to way to budget your renters insurance is to cut back on miscellaneous spending. For example, if you normally buy coffee every morning before work, pick one day per week to make your coffee at home.
Make an inventory of all the small purchases you make throughout an average week. If you can reduce your spending by just $5, you’ll be able to easily fit the cost of renters insurance into your budget.
Most expensive states for renters insurance
You probably already found your state on that lengthy list, but you might be curious how it stacks up to other states. Here are the top five states with the highest average rates for renters insurance:
- Louisiana and Alabama (tied)
Why is renters insurance more expensive in the south? A heightened likelihood for natural disasters (hurricanes, tornadoes) means your insurance provider is more likely to have to write you a check to replace your belongings. They make up for that extra risk by charging you more for your premiums.
Cheapest states for renters insurance
On the other hand, relatively naturally protected states pay less for their coverage. The five states with the lowest average rates for renters insurance are:
- South Dakota
Factors that influence the average cost of renters insurance
The location of your home or apartment will impact how much you pay per month for insurance. If you live in an area that is more prone to extreme and potentially damaging weather events, expect to pay slightly more. Homes that are located in the midwest, south and central plains regions tend to be the most expensive to insure, whereas homes in New England and the Pacific Northwest are often slightly cheaper.
If your possessions were damaged or destroyed, your deductible is the amount of money you would have to pay to replace them before insurance coverage takes over. For renters insurance, deductibles usually range between $500 to $1,000. The higher your deductible, the lower your premium will be. However, keep in mind that higher deductibles mean paying more money out-of-pocket towards a loss. Only choose a high deductible if you can afford it.
Type of building
The type of building also determines your renters insurance premium. For example, apartment dwellers usually pay less for renters insurance, whereas people renting single family homes or duplexes tend to pay more each month. Unfortunately, you usually don’t have control over what type of building you live in. But if your home or apartment has certain safety features, you may qualify for a discount.
Types of renters insurance policies
When selecting a renters insurance policy, there are two main choices—cash value and replacement cost value. Let’s take a look at both policies and what each covers.
Actual Cash Value (ACV)
With an ACV policy, the insurance company will pay you what your belongings are worth today if they get damaged or destroyed in a qualifying event. The ACV policy factors in depreciation, so you won’t get back the full cost of what you paid for your belongings in the first place. In exchange for the lower payout after a covered peril, you get lower premiums.
Replacement cost value (RCV)
Under an RCV policy, the insurance company will pay you to replace damaged items with new ones that are of similar type and value. RCV does not include depreciation, so you’ll receive the same (or nearly the same) amount of money as you paid for an item originally. Because your insurer pays you out more with this type of coverage, your premium will be higher for a RCV policy.
Before choosing a renters insurance policy, start by creating a home inventory of your personal possessions. If you have a lot of items with a high monetary value, an RCV policy will be the best option. On the other hand, if you don’t have many belongings or you don’t care about buying a second-hand couch if you need to replace your current one, you can probably opt for an ACV policy and save money.
Renters insurance discounts
There are some factors outside of your control that affect the rates for renters insurance in your area. But you do have the power to lower your premiums by capitalizing on all available renters insurance discounts.
Here are a few of the discount options most renters insurance companies offer:
- Bundling: You get this discount if you buy your renters and auto insurance from the same company, for example.
- Good credit score: Sometimes you can save money by showing that you have good credit, which shows insurance companies you may be less of a risk. This is only applicable in some states.
- Safety: You can get this discount if your home is equipped with a security system, fire sprinklers, etc.
- Full payment: If you pay your premium in full instead of making monthly payments, you can save money.
- Claim-free: If you go a set period of time without filing a claim, you might be eligible for a discount.
To make sure you’re getting the most affordable renters insurance possible, compare rates for renters insurance from at least a few companies. A lot of companies offer online quote tools so you can get an idea of what they’ll charge you for your policy in just a few clicks.
How does my deductible impact the cost of my renters insurance?
The higher your renters insurance deductible is, the lower your annual rate will be. One of the best ways that renters can save money on their insurance is by raising their deductible, assuming they can afford the out-of-pocket cost if a claim occurred.
For example, say you have a deductible of $500 and your annual premium is $250. To save money, you could increase your deductible to $1,000, and only have to pay $190 per year for your premium.
However, it’s important to keep in mind that not every kind of renters insurance coverage type has a deductible. Typically, the only coverage that requires a deductible is personal property coverage, which protects your personal belongings from theft and damage.