When you rent a home, you will factor multiple costs into your budget—rent, service fees, utilities and other living expenses. One thing that will probably factor in is the cost of renters insurance. It exists to protect tenants from the property risks & liabilities that could threaten at any time, which is why most landlords require renters to buy policies.
However, to buy renters insurance, you also have to pay for it. Therefore, it’s understandable why you want to save as much as you can on your rates. The good news is that your independent agent at BluCanopy will work with you to find a policy that offers you optimized benefits at affordable costs.
Still, it’s a great benefit to know why your policy rates might increase or decrease, and what you can do to control them. In the end, your renters insurance premiums will boil down to the risk you pose to your insurer. The more you know about risks, the more you can do to keep your rates low.
Understanding Renters Insurance Risks
To determine policy rates, insurers assign policyholders risk ratings. This risk rating is how likely you are to file a claim on your policy and therefore cost them a certain amount of money. Therefore, the more you are likely to cost the insurer, the more you are likely to pay. Insurers will need to charge you an amount appropriate to assume the cost risk of issuing you a policy.
Therefore, as factors in your life change, your risk rating might change too. Even changes you make to your own renters insurance will change this rating. Let’s take a closer look at how certain factors might raise or lower your renters premium.
1. Your Policy Limits
Most renters insurance policies insure your possessions inside the rental home, along with liabilities you pose by occupying the state. Though your landlord might require you to buy a minimum amount of coverage, you can also choose to expand your coverage options to include the appropriate benefits for all of your assets.
However, as you increase your coverage, you’ll create more of a cost risk for the insurer. Therefore, your policy will likely cost you more. After all, according to the laws of economics, the more you buy, the more expensive it will be.
2. Your Deductible
A deductible is the insured person’s portion of a claim cost that they agree to pay themselves. For example, if you have a $500 possessions deductible, and you sustain $2,000 in possessions damage, then you pay the first $500 and your insurer pays the remaining $1,500. Any possessions losses that equal less than the $500 deductible will not have coverage.
Depending on the value of the deductible you choose, you will take a different level of cost risk away from the insurer. For instance, if you take a $1,000 deductible instead of a $500 deductible, then you agree to pay an additional amount of a claim on your own. Therefore, the insurer will have to pay less on your behalf. This will lower your risk to them and might help lower your premium.
3. Your Claims History
If you have made a lot of claims on your renters insurance policy in the past, then it is an indicator to your insurer that you will likely do so in the future. Plus, you have already caused the insurer to pay out for you in the past.
Therefore, these factors will affect your risk rating, and might drive your premiums up. However, if you have gone many years between claims, your rates might stabilize or even drop over time.
4. Where You Live
Location is a factor that influence insurance risks. For example, risks of property damage, crime and liabilities will differ in different towns, neighborhoods and even from street to street. Therefore, if you live in an area with a high property crime risks, then you might have a higher risk of a home break-in. This could raise your risks of having to file a claim for a possessions loss. Therefore, you might have to pay more for your coverage.
5. Credit Scores
Clients who have financial reliability often are more trustworthy to insurers. That’s why your credit score is often an indicator that impacts your rates. Your credit score might show an insurer that you will pay your premiums on time, that you have strong financial reserves in place and that you take your personal security seriously. Therefore, the higher your credit score, the lower your premiums.
6. Your Discount Eligibility
Most major insurers offer policy discounts to qualifying clients. As a result, when you can receive a discount, your rates will drop compared to non-qualifying policyholders. Therefore, always ask your agent about applying discounts to your policy when enrolling in renters coverage. For example, you might benefit from:
- Automatic payment discounts
- Automatic renewal discounts
- Company loyalty savings
- Claims-free discounts
- Student discounts
Depending on the insurer you choose, your discount eligibility and overall coverage rate might vary. That’s why the best thing to do is to ask your independent agent to compare the coverage options of all the carriers they quote. They can help direct you to the appropriate policy.
Also Read: How to Know When You Should Switch Renters Insurance Policies
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