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How The Cost of Renters Insurance Is Calculated

By Teri Dormer

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Getting the keys to your first apartment or rental house is great. You know what’s not so great? Discovering that renters insurance coverage is mandatory — and you didn’t include the monthly cost in your budget.

Sure, there are plenty of “average” prices for renters insurance online that can help you start to expect what your rate will work out to, but no two policies are ever alike.

There are a handful of factors that can end up pushing your apartment insurance well above expectations. Curious what goes into your renters insurance monthly cost? Let’s take a look. 

How The Cost of Apartment Insurance Is Calculated

As you may have already figured out, insurance rates are always changing, and it can be impossible to really guess what your final rate will end up being. 

In reality, it’s important to recognize that the amount an insurance company charges for any kind of insurance isn’t always about you. Remember that no matter the cost, renters insurance coverage can be an absolute lifesaver when the unexpected happens. 

Location, Location, Location 

There are plenty of ways the location of your apartment plays into the overall cost of your renters insurance. 

Weather Patterns: If you live in an area known for flooding or tornadoes, you should expect to pay extra for your renters coverage.

While homeowners are often required to take out separate insurance policies to deal with specific weather concerns, the added cost of protection against a higher likelihood of damage from intense weather is bundled into your overall cost.

Crime Rates: Like the weather, if you happen to live in an area with above-average rates of crime, you should expect to pay more for your renters insurance. 

Popularity of Coverage: You might not realize this, but the monthly cost of your insurance premium is sometimes based on the number of people in your community with the same insurance provider.

The more people around you who use the same insurance company, the more people are paying into the “coverage pot,” helping to lower costs for everyone. 

Your Renters Coverage Deductible 

Your deductible is the amount of money you’ll be required to pay out of pocket before your insurance will step in after a claim has been filed. A higher deductible amount, the lower your overall premium costs. 

In contrast, if you opt for a lower deductible – where you end up shouldering less of the overall cost of claim – expect your premium to rise as a result. 

The Value of Your Possessions

Imagine your apartment like a snow globe. If the globe got flipped upside down and shaken up and all of your possession came spilling out of it, how much money would it cost you to put everything back together again?

Whatever the cost, that’s how high your policy limits should be. While higher policy limits mean you have less to worry about in the event of a disaster (like a fire or a robbery), they also mean higher premiums to cover the expense. 

Building Security  

Does your apartment have a security system? Security cameras? A security alarm that will alert you of trespassers? These kinds of high-tech amenities may not be standard in every apartment complex, but they can help lower the cost of your apartment insurance.

If there’s reliable security to help protect you – and your stuff – from unwelcome guests, you might get a discount on your insurance premium.  

Work From Home 

When your “side hustle” evolves into more of a legitimate business, you may want to consider letting your renters insurance provider know you’re working from home. 

Without the right kind of coverage, a fire or a flood in your apartment that damages expensive work equipment or your business stock may not be fully covered. In some cases, working from home may raise the cost of your renters coverage. 

Bundles and Discounts 

As with all things insurance, the bigger the bundle, the bigger the savings. 

If you already have auto insurance through a specific provider, you may want to check with them first about the cost of adding on renters insurance.

Many insurance companies offer a discount for every additional policy you sign on with them, making bundling one of the easiest saving opportunities in the book.  

Preventing Fires 

Just like taking extra security precautions, the total number of smoke detectors in your apartment can have a major impact on how much your coverage costs. 

In addition to smoke alarms, having a fire station nearby, or being able to identify if (or how many) fire extinguishers are available to your unit can also lower the overall rate of your coverage. 

Claims History 

Insurance companies aren’t quick to forget a claim, and a renter with a more colorful claims past could end up having to pay more in the future for the same coverage. While this isn’t necessarily true after just one claim, your claims history can raise or lower the overall cost of your apartment insurance premium. 

Your Credit History

Insurance companies like to see that you have a history of paying your bills on time, which is why credit history plays a part in the cost of your renters coverage.

If you have a lower credit score (or some unscrupulous marks on your credit report like bankruptcy), you may represent more risk to the provider and an increase in your rates. 

Size Matters 

In most cases, the size of your apartment building will have an impact on the cost of your renters insurance premium. Typically speaking, the bigger the building, the lower the rates. 

Finding Renters Insurance Online 

There are a variety of factors that go into how much you’ll pay for renters insurance coverage, and some of them are completely out of your control. 

Still, you have the power to shop around, and looking for renters insurance online is a great way to make sure you’re not overpaying unnecessarily. If the first provider comes back with a rate that seems too high, keep looking!

You may find an option that offers the coverage you need while keeping the cost of your apartment insurance reasonably affordable.

Protect Your Belongings With Renters Insurance

Averaging just $12 per month, renters insurance can protect your belongings for the cost of a few cups of coffee.