Why Does The Price Of Renters Insurance Vary?

Frequently, we’re asked about variations in the price of a renters insurance policy. It usually takes the form of something like

Why does the price of renters insurance vary?  My friend only paid eighty-nine dollars! Why am I paying more?

That’s a great question, and there’s a few different elements to it.

Why Does The Price Of Renters Insurance Vary?

Frequently, we’ll get inquiries from an insured who wants to know why they pay more for renters insurance than their neighbor. There are quite a few reasons for the price of renters insurance to vary, let’s take a look at a few.

Why Does The Price Of Renters Insurance Vary?

There are several reasons for the price of renters insurance to change. Some of them are state dependent. For example, North Carolina renters insurance prices are set by the state. All carriers tell the state what they would like to charge, and the NC Rating Bureau picks one of those numbers out of a hat.  Or perhaps, they average them all or only allow a certain percentage of increase annually. It has been said that the hat theory is somewhat more likely.

Credit Affects Renters Insurance Rates – Especially If You Don’t Have Any!

We frequently are asked why the price of renters insurance is what it is by new arrivals to the United States.  We welcome these calls, because we know that getting insurance with no history at all can be tough. We have options for people with no credit history because they just moved here, but it can impact the rate.

If you’ve just arrived here, you are Schroedinger’s Insurance Applicant.  By which of course we mean you could be low risk, or high risk.  That being said, if you turn out to be un-insurable, then there’s a larger problem. One of the reasons that no credit file existing can be rated somewhat higher by insurance companies is because they know nothing about you.

Without a credit file and with no prior coverage, it’s difficult to prove that you exist and are insurable. This definitely impacts pricing on renters insurance, but there are ways to overcome it. On the other hand, if you have damaged credit, this can impact your pricing as well.  There is a correlation between long-term damaged credit and increased claims activity, as well as decreased timely payment of premium. These things all factor in.

How Many Claims Have Your Neighbors Filed?

Previous geographically nearby claims can often impact the price you pay for your renters insurance.  For instance, if theft claims are common in an area, it will cost slightly more to insure. Claims from the previous resident of your apartment can also be relevant, especially if the claim is from an ongoing issue that was not resolved.

You don’t need to ask your neighbors how many claims they’ve filed, the insurance companies obviously already have this information and factor it into the pricing models.  However, you do need to know that it’s relevant. Previous renters insurance claims having a significant impact on your pricing may mean there’s something you don’t know yet about the neighborhood and should carefully consider.

Coastal Exposure

Do you need coastal Texas renters insurance?  Or maybe you live in Tampa and need Florida renters insurance. While there are different types of coastal risk renters insurance, they generally have two things in common. One, they often exclude wind.  Two, they’re often expensive because of the significantly increased risk. The wind exclusion is often not a major hurdle, since you don’t own the building if you have renters insurance.  On the other hand, the price can be very important.  Effective Coverage has several writing companies, each with a different appetite for different types of coastal renters insurance.

There are many other things that impact the price of renters insurance, but this general overview should give you something to think about.  It’s crucial to remember that, in the real world, no one cares if their renters insurance increases 10%.  That’s a brave statement, you say?  We disagree.  What’s 10% of $150 a year? 10% sounds like a big increase, but it’s around a dollar a month.  Renters insurance is still the least expensive protection you could ever buy, and one of the best investments you can make.