The factors which affect renter’s insurance rates are similar in nature to those of any other insurance policy. The primary factors which influence the annual premium of a renter’s insurance policy are the inherent risk to the property covered by the policy, the value of the policy, and the type of coverage chosen.
Risk assessment is integral to an insurance company’s pricing and availability of insurance plans. If the location of the policy is in an area which is prone to certain types of disasters – such as wildfires, floods, and hurricanes – covering damage caused by such disasters will increase the cost of the insurance policy. High crime areas also increase the risk of loss of property, so coverage for theft may increase if the property is in such an area.
The insurance policy will generally include discounts to the annual premium for measures which either prevent or limit destruction or theft of property. Such preventative measures include fire alarm systems, intruder alarms, and storm-proofing. The renter must also consider that, if the structure does not meet minimum state and local construction codes, it is possible the policy will be declined.
The value of the policy is the maximum amount of money the policy will pay to replace lost or destroyed property: higher coverage means a higher premium. When determining the value of the property, the renter determines the amount of money it would take to replace all of the items covered by the policy if they were destroyed. Such an estimate must include clothing, furniture, electronics, and anything else the renter would like to replace. As a note, certain items of extremely high value or which are susceptible to greater risk of damage or theft often require a separate insurance policy for their coverage.
The type of coverage can make a huge difference in the price of the insurance policy as well. For replacing property, the renter must determine if they want Cash Value or Replacement Cost coverage. The difference is Cash Value pays only what an item would be worth at the time of the claim with depreciation. Replacement Cost pays the full amount it would cost to replace the item, which makes it more expensive. Other factors related to type of coverage are the price of the deductible and available discounts.
The renter ought also consider liability insurance to cover injury to persons while on the renter’s property. Liability insurance cost is affected by both the level of coverage by dollar amount and the risk of injury; such as the renter owning a pet the insurance company considers a possible threat.
Ultimately it is up to the renter to weigh how much they can afford for renter’s insurance in their budget against the possibility of losing their property. In every case some type of coverage is highly recommended, but the first step is to contact your insurance provider to determine what the prices will be. They will review all of these factors and determine what options are available.