Coverage and Deductible Choices

In most cases, you can customize your insurance policies to adjust your renters insurance rate. Your policy selections can affect how much you pay for renters insurance coverage. For example, opting for additional coverage for more expensive items, like jewelry, will increase your cost. You can usually choose between actual cash value coverage and replacement cost coverage to protect your belongings. Here are the differences:

• Actual cash value coverage considers depreciation when determining the value of your belongings. For example, if your older model TV is damaged in an accident, your insurance company will pay you for the value of the TV minus depreciation over time. This coverage is generally standard on renters insurance policies.

• Replacement cost coverage is usually more expensive than cash value coverage. With replacement cost coverage, the insurance company doesn’t depreciate the value of your belongings. That means the insurer pays the full amount to replace your old TV with a similar model after a covered accident.

The deductible you choose also affects your premium. A renters insurance deductible is the amount you have to pay out-of-pocket before your insurance policy kicks in. For example, if your deductible is $1,000 and a fire destroys $2,000 worth of furniture in your home, you’re responsible for paying the first $1,000 before your insurance pays the remaining $1,000. Choosing a higher deductible usually lowers insurance rates. Similarly, a lower deductible typically increases rates.

Credit Score

While insurance companies don’t rely on your credit score like a bank, credit card company or other lender might, providers might pull a report to calculate your premium. Your credit score can help underwriters determine financial risk factors when deciding what to charge for renters insurance. You may qualify for lower rates if you have a higher credit score, but a lower score could mean paying more for renters insurance.

Claims History

When a covered event happens, such as a fire in your kitchen or an incident of vandalism, your renters insurance helps cover the cost of replacing your possessions. But after you file a claim for a covered loss, your insurer may raise your rates.

Insurance carriers raise rates after paying claims due to a potential risk of the policyholder filing another claim in the future. For example, if your dog bites a guest and you file a claim, your rates may increase. In the eyes of the insurance company, your dog has bitten a guest once, so the dog may do it again.

Likewise, renters insurance covers theft in most situations. But once an insurer pays your claim, it may see your apartment at a higher risk for future theft and raise your rates. Your provider can also decline to renew your policy based on your insurance claims history.