How poor credit could raise your renters insurance rates depends on where you reside, the amount of coverage you purchase, and if you made any past claims. However, your poor credit history can raise your renters insurance rates, while it can possess a significant difference. Generally, insurers have utilized credit-based insurance scores to determine rates and assess the risk associated with insuring individuals.
While similar to credit scores used by banks for credit card and loan applications, insurance scores compare factors like payment history and debt slightly differently. However, if you have a poor credit, your insurance score will also be poor. Additionally, individuals with lower credit-based insurance scores tend to file claims more frequently than those with higher scores.
Furthermore, in states where credit is considered to raise renters insurance rates, individuals with poor credit typically face rates that are 83% higher compared to those with good credit. Lastly, California, Maryland, Massachusetts, and Washington currently prohibit the use of credit scores to determine prices for renters and other types of home insurance.
What Affects the Rate of Your Renters Insurance?
There are several factors that can either raise or lower renters insurance rates, such as your location, desired coverage level or poor credit history.
Your Location
Renters insurance rates can vary significantly depending on your location. If you reside in a city with a high rate of home break-ins or regular weather-related disasters, you might encounter higher prices for renters insurance.
Coverage level
If you possess numerous belongings, especially costly items, or you seek peace of mind regarding personal liability, it’s advisable to raise your coverage level. However, it’s important to note that as coverage increases, so does the rate for your renters insurance.
Discount
Numerous insurers provide discounts to renters who install fire or burglar alarms in their rental properties. Additionally, bundling your renters insurance with another policy, such as car insurance, often qualifies you for further discounts.
Deductible
A deductible refers to the amount subtracted from your claim payout when filing a property damage claim. Renters insurance companies typically offer deductibles ranging from $250 to $2,000. Moreover, purchasing for higher deductible results in lower rates and it also means receiving less payout in the event of a claim.
Credit history
Individuals with poor credit typically face higher renters insurance rates. On average, for a renters insurance policy with $30,000 in personal property coverage, those with poor credit may incur an additional cost of $72 per year.
Safety Features
Insurance providers provide discounted rates on renters insurance policies for properties equipped with features that minimize risk. In addition, it reduces the chance of filing a claim. Some of these features may include Gated or secured community, Security/alarm system, Smoke detectors, Deadbolt locks, Video cameras and Sprinkler system.
Claims history
Having filed a previous claim, it could result in higher rates for your renters insurance.
Average Rate Of Renter Insurance
Renters insurance is generally more affordable compared to homeowners insurance, which can cost thousands of dollars annually, depending on your location. Additionally, the monthly average rate of renters insurance can also vary by state. The average rates are calculated based on a standard policy with the following coverage.
This includes $30,000 in property coverage, $100,000 in liability coverage, $1,000 in guest medical protection, and a $500 deductible. Moreover, it’s typically based on a profile of a 25-year-old unmarried male who lives alone, does not have pets, and has no history of renters insurance claims.
How To Secure Cheap Renter Insurance
Individuals with poor credit can take steps to reduce their renters insurance costs without having to accept excessively high rates or securing coverage entirely. Here are some tips to help lower your rates:
Check Your Credit Reports
If your credit data contribute in any adverse action like an increase in your rate, they are obligated to inform you. In such a situation, it’s essential to review your credit report and challenge any inaccuracies you discover. Additionally, if your premium rises, don’t hesitate to request an explanation from the insurance company regarding the reasons behind the increase.
Shop Around
Since various insurers use its unique pricing formula, it’s advisable to obtain quotes from a minimum of three companies to ensure you secure the most favorable deal. Moreover, you can collaborate with an independent insurance agent, to shop around on your behalf, potentially helping you find the best rates.
Looking For Discounts
You may be able to save money by bundling your renters and car insurance policies with the same company. Additionally, informing your insurer if your home is equipped with an alarm system could lead to further discounts. Other potential discounts include paying your premium in full upfront or enrolling in auto-pay.
Raise Your Deductible
A deductible represents the portion deducted from your insurance payout in the event of a claim. However, purchasing for a higher deductible can lower your premium, although you can consider whether you could cover that deductible before making a decision of making a claim.
Improve Your Credit
Settling expenses early and reducing debt can contribute to building your credit over time, potentially making you eligible for lower insurance rates. For instance, you can report your rent payments to credit bureaus, which could positively affect your credit score.
The rates of renters insurance is based by various factors including your location, chosen coverage amount, and any previous claims you may have filed. However, in many states, your rate is also raise by your credit history, which can have a significant effect on the price you pay for insurance.
