Why is renters insurance so cheap?

Renters insurance is one of the cheapest insurance products you can buy, costing an average of $15 a month. This is partly because a renters policy doesn’t insure a physical dwelling — just your personal property, liability, and additional living expenses.

Kara McGinley

Kara McGinley

Published March 2, 2020

KEY TAKEAWAYS

  • Renters insurance is generally cheaper than homeowners insurance because it covers your personal property, liability, and loss-of-use, but not the physical building that you live in

  • Adding endorsements to your renters insurance policy will increase specific coverage, but will raise your premiums slightly

  • If you live in an state that experiences natural disasters you may have a higher premium than someone who lives in a state with mild weather

  • Most renters insurance companies offer discounts if you bundle your policies or if you install safety features in your home, like smoke alarms or deadbolt locks

Renters insurance is a relatively cheap type of insurance policy, it typically costs much less than other insurance products. Renters insurance covers your personal property if it gets damaged or stolen, your liability if you cause damage or injury to another person, and any additional living expenses if you are temporarily displaced from your home due to a covered peril.

Despite its low monthly cost, renters insurance can save you tens of thousands of dollars if disaster does strike. While homeowners insurance costs an average of $1,200 a year, renters insurance premiums are significantly less, averaging $180 per year.

Renters insurance policies are made up of three different parts: personal property coverage, liability and medical expenses, and loss-of-use coverage. If renters insurance offers this much financial protection, how is it so cheap?

In this article:

Why renters insurance is so cheap

Renters insurance continues to be one of the cheapest insurance products you can buy, with prices reportedly falling 2.7% in 2017, according to the Insurance Information Institute. On the other hand, the price of a homeowners premium actually increased in 2017.

“Right off the bat renters insurance is cheaper because it’s simply insuring less things,” said Fabio Faschi, property and casualty team lead at Policygenius. “Renters insurance is covering your personal property and liability, whereas homeowners insurance is covering the actual structure of the home. The structure of the home is generally going to be more expensive than your stuff inside it.”

Renters insurance deductibles are generally lower than most insurance policies as well, usually costing either $500 or $1,000 (your deductible is the amount you pay out of pocket for a claim). Which, according to Faschi, is relatively cheap because a deductible is relative to the amount of coverage you have, and what you’re likely to file a claim for. “Homeowners claims are usually made because of damage to a major household system, like your roof or appliances. But renters insurance deductibles are cheaper, since most of the time your personal property isn’t going to be as expensive as, say, having to replace your roof.”

That being said, while shopping for a renters policy it is possible to receive a high renters insurance quote, especially if you have valuable belongings or live in an area of the country that experiences frequent natural disasters. That’s why it’s important to shop around and take advantage of discounts when purchasing a renters insurance policy.

Factors that affect renters insurance premiums

A variety of factors can affect your renters insurance premium, including the type of policy you buy, what state you live in and even details about your rental unit itself. Most renters insurance companies offer discounts, so you may be eligible for an even lower renters insurance rate than you think.

Renters insurance coverage amounts

The main factor that affects the price of your renters insurance premium is how much coverage you buy. An average renters insurance policy costs between $120 and $190 per year.

Here are common coverage amounts for each type of coverage in a renters policy:

Type of coverageCoverage amounts and ranges
Personal property$15,000 - $500,000
Liability and medical expenses$100,000 or $300,000 or $500,000
Loss-of-use and additional living expenses$3,000 - $5,000 or 40% of your personal property limit

Your landlord may require you to purchase a certain amount of renters insurance coverage in order to rent their apartment. Landlords will have their own insurance to protect the actual dwelling, but that does not extend to your personal property or liability. “Landlords usually want you to have renters insurance so that if you cause damage to their property, you as a tenant won’t be out thousands of dollars. You can instead file a renters insurance liability claim and your insurance company can reimburse your landlord for the damage you caused,” explained Faschi.

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Actual cash value policy vs. replacement cost policy

When it comes to how you’ll be paid after a claim, there are two types of renters insurance policies: an actual cash value policy and a replacement cost policy. Which policy you buy will determine how your insurance company will reimburse you for your lost or damaged items in the event of a covered claim.

  • Replacement cost policy: Pays out the value of your belongings as if they were new.
  • Actual cash value policy: Pays out the depreciated value of your belongings, meaning time and wear and tear will be factored into the reimbursement.

Replacement cost policies tend to have higher premiums, but they pay you out more. Before deciding which renters insurance policy to go with, you should compare renters insurance quotes and shop around, either in person, over the phone, or online.

Adding endorsements to your renters insurance policy

Certain items in your policy, like expensive jewelry, collectibles, or electronics, will have a sublimit, meaning there is a maximum amount your renters insurance company will reimburse you that is lower than your policy’s overall coverage limit for personal property.

For example, stolen cash usually has a sublimit of $200 to $250, so if you have $350 in cash in your wallet and it gets stolen, you will only be reimbursed up to $250. If you want to extend coverage for valuable personal property or for perils that your policy doesn’t cover, then you can add endorsements to your policy. However, these endorsements will increase the price of your premium.

Some common renters insurance endorsements include:

  • Scheduled property endorsement: Extends coverage for a specific personal possession of high value.
  • Earthquake endorsement: Renters insurance typically does not cover damage caused by earthquakes, so if you live in an earthquake-prone area you should ask your insurance representative about adding an earthquake endorsement.
  • Flood endorsement: Renters insurance generally doesn’t cover natural disasters, which includes floods. However, you can add a flood endorsement to your renters policy if you live in an area of the country that experiences frequent flooding.

Renters insurance discounts

You can get your renters insurance rate even lower if you qualify for any discounts that your insurance company offers.

Below are renters insurance discounts that many renters insurance companies offer:

  • Safety precautions, like installing smoke alarms or deadbolt locks
  • Multi-policy, such as bundling your renters insurance policy with a car insurance policy
  • Paid-in-full, paying your premium annually instead of monthly or bi-monthly

How much does renters insurance cost in each state?

Renters insurance map

Where you live will influence the price of your renters insurance premium. For example, if you live in an area that experiences extreme weather your renters insurance rate is going to be higher than someone who lives in a state with mild weather. Your ZIP code will also be a factor — if you live in an area with a high-crime rate your premium might be slightly higher because you will be considered more at-risk for filing a claim.

With those caveats in mind, below are the average annual renters insurance premiums in each state in the U.S. in 2017, per the NAIC:

Average Annual Premium by State, 2017

StateAvg Annual Premium
Alabama$235
Alaska$166
Arizona$178
Arkansas$212
California$182
Colorado$159
Connecticut$192
Delaware$159
District of Columbia$158
Florida$188
Georgia$219
Hawaii$185
Idaho$153
Illinois$167
Indiana$174
Iowa$144
Kansas$172
Kentucky$168
Louisiana$235
Maine$149
Maryland$161
Massachusetts$194
Michigan$182
Minnesota$140
Mississippi$258
Missouri$173
Montana$146
Nebraska$143
Nevada$178
New Hampshire$149
New Jersey$165
New Mexico$187
New York$194
North Carolina$157
North Dakota$120
Ohio$175
Oklahoma$236
Oregon$163
Pennsylvania$158
Rhode Island$182
South Carolina$188
South Dakota$123
Tennessee$199
Texas$232
Utah$151
Vermont$155
Virginia$152
Washington$163
West Virginia$188
Wisconsin$134
Wyoming$147
United States$180