Looking for an inexpensive way to protect your valuables? Renters insurance is a cheap way to protect your property from damage and theft. Think of it as forgoing one of those large premium coffees per week from your favorite barrista, and instead replace it with the peace of mind that your prized possessions are protected in case they ever get damaged or stolen. Save even more by putting these helpful tricks of the trade to the test and keep more of your money in your wallet!
1. Raise Your Deductible
When purchasing a renters insurance policy, increase the deductible. The deductible is the amount of money that the renter is responsible for paying out of pocket if he files a claim with his insurance company. The amount of the renter’s premium (the cost of the insurance policy) is partially based on the amount of the deductible. When it comes time to file a claim, the renter will be responsible to pay the deductible, and the insurance company then pays the remainder. Therefore, if your deductible is high, then the insurance company will be responsible for paying less of the claim. As a result, a higher deductible will produce a lower annual premium rate. On the other hand, if the deductible is lower, then the insurance company will be responsible for a greater portion of the claim, thereby resulting in a higher annual premium rate for the renter.
For example, if the renter files a claim for $5,000 in property damage and has a high deductible of $1,000, then the out of pocket cost for this renter’s claim would be a $1,000, while the insurance company would pay the remaining $4,000. If the deductible was $500, then the renter would be responsible for the first $500 on that same claim, but the insurer would be on the hook for $4,500. This second renter’s annual premium would cost more than the first renter’s premium. Therefore, the renter must decide whether to roll the dice and pay less up front for the annual premium and risk paying more if there is a claim. Or the renter can play it safe by opting for a lower deductible, pay a higher annual premium at the outset, and be responsible for a lower amount if the renter should ever file a claim.
2. Ask your renters insurance agent about discounts
Insurance companies don’t usually offer coupons for their policies, but many do offer discounts if you can qualify for them. Inform your insurance carrier or agent about your smoke detectors, carbon monoxide detectors, and security systems. The renter may be entitled to a discount. Also, check with your insurance carrier or agent to see if there is a discount with any of the professional groups that you belong to, for example a state bar association or AAA.
3. Bundle your policies
Similar to shopping at one of those big warehouse stores where you can buy large quantities at lower prices, most insurers will offer a “multiline” discount to its customers if they bundle their policies. By purchasing renters, car and any other insurance policy through the same insurance company, you will likely receive a multiline discount on all of your policies.
4. Determine the value of your personal property
The renter must determine how to value his belongings. There are two main ways that an insurance company replaces a renter’s damaged property, the “actual cash value” (ACV) versus the “replacement cost coverage”. If the renter files a claim, the ACV coverage will only cover what the value of the damaged property was worth at the time it was damaged or stolen. For example, if you purchased a new couch for $1000 three years ago, that couch would be worth less today. Although you may still need to spend $1000 to replace the couch, the renter’s insurance policy would only pay what the couch is worth today, less the amount that the renter owes on the deductible. On the other hand, if the renter has replacement cost coverage, the insurer will pay what it costs to replace the damaged items, less the deductible, up to a preset limit. For the above example, the insurance company would pay however much it costs to replace that same couch, less the renter’s deductible and up to a preset limit.
As a result, the ACV will cost less in annual premiums because if there is ever a claim, the insurer will be responsible for reimbursing the renter for essentially “used” property, not brand new property. Replacement cost coverage will result in a higher annual premium because the insurance company will need to pay more to reimburse the renter to replace the damaged property with brand new property.
5. Pay in full by check
Many insurers want to avoid the headache of monthly billing and the cost of credit card processing fees. They would prefer that you pay in full, up front. Therefore, many offer discounts if the renter pays the insurance bill in full rather than in monthly installments. Additionally, check to see if your insurance carrier charges a fee for using your credit card. If so, avoid swiping your card and opt for an online payment directly from your bank account.
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