Why Renters Insurance Rates Are Rising

How Much Is Renters Insurance?

The average cost of renters insurance is $170 per year, according to a 2021 report by the Insurance Information Institute—the latest available data. That figure had been trending downward over the previous decade, even as homeowners insurance rates went up.

However, renters may have seen that trend reverse in recent years as inflation, rising construction costs and more frequent severe weather events have begun to push premiums higher across much of the country.

Learn more: What Does Renters Insurance Cover?

Why Renters Insurance Rates Are Rising

Renters insurance costs used to trend downward, but that's begun to reverse as insurers face higher claim expenses and broader economic pressures. Several factors ranging from climate risks to inflated rebuilding costs are driving premiums upward.

Here's a quick look at some of the more influential factors.

More Frequent and Severe Natural Disasters

Extreme weather events, including hurricanes, tornadoes, wildfires, floods and storms, are becoming more common and costly.

Insurers facing higher paid claims for property damage and personal property replacement are passing those costs on to renters through higher premiums.

Inflation and Rising Replacement Costs

Inflation, especially for material goods and labor, has increased the cost of replacing damaged possessions. Because renters insurance covers belongings and living expenses after a loss, higher replacement costs translate directly to higher rates.

Higher Liability Risks

In addition to covering your personal belongings, renters insurance can also provide liability coverage that covers medical bills and property damage sustained by someone else in the place you're renting.

As lawsuits and liability claims become more frequent and costly, insurance providers raise premiums to reflect the growing financial exposure. Renters in areas with higher legal claims may see particularly sharp rate increases.

Tighter Insurance Markets

Reinsurance is a process that allows insurers to transfer some of their risk to other insurance companies, particularly for catastrophic losses.

But as residential insurance claims have increased in volume and cost, insurers have had to pay more for reinsurance, and those increases have trickled down to renters. Some insurers have even pulled out of certain high-risk regions, reducing competition in the area, which can result in higher rates.

How to Save on Renters Insurance

Even with rates climbing, there are still ways to keep your renters insurance affordable. Here are some steps you can take to reduce your monthly premium without sacrificing coverage:

• Bundle your policies. Combining your renters insurance with auto, life or other policies from the same provider can unlock multi-policy discounts. This can lead to significant savings while keeping all your coverage in one place.
• Increase your deductible. Opting for a higher deductible will usually lower your monthly premium. Just make sure you have enough savings to cover that amount if you ever need to file a claim.
• Take advantage of discounts. Ask your insurer about discounts for things like security systems, smoke detectors or even paying your premium annually. Many renters miss out simply because they don't ask.
• Improve your credit score. In most states, a higher credit score can mean lower insurance rates. Good credit signals to insurers that you're less likely to file frequent claims. Check your FICO^® Score^Θ and Experian credit report for free to see where you stand and get insights into how you can improve.
• Avoid unnecessary coverage. You can avoid overinsuring by calculating the true replacement value of your belongings.
• Shop around. Insurance companies price risk differently, and rates can change year to year. Compare quotes at least annually to ensure you're still getting the best deal.

Learn more: How to Get Renters Insurance

The Bottom Line

Rising renters insurance rates can feel frustrating, especially when the reasons are beyond your control. But that doesn't mean you're powerless. By understanding what's driving costs higher, you can make smarter decisions about your coverage and take steps to keep your premiums in check.

Even with recent price increases, renters insurance remains one of the most affordable ways to protect your belongings and safeguard against liability risks.