In America, credit is king. This means that your can affect everything from loan approval to your ability to flat.
Renters insurance protects your personal belongings in a rented home against unforeseen circumstances such as theft and fire. Let’s say you’ve experienced an unfortunate incident in the home you’re renting, but you have a renter’s insurance policy. In this case, you are insured against any lost or damaged items, and can also be protected from liability if someone gets hurt on your property.
But do you know what your may also affect your rates?
A rumor that can hit hard, especially if you’re far from stellar .
But there is no need to panic – there are many more options available.
How Credit Affects Renters Insurance
If you have a bad credit history, it can negatively impact your renters’ insurance rates. This is because your cA reassessment is often one of several factors insurers use to decide how much to charge you for a policy.
However, your credit score is never the only factor that determines your insurance rates.
Other important factors include:
- Where do you live.
- The value of your personal belongings.
- What type of property do you live in.
- Whether or not you have pets.
- Frequency of natural disasters such as hurricanes and wildfires in your area.
- What coverage do you need.
In some cases, insurance companies also offer discounts to customers based on a good credit history.
Whether these methods hurt or help your wallet depends on your credit score and which insurance company you choose.
Why do insurers use credit to set rates?
Insurance companies take into account your credit score as it may indicate the likelihood that you will file a claim.
Since customers with bad credit are statistically more likely to file claims with their renters’ insurance company, these companies charge customers with lower scores more upfront payments.
While using credit as a factor in determining insurance rates is a legal and common practice in many parts of the country, it is also controversial. Insurance companies often charge much higher rates to the very people who can least afford it.
With credit scores often correlate with income levelslow income customers usually pay higher rates.
However, there is some light at the end of the tunnel as renters insurance is one of the most affordable insurance options you will find.
Which states allow insurers to use credit scores?
Not all states allow insurance companies use your credit score to determine your insurance rates.
For example, the following states have laws that limit the extent to which insurers can base your rates on your credit:
- California.
- Hawaii.
- Maryland.
- Massachusetts.
- Michigan.
- Oregon.
- Utah.
If you have bad credit and live in a state that allows insurance companies to take credit scores into account, you still have options.
Some insurance companies do not consider your credit score when setting rates, and not all insurance companies give your credit score the same weight.
Will applying for renters insurance affect your credit score?
While many insurers check your creditworthiness when considering your insurance policy application, the good news is that applying for insurance won’t hurt your score.
Insurance companies do not initiate a tough investigation into your credit report; they cause only mild cravings that do not affect your credit score.
Should I still purchase renter’s insurance if I have bad credit?
Even if you have bad credit, you should still consider buying renter’s insurance. This is because renters insurance can save you a lot of money if something happens to your personal property.
Most renters’ insurance covers things like:
- Damage to your belongings if something happens to them.
- If there has been a theft in your apartment.
- If the house you are renting is burned down in a fire.
- If a guest is injured in the apartment you rented.
- Property damaged by visitor.
Some policies also cover living expenses if your apartment becomes uninhabitable and you need to move somewhere else, but you’ll have to check your policy.
Does the cost of renters insurance outweigh the benefits for those with bad credit?
It’s good to know that renter’s insurance doesn’t have to be very expensive, even if your loan doesn’t meet your expectations.
In many cases, it will only cost you a few dollars a month, which means it will more than pay for itself if your property is damaged or stolen.
For those with bad credit who need to focus on paying off debt and spending less, renters insurance is still worth it.
How to find good renter insurance with bad credit
Here are some search strategies best tenant insurance, regardless of your credit score.
Determine what coverage you need
When you buy a renter’s insurance policy, you need to decide what coverage limits to choose. While most companies set a minimum amount between $20,000 and $30,000, you may need to purchase additional coverage if you have valuable items such as expensive jewelry or appliances.
Shop around for the best prices
Not all insurance companies take your score into account when setting rates, and insurance companies that take credit as a factor may weight it differently.
That’s why it’s so important to shop on sites like Polygeniuswhere you can compare the rates of different insurance companies in one place.
Look for discounts
Some insurance companies offer their customers discounts on policies. These may include discounts for combining renter’s insurance with auto insurance, discounts for paperless statements, and discounts for prepaid policy.
Consider it in your budget
If you’ve never bought renter’s insurance before, you may not know how much it costs. Luckily, renters insurance policies are often incredibly affordable and can easily be added to your monthly budget without breaking the bank.
For example, renter insurance rates from Lemonade start with as little as $5 a month and you can get covered in as little as 90 seconds. For the price of a cup of coffee, you can make sure your property is protected in the event of an accident, theft or natural disaster.
Summary
Unfortunately, a bad credit history can negatively impact a renter’s insurance rates. But not all insurance companies use credit information to determine prices, so getting quotes from multiple providers can give you a better idea of how much you’ll have to pay.