How Your Credit Check Can Affect Your Renters Insurance

Most renters are people who cannot afford a home and all the monthly costs that go with it. In the quest to live a low-cost lifestyle, renters often overlook the financial benefits of having a renters insurance policy. A growing number of landlords require that their tenants carry a specified amount of renters insurance to lower their risks.

What Renters Insurance Covers

Most landlords carry property insurance that covers the entire structure of the home or complex. So if you rent an apartment, the unit is covered by the landlord, but your personal belongings are probably not covered. In that scenario, you will need renters insurance to protect the value of your personal possessions. Here are the main areas covered by a renters insurance policy:

  • Property: the coverage pays for replacing items stolen or damaged by the policy’s named perils, such as storms. Renters insurance typically doesn’t cover damage caused by earthquakes and floods. Not all items are automatically covered, as you may need special coverage for jewelry.
  • Liability: If you rent a commercial or personal property and a visitor gets injured or becomes ill, your policy will cover medical and litigation costs.
  • Loss of use: When you cannot live at your residence due to damage from a covered risk, you are entitled to benefits that pay for lodging and other living expenses.

Renters insurance is not a legal requirement but can be mandated by landlords. Therefore, a rental or lease agreement should explicitly state whether renters insurance is required.

Premiums and Credit

Your renters insurance premium will be based partly on your credit-based insurance score. This unique score is not the same as your FICO score, as it reflects your likelihood of filing a claim, partly based on your credit history. California does not allow these credit-based insurance scores while many other states do. The higher your credit-based insurance score, the lower your monthly premium will be due to lower risk. If you already have a good FICO Score or VantageScore, you will most likely be eligible for a lower premium.

Your location is an essential factor that affects your premium since high crime areas have predictably higher rates for claims. It also matters how long you’ve been with the insurance agency and the number of claims you’ve filed. A few other factors that affect your monthly insurance costs are the amount and type of coverage, along with your choice of deductible. If you wish to lower your monthly costs, you can raise your deductible, which is the amount of cash you pay out of pocket for repairs before your coverage takes over.

As far as whether or not a credit check by the landlord will affect your credit, you can relax because it’s only a soft credit check. While hard inquiries can shave off about 10 points, soft inquiries will not impact your credit score.

Preparing for Renters’ Credit

The best way to prepare for a renters’ credit policy is to start by taking inventory of your assets. Make a list of each item along with its estimated cost of replacement. Then share the list with a renters’ insurance agent. Find out the exact type of coverage you need to protect your most valuable belongings.

It’s a good idea to get renters insurance if you are a renter and own valuable items. Your apartment will be protected by the landlord, but you must take responsibility for insuring your personal items. Your credit history makes a difference when it comes to paying lower premiums on renters insurance, but the soft credit check won’t hurt your credit score. Contact us at Jack Stone Insurance Agency to get started with renters insurance.

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