Families and households that are signing up for renters insurance don’t always understand how insurance companies value these kinds of policies and how they calculate premiums. Some inside information about how insurers operate can help you make better decisions in buying and negotiating renter’s insurance policies to cover all of the possessions and items in your rented home.
Renter’s Insurance: General Policy Information
Those who want to sign up for renter’s insurance policies should begin with a good inventory. Go through the house and write down every item that you want covered, along with a value for each item. This will help you complete most of the detailed process of evaluating how much your personal goods are worth. Those doing these inventories will want to exclude a lot of small items for the general purpose of getting the biggest and most expensive things covered without putting too much time and energy into the inventory.
Along with the inventory, you’ll also want to understand how renter’s insurance values items. Many insurers use two different valuation methods, actual cash value and replacement cost value. Actual cash value is tied to the direct market price for used items, while replacement cost value includes depreciation from the time that you originally bought items.
Issues with Renter’s Insurance: Your Credit Rating
Another point that not all consumers know is that lots of different factors can affect the “underwriting” of your renters insurance policy. The total value and risk factors will be included, but what about your actual financial credit history? Most people would think that their credit history would not affect renter’s insurance, but according to recent insurance industry trends, it actually might.
Why Credit Ratings May Affect Insurance
The basic fact is that insurance companies of all types are now turning to complicated computer algorithms in an attempt to find the best customers. One tactic that they have been using is taking specific credit reports designed for insurers, such as those from companies like TrueCredit or ChoicePoint or other third party reporters, to figure a policy holder’s credit history into an insurance premium. This is most often done in auto insurance, but recent reports indicate it may be part of homeowner’s and renter’s insurance underwriting calculations as well.
Insurance companies including credit ratings in their premiums has caused something of an uproar among consumer advocate groups. The logic behind using credit ratings, according to insurers, is that those who default on debt are more likely to make claims. Advocates for the American family often refute this idea, calling the use of credit ratings a discriminatory practice.
Those who are signing up for renter’s insurance can ask their insurance companies whether or not they will seek their credit score when compiling policy information. Individuals are generally entitled to knowledge about what companies inquire about their credit. Consumers can take advantage of free credit reports and tools from the three major credit reporting agencies TransUnion, Equifax and Experian. It’s a good idea to always be knowledgeable about your credit score and monitor your credit situation both to protect against identity fraud and to be sure a bad mark or error on your credit report is not working against you when it comes to insurance underwriting and other financial situations.