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Where can I get cheap renters insurance with no down payment?
When you sign up for renters insurance, you always have to pay at least one month’s premium upfront (your premium is the money you pay for insurance).
Many insurers also ask you for an extra fee on top of this. Some companies, such as Progressive, refer to this as a down payment, although others use a different term, such as installment fee. These are all different words for the same concept — an extra charge that your insurer adds onto your first payment.
How to avoid down payments in renters insurance
You can often avoid this extra fee by paying for an entire year upfront instead of making monthly payments.
You can also avoid it by getting renters insurance from a company that never charges a down payment, no matter whether you pay each month or upfront for the whole year.
Renters insurance companies with no down payment
Here are six companies that never ask for a down payment when you buy renters insurance:
- State Farm
- Liberty Mutual
These insurers still require you to pay at least one month’s premium when you buy a policy, as per the industry standard.
Renters insurance with an avoidable down payment
Several major insurers charge an additional upfront fee if you choose to pay your premiums on a monthly basis, but not if you pay for the entire year:
You might also be able to get your insurer to waive the down payment if you call a representative on the phone or visit their office in person instead of just buying your policy online. When you receive your renters insurance quote, be sure to ask how they handle down payments.
Finding cheap renters insurance
Most renters insurance policies are fairly cheap, with or without a down payment. On average, renters insurance costs just $15 per month, but you might pay more or less depending on your risk profile.
Factors that affect your premiums include:
- Your city’s crime rate
- Whether your area is prone to extreme weather
- How many claims you’ve made previously
- Your home’s safety features (i.e. burglar alarm, smoke detectors, etc)
- Your credit history (though there are some states where no credit check for renters insurance is required).
Even if you have a higher risk profile, renters insurance will still probably be quite affordable. For example, in Louisiana, which frequently gets hit by severe floods and hurricanes, you can get renters insurance for just $28 per month on average.
Why do insurers charge premiums or down payments for the first month?
Insurers charge premiums upfront because renters insurance is a service, and it’s very common to pay for services upfront. Cable companies usually bill one month in advance, and landlords require at least one month’s rent when you sign your lease. Insurers operate the same way.
The more complicated answer is that insurance is a contract between you and your insurer. You agree to pay your insurance company money, and in exchange, they agree to protect you from certain types of financial loss.
Your initial premium activates that agreement. Without it, there would be no binding contract between the two of you.
Why charge an additional down payment for the first month?
Some insurers tack on an extra fee for your first month to provide an incentive for you to pay for an entire year upfront.
Insurance companies prefer annual payments for several reasons:
- They’re more reliable: When you pay in advance, there’s no chance that you’ll go bankrupt and default on your monthly payments.
- They’re more lucrative: Insurers invest most of the money that you pay them. They can earn more by investing several hundred dollars right away than by investing $15 every month.