Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating Renters Insurance Costs
Transcript
- Lucas: Alright Luna, I want to talk about a cost that doesn't get nearly as much attention as rent or car insurance — renters insurance. And the reason I bring it up is that, for the first time in a while, your raise is actually beating the premium increases. Luna: Interesting. I mean, renters insurance is relatively cheap to begin with — usually a couple hundred bucks a year. But you're saying the gap between wage growth and premium growth has widened? Lucas: Exactly. Let's look at the numbers. Average hourly earnings for private workers hit $37.50 in May, up from $37.41 the month before. That's a roughly 2.4% annualized increase over the past year. Meanwhile, renters insurance premiums have been climbing at about 2% year-over-year, according to the CPI for tenant insurance. Luna: So wages are outpacing premiums by a bit. But how much does that actually matter for the typical renter? Lucas: Well, let's do the math. Median usual weekly earnings are now $1,204. A typical renters insurance policy runs about $175 a year — that's roughly $3.37 a week. So that's about 0.3% of weekly income. Even if premiums rise 2%, that's an extra seven cents a week. Your raise covers that easily. Luna: Seven cents — yeah, that's negligible. But why are renters insurance premiums rising so slowly compared to, say, auto insurance, which we've covered in a past episode? Lucas: Great question. Part of it is that renters insurance claims are typically smaller and less frequent. You're insuring personal property, liability, and maybe loss of use — not a vehicle that can be totaled. Also, renters don't have the same catastrophic loss exposure as homeowners. So insurers haven't had to jack up rates as much. Luna: Makes sense. I also recall that renters insurance is often bundled with auto policies, which can keep the standalone price down. And the demographic of renters tends to be younger, maybe with less high-value stuff to claim. Lucas: Right. The average claim for renters insurance is about $3,500, versus homeowners claims that can easily hit $15,000. So the risk pool is cheaper. And while property insurance overall has seen inflation from rebuilding costs and materials, renters don't cover the structure. That insulates them from a lot of the price pressure. Luna: So the story here is that renters insurance is one of those costs that has become more affordable relative to income. It's not just that wages are rising — it's that this particular expense is not rising much at all. Lucas: Exactly. And if you look at the broader economic indicators, the CPI for renters insurance has actually been fairly flat over the past year — up just 1.8% from May 2025 to May 2026. Compare that to overall CPI, which rose about 2.5% over the same period. So renters insurance is actually disinflationary compared to the average basket of goods. Luna: That's a nice little win for renters. But I wonder — does the typical renter even know that? I mean, renters insurance is often required by landlords, but it's not something people shop around for every year. Lucas: You're right. A lot of people set it and forget it. And that means they might be overpaying. But even so, the sticker shock is minimal. A $175 annual premium is less than a month of Netflix and takeout for many people. So the fact that it's becoming a smaller slice of income is a real, if modest, boost to purchasing power. Luna: And unlike some other costs we've covered — like rent or healthcare — this is one where the trend is clearly in the consumer's favor. That's worth highlighting. Lucas: Absolutely. And it's a good reminder that not every expense is going up faster than wages. Some categories are actually becoming more manageable. Renters insurance is a small piece of the puzzle, but it's a positive data point for millions of renters. Luna: So if someone listening is paying $200 a year and their wages went up 2.5%, they're actually better off. That's a nice feeling. Lucas: Yeah. And I think that's part of why we do this show — to help people see where their money is actually going and where it's not. Walking through the economy like this, it can be eye-opening. Luna: Speaking of which — if you find these breakdowns useful, and you'd like to see the show stay ad-free and independent, listeners can support us at Buy Me a Coffee dot com slash Fexingo. It's a simple way to keep the conversation going. Lucas: Yeah, we really appreciate that. And like Luna said, no pressure — just if it's something you want to do, it helps us keep doing this. Now, back to renters insurance: one other factor I want to mention is that the claims frequency for renters has actually been dropping. Luna: Oh really? Why is that? Lucas: Partly because of better building safety — things like fire alarms and sprinkler systems are more common in newer apartments. Also, theft rates have been declining for years. So insurers are paying out fewer claims per policy, which helps keep premiums low. Luna: That's a structural trend that benefits renters. It's not just a one-time blip. Lucas: Exactly. And it's worth noting that renters insurance is still vastly under-purchased. Only about 40% of renters have it. So for those who do, it's becoming more affordable. For those who don't, the barrier to entry is lower than ever. Luna: Well, and if your landlord requires it, it's essentially mandatory anyway. But the cost is so low that it's almost irrational not to have it. Lucas: Right. For the price of a couple of lattes a month, you get protection for your belongings and liability coverage. And with wages rising faster than premiums, it's a no-brainer. Luna: Alright, so to wrap up: renters insurance is one of those rare categories where your raise is clearly winning. Any final thoughts? Lucas: Just that it's a good example of how inflation isn't uniform. Some costs are rising faster than wages, but others — like renters insurance — are falling behind. For the average renter, that's a small but real improvement in purchasing power. And that's worth celebrating.