Renters insurance is a great way to protect yourself and your property when you rent a home. One key part of renters insurance is your deductible. Put simply, a deductible is the amount you pay before your insurer will settle your claim. It’s important to have a good grasp on deductibles when you’re setting up any type of insurance policy. It could just be the difference between saving and costing you money.
When you get a renters insurance policy, you’ll need to choose your deductible. How high or low you set the amount is up to you. Keep in mind that doing one or another can affect your rates. Generally, setting your deductible higher will lower your rates. But it also means you’ll have to pay more upfront. There are pros and cons to both options.
This article will define renters insurance deductibles. You’ll learn what role they play in renters insurance and how they work. We’ll also help you decide how high or low you’ll need to set your deductible. Finally, we’ll answer some frequently asked questions about renters insurance deductibles.
What is a Renters Insurance Deductible?
Whenever you file a renters insurance claim, you’ll need to pay a deductible. A deductible is the amount of money you pay out of pocket to your insurer. After you pay your insurer, they’ll take care of the rest of the damages (up to your coverage limits).
With renters insurance, you’d usually file a claim because of a disaster that damages your belongings or anything else inside your unit. Typically, renters insurance includes coverage for:
- Liabilities i.e., bodily injuries and property damage
- Personal belongings
- Additional living expenses
It’s up to you to set your deductible at the amount that you want. Your insurer will typically give you a few choices. Often, you’ll have the option to choose between a set amount of money or a percentage of the claim. You can find your deductible amount on your policy declarations page.
Some coverages, such as liability protection, may not have a deductible. But you can expect any personal property claims to include one. Be sure to check with your insurer about which types of coverage don’t include a deductible. Per the Insurance Information Institute (III), states regulate the way that deductibles work in your policy. It’s also common for these laws to differ between each state.
How Renters Insurance Deductibles Work
There are normally two types of deductibles you can choose from. Dollar amount (flat) or percentage based. The one that you choose will determine how much you’ll end up paying each time you make a claim. Here’s how each type of deductible works:
Dollar Amount Deductible
A dollar amount or flat deductible is one where you choose a set amount to pay. You must agree to a specific dollar amount with your insurer when you set up your policy. Then, if there were an accident or disaster, you’d just pay that amount whenever you file a claim.
For instance, let’s say you have a $500 renters deductible, and somebody breaks into your rental unit. If they take $5,000 worth of your property, you’d only have to pay $500. Your insurer would cover the remaining $4,500.
With a percent deductible, you’d pay your insurer a certain percentage of your property’s total value. In other words, you’d pay them for a percentage of your total coverage. For example, imagine that you have $25,000 worth of coverage for your property and your deductible is set at 1%. You’d have to pay $2,500 if you ever file a claim.
Flood and Earthquake Deductibles
Your renters insurance will cover your property from disasters such as wind and hail. But it doesn’t include coverage for floods or earthquakes. You’ll need to add these separately to your policy. Your insurer may also set certain deductible rules if you live in an area that’s at risk for disasters. The rules are different for both flood and earthquake insurance.
Per the III, you’ll need to buy flood insurance if you live in an area that’s a high risk. With flood insurance, you have the option of a flat or percentage deductible. The deductible is usually for your personal property, but it could also be for the unit’s inside structure.
You may need to buy earthquake insurance if you live in a high-risk area. Earthquake insurance usually requires you to have a percentage deductible between 2 and 20%. Some states may also require you to have a higher deductible of around 10%. These are states that are at a higher risk of earthquakes, such as:
- California (requires a 15% deductible, plus 10% for extra structures)
What Should Your Deductible Be Set At?
What you set your deductible at is your choice. But what’s the best option for you? It depends on your situation. There are good reasons to set a high deductible. But you might also find that there are good reasons to have a low one. Here are the pros and cons for each option:
Setting a High Deductible
There are plenty of advantages to setting a high deductible. Your rates will almost certainly go down if you choose this option. This is because you’re committing to paying more money if you file a claim.
Lower rates sound great. Why wouldn’t anyone want that? But it’s not always a good idea to set a high deductible. Doing so means you’re putting yourself on the hook to pay a larger amount of money after a disaster. You should only set a high amount if you can afford to pay it later. If $1,000 is too much to pay all at once, you shouldn’t do it.
You should also consider whether or not you’re renting in a risky area. If you live in an area at risk for disasters or crime, setting a high amount might not be a good idea. This is because you’d have to pay the amount each time you file a claim. If you’re at risk of filing many claims, you should probably get a lower deductible.
Setting a Lower Deductible
When you set a lower deductible, you’ll likely see higher rates. But there are still some reasons to go this route. If you’re at a high risk for filing claims, then you should think about setting your deductible at a lower amount. You should also think about whether you’d be able to pay a high deductible if you ever had to file a claim. If your answer is no, then you should go for the lower option. Also, renters insurance is so cheap that a lower deductible doesn’t affect your rates very much.
Do Renters Insurance Endorsements Have a Deductible?
Riders or endorsements are extra coverage that you can add to your policy. They cover expensive items that go over your coverage limits, such as jewelry or art. They may also cover disasters that your renters insurance doesn’t cover, like water backup damage or identity theft.
Endorsements that extend coverage limits for your specific don’t usually include a deductible. That means when you file a claim, you’ll only have to pay the deductible for your standard policy’s personal property coverage. There shouldn’t be an extra deductible for your added endorsement.
Frequently Asked Questions
Q: When do I pay a deductible?
A: You’ll need to pay a deductible whenever you file a claim with your insurance company. This happens when a disaster strikes your rental unit and causes damage. Most of the time, renters claims are for your personal belongings. You may also have to file a claim if you or your family cause some type of damage.
Q: Is it better to have a high or low renters insurance deductible?
A: This depends on your situation. There are reasons to do both. Setting a higher deductible means you’ll have lower insurance rates. But it also puts you on the hook for paying more money out-of-pocket if a disaster hits. Only do this if you can afford to pay it.
Setting a lower deductible will give you higher rates. But it also means that you’ll pay a smaller amount if there were a disaster. A lower deductible would be a good choice if you live in an area that’s at risk for disasters or crime. You might also consider a low deductible if you can’t afford to pay a lot of money all at once.
Q: How do I find out my deductible?
A: You can find your deductible on your policy declarations page. This is also the front page of your policy. Your deductible will either be a flat dollar amount or a percentage. For homeowners and renters policies, you’ll have the option between either. A flat deductible is when you pay a set dollar amount each time you file a claim. And a percent deductible means that you pay a percentage of your total coverage.
Q: Do I have to pay a deductible when the damages weren’t my fault?
A: You must pay a deductible when you file a claim. This is regardless of any fault. Renters insurance covers you from damage by vandalism, theft, and various natural disasters.
Keep in mind that if the damages were your fault, you would have to pay for everything out of pocket. This includes wear and tear and a lack of maintenance on your part.