One key aspect of a renters insurance is the deductible. Put simply, this 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 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 it 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 and how they work. We’ll also help you decide how high or low you’ll need to set yours. Finally, we’ll answer some frequently asked questions.
What Is a Deductible?
Whenever you file a renters claim, you’ll need to pay a deductible. This is the amount of money you pay out of pocket to your insurance company. After you pay your provider, 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, policies include coverage for:
- Liabilities i.e., bodily injuries and property damage
- Personal belongings
- Additional living expenses
It’s up to you to set your deductible to 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 set amount on your policy declarations page.
Some parts of a renters policy don’t require a deductible, such as liability protection, but any personal property claims will. Be sure to check with your insurer about when you’ll need to pay one to satisfy a claim. Per the Insurance Information Institute (III), states regulate the way that deductibles work. 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 works:
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 insurance company would cover the remaining $4,500.
With percent deductibles, you’d pay your insurer a certain percentage of your belonging’s total value. In other words, you’d pay them for a pre-decided fraction of your total coverage. For example, imagine that you have $25,000 worth of insurance protection 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 Insurance 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 high risk for flooding. With this, you have the option of a flat or percentage deductible. This 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. This coverage usually requires you to have a percentage deductible between 2 and 20%. Some states may also require you to have a higher one 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)
High or Low Renters Insurance Deductibles
How high or low to set a renters deductible is up to you. But which choice is better? It depends on your situation. There are good reasons to have a higher one. But there’s also a solid argument for setting it lower. Here are the pros and cons for each option:
Setting a High Deductible
There are plenty of advantages to setting a high deductible. Your renters insurance 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 of them, 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 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 one if you ever had to file one. 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.
Renters Insurance Endorsement Deductibles
Riders, endorsements, and floaters are extra protection for valuables that you can add to your policy. They cover expensive items that go over your limits, such as jewelry or art. They may also protect you from disasters not covered by standard renters insurance, like water backup damage or identity theft.
Endorsements that extend coverage limits for your valuables don’t usually include deductibles. That means when you file a claim, you’ll only have to pay the deductible for your standard renter policy’s personal property insurance. There shouldn’t be an extra one for your added protection for individual prized possessions.
Frequently Asked Questions
When do I pay a deductible?
You’ll need to pay your deductible whenever you file a claim with your insurer. This happens when a disaster strikes your rented apartment or home. Most of the time, renters insurance claims are for your personal belongings. You may also have to file one if you or your family cause damage.
Is it better to have a high or low renters deductible?
This depends on your situation. There are good argument for having both a low or high deductible. Setting it higher means you’ll pay less for your renters insurance premium. 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 for 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 one 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 option if you can’t afford to pay a lot of money all at once.
How do I find out my deductible?
You can find it on your policy declarations page. You’ll have either a flat dollar amount or a percentage version. For homeowners and renters policies, you’ll have the option between either. A flat one is when you pay a set dollar amount each time you file a claim. And a percent one means that you pay a percentage of your total coverage.
Do I have to pay a deductible when the damages weren’t my fault?
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.