In addition to establishing your out-of-pocket costs to replace or repair your belongings, your renters insurance deductible also helps determine your policy’s rate. Here’s how your renters insurance deductible works and how it affects the cost of your policy.
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What is a renters insurance deductible?
Your renters insurance deductible is the amount of money you pay to repair or replace your possessions before your insurance funds kick in. If you ever file a claim for your belongings, your insurance company subtracts your deductible from the amount of money it pays to cover these expenses.
The deductible only applies to your personal property coverage, which usually includes furniture, electronics, jewelry, clothes, gear and other possessions. If you’ve purchased appliances or made improvements to your rental unit, your personal property coverage usually covers these items, too.
You do not have to pay a deductible for the other coverages on your renters insurance policy, which normally include additional living expenses, personal liability and guest medical coverage.
If a fire destroys $5,000 worth of your property and you have a $1,000 deductible, the insurance company pays $4,000. Bear in mind that the exact amount you receive from the insurance company also depends on whether you insure your property at its actual cash value or on a replacement-cost basis.
If the same fire requires you to also spend $3,000 more than normal on rent and other expenses while your rental is being repaired, the insurance company covers these additional living expenses, regardless of how much you receive for your personal property.
|Coverage||How it helps||Deductible?|
|Personal property||Pays to repair or replace your belongings, up to the coverage limit you choose.||Yes, usually offered in amounts between $250 and $2,500.|
|Additional living expenses||Above normal rent and other expenses after a qualifying event leaves your home uninhabitable. Coverage is usually capped at a percentage of your personal property limit, but you can often increase it.||No|
|Personal liability||Pays for injury or damage you cause to others. Usually offered with a $100,000 limit, but you can often increase it.||No|
|Guest medical coverage||Pays for medical treatment for guests injured while visiting your property. Usually offered with a $1,000 limit, but adjustable.||No|
The most common renters insurance deductibles are $500 and $1,000, but they are usually available in amounts ranging from $250 to $2,500.
How does my deductible affect the cost of renters insurance?
A higher renters insurance deductible usually lowers your rate, and vice versa. This allows you to choose a deductible that hits your personal sweet spot, in terms of keeping your premiums affordable while protecting you from potential financial hardship if you have to file a claim.
For example, if you select a $2,500 deductible and lose $3,000 worth of property in a burglary, the most you can get from the insurance company is $500. If you only have $1,000 in the bank, you end up with a sizable shortfall between the value of your items and the money you have to replace them.
On the other hand, If you have a $250 deductible and $1,000 in the bank, replacing your items after a $3,000 loss won’t necessarily deplete your entire savings account.
Regardless of the deductible you choose, you'll only want to file a claim after a major loss. A single claim usually increases your rates for a few years. If you file too many claims, your insurance company may decline to renew your policy in the future.
Are there cheap ways to lower my renters insurance deductible?
Although there’s usually a financial tradeoff between a low premium and a low deductible, there are at least three cheap ways to reduce your renters insurance deductible, in part or in total.
The most common way to reduce your renters insurance deductible without paying more is to choose a company that offers a diminishing deductible benefit.
Diminishing deductibles, offered by Allstate, American Family and others, reduce your deductible by a specified amount, usually $100, at no extra cost after each claim-free year. If you go five years without filing an insurance claim, you’ll turn a $1,000 deductible into a $500 deductible.
Bundling your renters policy with your car insurance may also reduce your out-of-pocket costs if an incident requires you to file claims on both policies.
Though rare, this can happen. For instance, if a fire in a garage damages your home and car, your renters insurance covers your personal property, while the comprehensive coverage on your auto policy covers the car. If both policies are with a company that offers a single deductible feature, you only pay one deductible.
Bundling also typically qualifies you for a discount on your premiums.
Scheduled personal property
Another way to partially reduce your renters insurance deductible only applies to certain valuables, such as jewelry and works of art.
Most renters insurance policies cap coverage for theft of jewelry at about $1,500 and place similar limits on other valuables. However, you can obtain more coverage for your high-value items by placing them on a scheduled personal property floater. These add to the cost of your policy, but they usually also come with a separate deductible that can be lower than the one in your base policy.
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