What is a renters insurance deductible? What is the point of it? How does it work? Those questions and many more are answered in this article.
A lot of people who go to buy renters insurance--or any kind of insurance, for that matter--focus on how much they'll have to pay per month or year for it.
Others focus on how well a particular policy will cover them if something happens and they have to file a claim.
That makes sense, of course. After all, they're clearly two of the most important components of renters insurance.
They're not the only important components of renters insurance, however. Another that's nearly as important: the deductible associated with whatever policy you decide to buy.
Why is that? And what is a renters insurance deductible, anyway? Also, how does a renters insurance deductible work? Keep reading for answers to those questions as well as a number of others.
A renters insurance deductible is the amount of money you agree to pay, or contribute, toward a covered personal property loss.
In other words, whenever you file a claim on your renters policy, you are responsible for the deductible amount. Once that's taken care of, the insurance company will send you a claim payment.
Although renters deductibles usually are a specific dollar amount, such as $500 or $1,000, that's not always the case. Sometimes, they're a percentage of the total amount of coverage a policy provides.
You need to know and care about renters insurance deductibles because they determine how much you pay toward any claim you file for a covered loss.
If the deductible is fairly high, like $1,000, that amount will be deducted, or subtracted, from the claim check or payment your insurer sends you. Which means you'll receive $1,000 less than you may have expected.
Insurance companies attach deductibles to renters policies--as well as other types of insurance policies--for a couple of reasons.
One reason they do so is deductibles tend to keep policyholders from filing small claims. For example, let's say someone breaks into your apartment, condo, or house and steals your tablet that's worth about $300. Without a deductible, you might file a claim for it. With a $500 or $1,000 deductible, though, you wouldn't even think of filing a claim--or at least you shouldn't think of filing a claim. (More on that in a little while.)
Another reason insurers use deductibles for renters and other kinds of insurance policies is they supposedly help reduce incidents of fraud.
You may have read that you have to pay your deductible amount to the insurance company that sold you your renters policy before you can get a claim check.
Although that's how things work with some other forms of insurance, that's not how it works with renters insurance.
With renters insurance, the insurer basically deducts or subtracts your policy's deductible amount from any claim payment it sends you.
So, if you file a claim for $5,000 worth of stolen personal property and your renters policy has a $500 deductible, your claim payment will be for $4,500.
This is why you shouldn't even think of filing a claim for a loss that's worth less than your renters policy's deductible amount. If your claim is for $400 and your deductible is $500, the insurance company won't send you a dime. Even worse, by filing a claim, you may cause your insurer to raise your rates.
Another aspect of renters insurance deductibles and claims that differs from how some other types of insurance work: you "pay" your deductible pretty much every time you file a claim on your renters policy. There are exceptions that we'll go into later on, but in general you should be prepared for your insurer to apply your deductible to any claim you file.
That's a far cry from other kinds of insurance, where you can "meet" your deductible for a given year or policy period and then not have to worry about it again until the next year or period begins.
Renters insurance covers you in a number of different ways and circumstances. One example is it covers your belongings or personal property if they're destroyed, damaged, or stolen. (And this remains true even if your "stuff" is destroyed, damaged, or stolen while outside your rental home, condo, or apartment. For more information on this subject, check out this article about insurance and self-storage units.)
Another example is it covers you if your rental unit becomes uninhabitable for some reason or other. (Insurance companies call this "loss of use.") And renters insurance covers you if someone is injured on your property or if you cause damage to someone else's property.
You won't have to pay your renters insurance deductible, or your renters insurance deductible won't be applied, if you find yourself in either of the last two situations.
You also shouldn't have to worry about your deductible if you add especially valuable belongings--like art, jewelry, or electronics--to your renters policy via riders or endorsements and file a claim on them. You'll pay an additional or separate premium for those riders or endorsements, but not a deductible.
On a related note, see our article about what renters insurance doesn't cover to learn more about that topic.
Whether you decide to buy replacement cost renters insurance or actual cash value renters insurance, it shouldn't have any impact on your policy's deductible.
You and the company behind your renters insurance set your deductible when you buy a policy. Most people base their plan's deductible amount on how much they want to spend on their premium payments and how much they're willing to pay or contribute if they file a claim.
By the way, if you don't know the different between these types of plans, read our article about them: "Actual Cash Value vs. Replacement Cost for Renters Insurance."
Actually, renters insurance deductibles and homeowners insurance deductibles are fairly similar. They're both used in the same ways, and they even usually "cost" the same amount of money. Most home insurance deductibles are between $500 and $2,500 (although some go as high as $5,000 or more), while your typical renters insurance deductible is $500 or $1,000.
If you're looking for insurance deductibles that are quite different from the deductibles attached to renters policies, look no further than the ones associated with health insurance.
With health insurance, once you reach your deductible you don't have to pay most of your medical bills for the rest of that particular year or policy period.
With renters insurance, there's no such thing as a yearly or annual deductible. Your deductible comes into play (almost) every time you file a claim for a loss.
Probably not. Insurance companies typically charge you an additional or separate premium for riders or endorsements, but they usually don't apply a deductible to any claims to make against them.
That's not the case with all insurers or all renters policies, though, so don't assume it's true of yours. If you have any doubts about whether or not your insurance company will apply a deductible to claims you file against your rider or endorsement, pick up the phone or send an email and ask for clarification.
Renters insurance policies usually don't cover losses caused by earthquakes. To get that protection, you have to buy coverage that's specifically tied to earthquake damage and destruction.
Most earthquake insurance plans come with a deductible that's separate from the one associated with your renters policy. The amount varies from policy to policy and insurer to insurer, so pay close attention and don't be afraid of asking questions when you shop for this type of coverage.
Renters insurance policies also typically don't cover losses caused by flooding. Again, you have to buy specific flood coverage to be protected against this kind of catastrophe.
Like earthquake insurance, flood insurance often comes with a deductible that's separate from the one associated with your renters policy.
To learn more about this, contact the National Flood Insurance Program. It works with private insurance companies to offer flood insurance to homeowners and renters living in certain communities. Also, read our article about flood insurance for renters.
Yes, most insurance companies will give you some leeway when it comes to setting your renters insurance deductible. That said, most people go with either $500 or $1,000 in this area.
This really is a question you have to answer for yourself. While you do that, though, consider this: if you go with a higher deductible, you'll have a lower monthly premium. And if you go with a lower deductible, you'll have a higher monthly premium.
All that said, renters insurance is pretty cheap no matter what amount you choose for your policy's deductible. High or low, your premium shouldn't cost you more than $15 to $30 a month.
A high renters insurance deductible basically means the insurer will deduct a higher amount from any claim payments it sends your way. For instance, if your deductible is $1,000, the insurance company behind your renters policy will subtract that amount from any checks it makes out to you after you file claims for covered losses.
Remember: your renters insurance deductible applies to every claim you file. So if you file three separate claims in a year, your insurer will subtract your deductible amount from all three of the resulting claim payments.
Having a low renters insurance deductible just means the insurer will deduct a lower amount from any payments it sends your way. If your deductible is $500, for example, your insurance company will subtract that amount whenever it goes to cut you a claim check.
You should be able to raise or lower your deductible, and thus raise or lower your premium, as you see fit, but don't take that as gospel.
Contact your insurance company and ask about it. Someone there will be able to tell you if it's possible. They'll also be able to tell you how much you can raise or lower your renters insurance deductible and how often you can do so.
Most people who buy renters insurance choose a deductible of somewhere between $500 and $1,000.
Don't take that to mean a higher or lower deductible is out of the question. Some insurers allow deductibles that are under $500, while others allow deductibles that are as much as $5,000.
Where you settle on that spectrum should depend on how much your belongings and possessions are worth and how much you want to pay per month (or year) for your renters insurance plan.
If you have a physical or digital copy of your renters insurance policy, pull it out or open it up. Then look for the section that talks about "policy declarations." That's where you'll almost always find information on your plan's deductible--including its amount.
Don't worry if you can't find that information even after taking the steps mentioned above. A quick call or email to the insurance company that sold you the policy should make everything clear and set your mind at ease.
For answers to other questions like this, check out our article about renters insurance basics.
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