What Renters Insurance Deductible Should I Pick? | SmartFinancial (2024)

Your renters insurance deductible is the amount of money you must pay before your insurance company will contribute any money toward a personal property claim. When deciding what deductible to choose, you need to consider how much you can afford to pay up front in case of a covered loss and how much you want to spend on your regular premium payments.

Read below to learn when you have to pay a deductible on renters insurance and what deductibles may be available to you.

What Is a Renters Insurance Deductible?

Like other types of insurance deductibles, a renters insurance deductible is the amount of money you agree to pay out of pocket whenever you file a renters insurance claim.

Your insurance company will only cover losses that exceed your deductible.

For example, if you have a $500 deductible, you will have to cover the first $500 yourself anytime you experience a loss that is covered by your renters insurance. This means that, if you lose a $1,000 fridge and your policy comes with replacement cost coverage, you would receive $500 from your renters insurance company, which you could then use to buy a new refrigerator.

How Does a Deductible for Renters Insurance Work?

Renters insurance companies require policyholders to pay a deductible on covered claims in order to discourage excessive claims. This helps the insurance carrier save money and allows it to keep prices lower for all policyholders than they would be otherwise.

For example, if you have a $1,000 deductible, then there would be no purpose in filing a claim if you lose something worth $900. As a result, the deductible allows your insurer to provide you with a financial safety net in case of a substantial loss without having to pay for every little thing that goes wrong in your home.

In addition, you should note that your renters insurance rates could go up after just one claim and will almost certainly increase if you file multiple claims.

So, if you have a $1,000 deductible and lose something worth $1,200, you might still decide against filing a claim since the $200 you would save in the short term may not be worth the added cost of a higher premium in the long run.

How Much Do Renters Insurance Deductibles Cost?

The most common renters insurance deductibles you will have the option to choose between are $500 and $1,000.^[1] However, you may have a wider range of potential deductibles to choose from depending on your insurer. For example, Lemonade offers deductibles ranging from $250 to $2,500 on its renters insurance policies.^[2]

Renters Insurance Coverage Limits

After you pay your deductible, your insurance provider will only pay for covered losses up to your coverage limits. For example, if you have a $1,000 deductible and a $30,000 limit on your personal property insurance, then the most your insurance company will pay for a covered loss is $29,000, even if you lose more than $30,000 worth of property.

In addition, your insurance carrier may enforce sublimits on certain expensive items. For example, Lemonade only insures cash and cryptocurrency up to $200, while it only insures jewelry, bikes, instruments and other valuables up to $1,500 unless you purchase a scheduled property coverage endorsem*nt.^[2]

Keep in mind that you will only be reimbursed for the lost item's actual cash value, which deducts for depreciation factors like age or wear and tear. You can get reimbursed for the cost it would take to replace it off the shelf today but this replacement cost coverage will cost extra.

When Does a Renters Insurance Deductible Apply?

You will generally have to pay a deductible on personal property insurance claims, but a deductible may not apply to other renters insurance coverage types.^[3] Your personal property insurance covers physical belongings like furniture, electronics, clothing and more in case they are lost or ruined because of a named peril like fire or theft.

Although renters insurance typically also includes personal liability, medical payments and additional living expenses coverage, you may not need to pay a deductible for claims on these coverage types. Meanwhile, a homeowner will usually have to pay a deductible on their dwelling and other structures coverage, but these coverage types aren’t included in a renters insurance policy since they are covered by your landlord’s insurance instead.

Do Renters Insurance Deductibles Affect My Premiums?

Renters insurance deductibles affect your premiums because they dictate how much your insurance company is responsible for covering whenever you need to file a claim. The higher your deductible is, the less your insurance company will have to pay toward covered losses and the lower your premiums will be as a result.

In fact, increasing your deductible from $500 to $1,000 can potentially lower your premium by 25%.^[4] For example, if you pay $180 per year with a $500 deductible for renters insurance, then doubling your deductible may lower your annual premium to $135.

What Renters Insurance Deductible Should I Pick?

The deductible you should pick for your renters insurance depends on how much money you are comfortable paying out of pocket in case a peril damages or destroys your belongings. For example, you may prefer a high deductible if you have a large amount of money saved up since it would allow you to pay less on your premiums.

However, if it’s easier for you to split the costs across multiple premium payments than it is to muster a large upfront payment, then you could opt for a low deductible. Even though your regular premium payments would increase, the percentage of each claim that your renters insurance covers would also increase.

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