Deciding what you can pay before your insurance pays.
When you are buying a renters insurance policy, one of the most important choices you have to make is how much your deductible will be. Not only will your choice influence any claims you have to make, it’ll majorly affect your monthly premiums.
Is there a “right” renters insurance deductible amount? And what should yours be?
Renters insurance covers your stuff, but you also have some responsibility for your possessions.
Enter the renters insurance deductible: the amount that you (the insured) have to pay out of pocket towards an insured loss before your insurance company pays anything on a claim.
Viewed another way, it’s the amount that is subtracted from the payout from your insurer on each claim.
Renters policies aren’t the only policies with deductibles; other kinds of insurance have them too, including car insurance, health insurance, and homeowners insurance. These out-of-pocket expenses keep insurance costs lower by discouraging large numbers of claims, which cost insurers money to process.
For renters insurance, common deductible amounts are $500 or $1,000, but $250 or lower deductibles are also possible from some insurers, as are deductibles up to $2,500.
Renters insurance coverage is made up of several types of protection:
Your deductible only applies to your personal property coverage. You don’t have to pay a deductible for liability claims, medical payments to others, or for loss of use. But anytime you make a claim for damage to your personal belongings, your deductible does apply. Additional coverages also generally come without deductible payment requirements.
Each renters insurance policy, in addition to its personal property and liability coverage limits, also has category limits.
Category limits vary by policy, but some examples of common limit amounts include:
It’s possible to extend these category coverage limits through a rider or endorsement. Your standard deductible would still apply to each claim, unless specifically noted otherwise.
When you’re shopping for renters insurance, raising your deductible is one of the ways to get your monthly renters insurance premium to decrease. When you choose a higher deductible, you lower your premium payment. And when you choose a lower deductible, you raise your premium payment.
To give you an example, here are quotes we pulled from five renters insurance companies for a $20,000 renters insurance policy for a 30-year-old male renter in Chicago.
|Insurance Company||Monthly Cost - $500 Deductible||Monthly Cost - $1,000 Deductible|
Note: We deferred to the most comparable coverage amounts when identical policies were unavailable.
When you get renters insurance quotes from Policygenius, you can use our tools to see how increasing and decreasing the deductible affects the renters insurance costs for your specific situation and location — enter just a few details to start.
Sometimes the best way to understand deductibles — and decide which deductible amount is right for you — is to consider examples.
Let’s say you make a renters insurance claim for your $1,500 couch after a leak from a burst pipe ruined it.
If your deductible is $500: Assuming that your insurer agrees that the couch is a covered loss and that your policy is a replacement cost value policy, your insurance company would pay you the replacement cost value of the couch ($1,500) minus your deductible ($500), meaning you’d get a check for $1,000.
If your deductible is $1,000: The same claim ($1,500 couch) on a policy with a $1,000 deductible would yield you with a check for just $500 from the insurance company.
Alternatively, if your policy is an an actual cash value policy opposed to a replacement cost value policy, you won’t be paid the cost of a new couch minus your deductible — you’ll be paid the cost of your couch minus depreciation minus your deductible . Each insurer uses its own formula for coming up with the depreciated value of the couch. But they could decide the couch was worth just $800, meaning that, after a $500 deductible, you’d only get $300 from the insurance company. If you had a $1,000 deductible, you wouldn’t get anything.
And that’s how you decide the right deductible amount for you. You choose an amount that you’re able to afford to spend out of pocket at any given time.
Logan Sachon is the co-founder of The Billfold, a groundbreaking personal finance site for millennials that was named one of Time's 25 Best Blogs of 2012. Her work has been published in New York Magazine, Glamour, The Guardian, BuzzFeed and more.