4 Things You Should Know Before Choosing a Renters Insurance Deductible
Renters insurance has a deductible just like homeowners and auto insurance policies. The deductible is the amount you pay after filing a claim and before the insurance company will begin to cover damages and repairs. A higher renters insurance deductible usually means a lower monthly premium and vice versa. Choosing the right deductible is important because you will have to pay the deductible amount in the event of a loss. Otherwise, your insurer will not cover the claim.
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What Is a Deductible on Renters Insurance?
Like car insurance, the deductible on renters insurance is the amount you pay if your apartment or rented home gets vandalized, burglarized or if something happens that causes damage to your personal property inside the apartment.
Example: Your home was broken into. Your valuables were stolen and objects were broken during the robbery. Let’s say you file a $5000 claim. You have to pay your deductible first before the insurance company begins to pay the remainder of the claim. If you had a $1,000 deductible, you’d have to pay $1,000 and the insurance company would pay the remaining $4,000. If you had a $250 deductible, you pay that and the insurer pays $4,750.
Note that if you’re paying $1,000 in deductible, you are paying more each month than if you have a $250 deductible.
How Much Is a Deductible on Renters Insurance?
Most often, the deductible on renters insurance is $500 to $1,000. If you opt for the higher deductible, you’ll pay less monthly on premiums. However, you’ll have to pay that $1,000 in order to have your insurance company cover the rest of the losses and damages.
Some insurance companies offer much higher deductibles, like $2,000. This is not a good option for people without an emergency fund. Again, you always have to pay the deductible in full before your carrier begins to pay for damages.
You may be able to find an insurer with a lower deductible like $250 but you’re paying more each month. Lemonade Insurance Co. offers a $0 deductible plan and it’s likely the highest monthly rate around (but, you pay nothing when you file a claim!).
Sometimes, deductibles come in the form of a percentage of the policy’s property coverage. For instance, if you have $15,000 property coverage and your deductible is at 10%, you will need to pay $1500 before your insurance pays for any damages or loss for any claim, regardless of the amount you’re claiming.
How Do I Choose the Right Deductible for Renters Insurance?
Really, the best way to determine which policy is right for you is to see how often you think you may need to file a claim. Because an expensive deductible is more difficult to pay, you should not choose the highest deductible if you know you’re prone to break-ins or if the apartment complex you live in is poorly maintained (a faucet leak upstairs from you may destroy all your property).
If you know you will likely never file a claim it may not make sense for you to pay the highest monthly premiums with a low deductible.
Generally speaking, renters insurance is very inexpensive and costs anywhere between $11 and $45. The average coverage on a renters policy is $40,000 for personal property, a $1,000 deductible and liability protection of $100,000. This example plan would cost around $17 a month.
The best advice in choosing deductibles is to speak with your insurance agent, who should be able to crunch some numbers for you. If you don’t have a trustworthy agent, we can pair you up with a licensed agent who can compare several competitive quotes for you, so visit here.
If I File a Claim Will My Renters Insurance Rate Go Up?
Yes, just as with auto insurance and homeowners insurance, your insurer will likely raise your rate if you file a claim or two. Also, beware of filing more than a couple of claims in a given year because your insurer may drop you if you prove to be too high a risk to insure. Remember that insurance is designed to help you pay for damages and repairs you simply can’t afford to pay on your own. It’s not a product that’s meant to be maximized. In fact, you may earn a discount if you file zero claims in an extended period of time.
Unnecessary claims are just not worth making: for instance, if you have $900 worth of damage in your home from a leak upstairs, and your deductible is $1,000, you have to pay $1,000. Another example: The damages amounted to $1,100 and you have a $1,000 deductible. If you file, the insurer is helping you with a $100 in coverage. Was it worth filing these two example claims? No, because you are no longer eligible for a claims-free discount and may actually get your rate hiked up for filing a claim.
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Renters insurance is one of the most underrated types of insurance out there. It’s also one that many people regret not having invested in until it’s too late. A renters insurance policy can protect you and your belongings in situations that you may not have ever anticipated.
Before purchasing renters insurance, it’s important to keep in mind that you should buy enough renters insurance to cover all of your personal property. The best way to calculate how much you need is by creating a list of all your belongings along with their estimated value.
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Imagine the ceiling caving in; a major leak upstairs or a fire! If something were ever to go wrong you may not only have to replace some valuables in your apartment, but your place may become uninhabitable for a length of time too. What would you do if you had to stay in a hotel for a couple of weeks?
You may not remember everything that got destroyed and you won’t be compensated for it either. Think about what kind of damage a really bad water leak or fire will do. Your things may become unrecognizable and you may not list everything properly when you start the claims process. Or worse yet, what if the insurance company requires proof of ownership?
Comparison shopping usually results in a savings of several hundred dollars a month!
Here is what you should keep in mind If you rent an apartment, condo, townhome or single-family home.