Filing an insurance claim as a renter can be stressful. In addition to your property being damaged or stolen, you also have to pay a deductible before your insurance kicks in. Fortunately, you can select your deductible amount when you buy your renters insurance policy. So what is a good deductible for renters insurance?
What is a renters deductible
A renters deductible is the amount of money you have to pay up front whenever you file a renters insurance claim. Therefore, if you have a $500 deductible, you will have to pay for the first $500 yourself if your claim is covered by your renters insurance.
For example, let’s say that a pair of bicycles was stolen from your apartment. If the bikes were worth $1,200 and you had a $500 deductible, you would pay the first $500 and your insurance carrier would pay the remaining $700.
Here are some other personal belongings that your renters insurance policy might pay to replace if they were damaged or stolen by a covered event:
- Furniture
- Bicycles
- Televisions
- Computers
- Electronics
- Clothing
- Musical instruments
- Sports equipment
- Appliances
Typical deductible amounts
The two most common renters insurance deductible amounts are $500 and $1,000. However, some carriers offer deductibles ranging from $250 to $2,500 on their renters insurance policies.
Deductible vs. Premium
An insurance deductible differs from your insurance premium. As previously defined, your deductible is the amount of money you pay out-of-pocket toward a covered claim.
Your premium is the amount of money you pay your insurance carrier for a full year of coverage—whether you have a home, renters or condo policy. You can pay your premium monthly, semi-annually or annually. If you don’t pay your premium, your policy will be canceled.
Choosing the right deductible for you
Choosing the right renters insurance deductible for you depends on your financial situation. If you can afford more out-of-pocket costs, you may want to choose a higher deductible amount—say, $1,000. Your insurance company will then typically lower your annual premium.
However, if you don’t think you can afford unexpected expenses like a deductible, you may want to choose a lower deductible. Just remember that a lower deductible means you’ll pay a higher premium.
| Higher Deductible Amount |
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| Lower Deductible Amount |
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How a renters deductible works
If you file a renters insurance claim, you would pay your deductible after you receive a settlement amount from your insurance carrier. Here is the order of steps in a typical renters claim:
It may seem obvious, but your insurance company will only cover losses that exceed your deductible. For example, if your $1,300 sofa is damaged by a fire—and you have a $500 deductible—you would receive $800 from your renters insurance company, which you could then use to buy a new sofa.
Conversely, you would not file a renters insurance claim if the amount of your deductible exceeds the value of the item lost or damaged. 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.
Will I be reimbursed for the item’s actual cash value?
Standard renters policies will only reimburse you for an item’s actual cash value, which takes into account depreciation. For example, if the laptop you purchased for $1,000 three years ago is stolen from your home, and your policy provides for actual cash value, you’ll receive what your laptop was worth at the time of the theft. This may only be $300 due to depreciation.
If you want, you can get reimbursed for the amount it would take to buy the item new, but it will cost you extra. This is called replacement cost coverage.
Here’s a quick explanation of the difference:
| Actual cash value |
| Pays you what the item is worth at the time of the theft. It factors in depreciation, which is how much an item decreases in value over time due to age and wear and tear. |
| Replacement cost value |
| Pays you to replace the item with a brand new, similar item, without considering age or wear and tear. It is more expensive than actual cash value coverage. |
Will my renters insurance premium go up if I file a claim?
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 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.
Will my insurance carrier pay up to my 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 $20,000 limit on your personal property insurance, then the most your insurance company will pay for a covered loss is $19,000, even if more than $20,000 worth of property is damaged or stolen.
