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What is a renters insurance deductible?
Your renters insurance deductible is the amount of money that you pay when you file a personal property claim with your insurer to get them to reimburse you for a damaged or lost item. After you pay the deductible, your renters insurance policy kicks in and reimburses you for the rest.
For example, if your $1,500 MacBook is stolen and your deductible is $500, your provider will only pay out $1,000. If you want to replace it with another $1,500 laptop, you’ll have to pay the remaining $500 yourself.
What is the average renters insurance deductible?
The average renters insurance deductible is $500. Typically, renters insurance deductibles fall between $250 and $1,000, but some insurance companies offer deductibles as high as $2,500.
While most deductibles are fixed dollar amounts (e.g. $500), some insurance companies offer them as a percentage of your insured property coverage (e.g. 15% of your total coverage).
How renters insurance deductibles work
When you buy your renters insurance policy, you will have to choose a deductible. Your insurer will ask you what you prefer when you sign up on their website (or when you call them, if they require you to sign up over the phone).
The deductible you choose is important because it directly affects your monthly premiums and your potential claims.
How deductibles affect your premiums
Your deductible and monthly premiums (the amount you pay for your insurance coverage) are inversely related. In other words:
- If you choose a lower deductible, you’ll have to pay higher monthly premiums.
- If you choose a higher deductible, your insurer let you pay lower monthly premiums.
Basically, choosing a higher deductible means you’re assuming more financial risk yourself, instead of passing it on to your insurance company. They’ll reward that by charging you less money each month.
How deductibles affect your claims
When you file a renters insurance claim, asking your insurer to reimburse you for property damage, they’ll pay whatever amount isn’t covered by your deductible. This means that if you have a lower deductible, they’ll pay out more, and vice versa.
What if the loss is less than my deductible?
If your loss is lower than your deductible (e.g. if a small kitchen fire causes $400 of damage and you have a $500 deductible), it’s not worth making a claim. You’d have to pay for everything yourself, so you’d be going through the hassle of filing one for nothing.
Also, if you make too many claims, your insurer might raise your premiums, because you’ll seem like more of a risk. In general, you should only file a claim when you actually need to.
When do you have to pay a deductible?
You only have to pay a deductible when you file a personal property coverage claim. When you file other types of claims, you don’t have pay a deductible.
What this means
In addition to personal property coverage, renters insurance provides three other types of coverage:
- Personal liability: Covers the costs if you accidentally hurt someone or damage their property, or if someone sues you.
- Guest medical coverage: Covers smaller medical bills if a guest is injured in your home.
- Loss-of-use: Reimburses you for your living expenses (e.g. your hotel stay) if you have to temporarily leave your home.
Again, you don’t need to pay a deductible if you file for any of those types of coverage — you only pay your deductible when you make a personal property claim.
For more on those other types of coverage, see our guide, What does renters insurance cover?
How to choose a renters insurance deductible amount
Before deciding on a renters insurance deductible, consider these factors:
- How much can you afford? What’s the maximum amount you can afford to pay out-of-pocket if you have to file a claim? Obviously, your deductible shouldn’t exceed that amount.
- How safe is your home? If you live in a neighborhood that’s prone to burglaries, or in an older house that presents a fire risk, you’re more likely to have to file an expensive claim, in which case you might choose a lower deductible.
- What’s the highest monthly premium you’re willing to pay? If opting for a lower deductible means paying your premiums will be a struggle, you should choose a higher one.
Another way to look at is to think about how much risk you’re willing to assume. You might choose a higher deductible if:
- You don’t think you’re very likely to have to file a claim, so even though you’re taking on more risk, you think the overall risk still remains quite small.
- You have a lot of money saved up and aren’t worried about paying a large amount out of pocket.
- You just happen to have a higher tolerance for risk.
Ultimately, this is a personal decision that boils down to what you feel comfortable with. There’s no “right” answer. If you’re really not sure, we suggest choosing $500, which is the number that most insurers default to unless you specifically ask for something else.
Why do renters insurance deductibles exist?
When you’re already paying every month to insure your things, it can feel unfair that you still have to pay money out of your own pocket when you make a claim. You might be wondering how renters insurance providers justify charging deductibles.
Renters insurance deductibles exist for two main reasons:
1. To avoid a large number of claims
If there were no deductibles, the number of renters insurance claims would skyrocket. People would file any time something in their apartments got damaged, even for losses as small as $50, and insurance companies would have a hard time keeping up.
That would make it harder to process legitimate claims (which would mean you’d have to wait longer before getting reimbursed). It would also mean providers would have to charge much higher premiums to avoid operating at a loss.
2. To reduce moral and morale hazard
Moral hazard and morale hazard are similar-sounding terms for two types of risky behavior that people engage in after buying insurance.
- Moral hazard: This refers to deliberate destruction of property with the goal of collecting insurance money, which is a type of insurance fraud.
- Morale hazard: This is when people behave recklessly because they’re insured — not damaging their belongings on purpose, but treating them more carelessly because they know their provider will reimburse them for any damages.
While most people are honest and responsible, not everyone is. Some people engage in these behaviors, which costs insurance companies time and money.
Requiring a deductible discourages this, which ultimately lets insurers charge lower premiums to legitimate customers.