If you rent, rather than own, your home, you’re off the hook for homeowners insurance — but you may still need (or desire) renters insurance, which can help cover your assets in the event of a calamity. Like all other forms of insurance coverage, choosing a renters insurance policy involves choosing a deductible, which will have an effect on your overall policy cost.
Let’s learn more about how a renters insurance deductible works — and how to choose one that’s right for your circumstances.
What Is a Renters Insurance Deductible?
As is true of most other forms of insurance, if you wind up needing to file a claim, the insurance company will still expect you to pay some of the cost. That out-of-pocket expense is called your deductible, and is separate from the premium you pay on a regular basis simply to keep the policy active.
For example, say you have a renters insurance policy that covers up to $20,000 worth of your belongings in the event of a covered loss. If your deductible is a flat $500, you’d pay $500 and the insurance company would pay $19,500 toward replacing your belongings. Your deductible might also be calculated as a percentage of your property coverage — so in this example, if your deductible is 2%, you’d pay $400 (2% of $20,000) and the insurer would pay out $19,600.
Your premium, on the other hand, is the amount you pay monthly or annually in order to support the policy. In the case of renters insurance, that might be about $200 a year, or $20 or less a month.
Recommended: What Is Renters Insurance and Do I Need It?
Choosing a Renters Insurance Deductible
You’ll probably be happy to know that you have some agency when it comes to choosing your renters insurance deductible. While many policies offer flat deductible options of either $500 or $1,000, certain companies do offer lower or higher amounts. Occasionally, you may even find a program available with a $0 or 0% deductible, which means you wouldn’t pay anything out of pocket if you were to make a claim.
Paying less during a time of loss probably sounds like an unmitigated good thing. But there is a bit of a catch — generally speaking, the lower your deductible, the higher your premium, which means you’re paying more on a regular basis for a benefit you might get if a loss occurs. On the other hand, if you hedge your bets and go for a high deductible, your regular premium payments will be lower… but you’ll be on the hook for a lot more if you do need to file a claim.
How Does Your Renters Insurance Deductible Affect Your Premiums?
While the inverse relationship between deductibles and premiums is fairly standard, other factors do play into your specific renters insurance costs.
For example, your insurer may cut you a break if you have certain security equipment installed, such as an alarm system or smoke alarm. On the other hand, if you live in what’s deemed a high-risk area or your credit score could use some work, your available coverage options may be more expensive, even if you choose a high deductible.
Renters Insurance by State
Because different states have different risk levels, both for criminal activity and natural damage, the average cost of renters insurance varies depending on what state you’re in. Here are the average monthly renters insurance premiums by state, per data from The Zebra :
• Alabama: $20
• Alaska: $9
• Arizona: $13
• Arkansas: $17
• California: $19
• Colorado: $15
• Connecticut: $14
• Delaware: $18
• District of Columbia: $22
• Florida: $19
• Georgia: $20
• Hawaii: $15
• Idaho: $11
• Illinois: $13
• Indiana: $14
• Iowa: $10
• Kansas: $18
• Kentucky: $16
• Louisiana: $28
• Maine: $13
• Maryland: $21
• Massachusetts: $18
• Michigan: $13
• Minnesota: $14
• Mississippi: $27
• Missouri: $16
• Montana: $13
• Nebraska: $14
• Nevada: $15
• New Hampshire: $10
• New Jersey: $14
• New Mexico: $15
• New York: $19
• North Carolina: $15
• North Dakota: $10
• Ohio: $14
• Oklahoma: $21
• Oregon: $14
• Pennsylvania: $10
• Rhode Island: $26
• South Carolina: $15
• South Dakota: $10
• Tennessee: $18
• Texas: $21
• Utah: $11
• Vermont: $10
• Virginia: $14
• Washington: $12
• West Virginia: $15
• Wisconsin: $10
• Wyoming: $9
Keep in mind that your specific annual price will vary further based on your city and even your neighborhood, as well as many other factors. Check with your insurer directly for actual insurance premium prices available to you.
Recommended: Why Do Landlords Require Renters Insurance?
Renters Insurance Overview
Renters insurance can be a truly valuable tool if you suffer a loss as a renter. While it doesn’t cover the structure of your home, the way homeowners insurance does — the building’s owner is responsible for those costs — renters insurance does cover your belongings in case of damage or theft, as well as covering personal liability costs in the event that someone is injured while at your home and sues you.
Some landlords require renters insurance, while others don’t. But for most renters, it’s a good idea to at least consider it — especially since it’s usually pretty affordable. (Many renters insurance programs cost less than $200 per year or about $17 monthly.)
Do keep in mind that renters insurance, like all types of insurance coverage, doesn’t cover everything though.
What Does Renters Insurance Cover?
Generally, renters insurance offers coverage in the following four categories:
• Personal property: This covers your possessions.
• Personal liability: This would take care of the medical or legal fees you might incur if someone is hurt while at your home.
• Loss-of-use or additional living expenses: This covers the money you’d need to spend to find yourself a place to stay and food to eat if your home was, for some reason, rendered unlivable.
• Additional coverages: These may be purchased to cover items and services that wouldn’t otherwise be eligible for coverage on your policy (such as lock replacement).
Keep in mind also that certain high-value categories of items may have coverage limits — though these can often be exceeded if you purchase a separate rider or endorsement for them. These categories may include cash, jewelry, watchers, fur clothing, and firearms.
Recommended: What Does Renters Insurance Cover and How Does it Work?
The Takeaway
Renters insurance is a kind of insurance that can cover your belongings and personal liability if you’re a renter. Like other forms of insurance, a deductible likely applies — and although you can choose your deductible, the lower the deductible you choose, the higher your premium is likely to be.
While insurance isn’t anyone’s favorite bill to pay (at least not anyone we know), it’s the kind of thing you’re really grateful for when you do turn out to need it.
Once you’ve got your home and healthcare covered, you might also want to consider life insurance, which can help the people you leave behind to continue to live a comfortable, steady lifestyle if something should happen to you. SoFi has teamed up with Ladder to offer competitive, affordable and simple-to-set-up life insurance, and no medical tests are required for eligible applicants. We’ll also help you create and manage your estate plan — and better yet, we’ll do it for free!
Photo credit: iStock/Edwin Tan
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