While this question comes up more often with auto insurance, we often get asked whether a potential liability claim is worth making, or whether the insured should just try to settle it with the person who suffered the alleged harm instead of making a renters insurance liability claim.
When asked if a payment arrangement is a good alternative to letting someone make a liability claim on their renters insurance, the answer is always to use the renters insurance coverage. There are a multitude of reasons you shouldn’t just make a payment arrangement, we’ll examine a few of the most important.
If You Make A Payment, You May Toll The Statute
“Toll the statute?” What does that even mean in regard to a renters insurance liability claim? The short and sweet version is that someone has a limited amount of time to bring a claim against you for an alleged wrong they suffered at your hands. That’s called the “statute of limitations.”
If you make a payment towards that loss or otherwise take action that accepts liability or causes the person who was wronged to delay taking action, the statute of limitations may be tolled, or paused. If they had three years to bring suit, hypothetically, you could stop that clock by making a payment or a payment arrangement instead of letting them bring a liability claim against your renters insurance if they so choose.
By making a payment arrangements instead of a renters insurance liability claim, you run the risk of extending the time they have to take action against you, perhaps indefinitely. This varies greatly by state and the type of harm alleged, of course. But that’s why your renters insurance company has lawyers, to sort those issues out so that you don’t have to. Speaking of which…
Your Renters Insurance Company Has Lawyers. Lots Of Them. At No Cost To You.
If a claim is brought against you under your renters insurance liability, your insurance company is required to defend that claim on your behalf. That means the kind of lawyers you probably couldn’t afford on an hourly basis working tirelessly to defend you and the insurer. This may result in a smaller payout, or none at all. But they can’t defend you if they’re not aware of the claim. That’s another reason you don’t make a payment arrangement instead of using renters insurance liability coverage.
Even A Partial Payment Is Often Construed As Admission Of Liability
What if someone visiting you falls down the outside stairs? You assume that you’re responsible, and as a result you start making small payments towards their resulting medical expenses and loss of work. You’ve just admitted liability in a way that rarely can be taken back or changed.
If it later turns out that your landlord was at fault, or even that the city was at fault for not properly maintaining the sidewalk adjoining the steps, that payment you made prevents you from assigning that wrongdoing to them or having them share in paying the costs.
When you make a renters insurance liability claim, or one is made against you, the insurance company will find all parties who may have been at fault, and work to make sure that you and your insurance are only responsible for the part of the loss that you should be responsible for. This is by far preferable to you being personally responsible for the entire amount. Not to mention that a liability claim paid by your insurance doesn’t come out of your pocket.
Liability Claims Are Limited By The Renters Insurance Policy Limit, Not By Your Wallet
When you make a payment arrangement instead of a renters insurance liability claim, you’re limited by the amount of money available to you. You’re also limited by the fact that the wronged person can still sue you and collect even more than you’ve agreed to give them.
With a renters insurance liability claim, you have the ability to have the claim settled up to the policy limit, often at least $100,000. Can you write a check that large? Even if you can, would you write a check that large if you knew that the person could still come back and sue you at a later date, and that later date could be any time in the future because you’ve tolled the statute of limitations with that payment? If you’ve wiped out your savings to make someone whole, and they still sue you, you’ve admitted liability and have nothing left to give them. That’s not a good position to be in.
If The Loss Is Worse Than Expected, You’re Still On The Hook
If you make a settlement offer instead of allowing someone to make a renters insurance liability claim, you’re settling based on what you believe the loss to be today. If later additional injuries or damages are uncovered, you’re still on the hook for those additional losses.
On the other hand, if you let them make a renters insurance liability claim against you, their act of cashing the check from the insurance company generally waives future claims or extensions of claims against you. That means they can’t later decide their injuries were worse than they thought and proceed against you as an individual.
But Will My Renters Insurance Go Up Over A Liability Claim?
Sure. But not as much as the claim would cost you out of pocket even in a best case scenario. If we assume that the person who tripped on your steps is legitimately owed $5,000, and that you pay the national average of $180 a year for renters insurance, you’re going to come out ahead. Even if your renters insurance doubled (not likely), you’d then be paying thirty dollars a month. Consider that in light of making a $5,000 payment to someone.
Now consider that in light of making that $5,000 payment to someone and having them demand another $10,000 in a few years because they can. The statute is tolled and you never made them disclaim further liability!
In a nutshell, it’s nearly always better to file a renters insurance liability claim than to make a payment arrangement or partial payment of any kind. Your renters insurance company has the resources, the experience, and the money to pay the claim and make sure that you don’t accept liability for something you shouldn’t, as well as to protect you in the future. The cost to you is negligible, so always make sure to let your renters insurance liability coverage handle any events that could mean liability for you rather than handling it yourself!