What is the difference between renters insurance vs homeowners insurance? This is a good question as renters and home insurance share some similarities and also some very notable differences.
Renters Insurance vs Homeowners Insurance
The difference between renters insurance vs homeowners insurance seems obvious: the former is for people who rent their homes, while the later is for those who own them.
But that's just the main difference. While both types of coverage offer you protection, there are clear distinctions between these two types of insurance.
Here's a look at how these two types of insurance policies differ.
One of the primary differences between renters insurance vs homeowners insurance is the type of coverage they offer:
Homeowners insurance covers the contents of your house, as well as the structure itself and the property is sits on. This means that if your property is damaged in a storm, your house is damaged in a fire, a homeowners insurance policy will help to cover the cost of repairing or replacing what has been damaged or stolen.
Renters insurance, on the other hand, doesn't cover the structure of the building. Should a fire break out and in the building, for example, your landlord's insurance policy will cover the damage, not your renters insurance policy. However, if the fire was a result of something you did - leaving on a space heater, for example - any damages to your unit will be covered by the liability portion of your renters insurance policy.
Homeowners Insurance vs Renters Insurance Cost
There is also a marked difference in regard to the cost of renters insurance vs homeowners insurance. With renters insurance, the cost is significantly lower. That's because there it won't cost the insurance provider as much for any claims that are filed. With homeowners insurance, the cost is much higher, and for good reason. This type of policy insures an entire house, including the structure, the contents, and the liability. Considering the fact that houses are usually larger than rental units, and that they cover the cost of any structural and/or property damage, an insurance company will have to shell out a lot more in the event that a claim is filed.
Coverage For Personal Property
This is actually a way that renters and homeowners insurance are similar: both offer coverage for your personal property:
With a homeowners insurance policy, not only is the physical structure of your home covered, but so are its contents; your personal property. Though renters insurance doesn't offer structural coverage, it does protect your personal property inside the rental unit. In fact, that's the primary reason renters get this type of insurance coverage. With both types of policies, if your personal items are damaged in an accident, such as a fire, or they are stolen, your insurance company will cover the cost of replacing them.
One thing to keep in mind with both policies, however, is the value they choose to insure their personal belongings. There are two options available:
- Actual Cash Value, which offers coverage in the amount your items were worth at the time they were damaged or stolen. This is more cost-effective, but it might not provide you with enough money to actually replace your property.
- Replacement Cost, which insures your personal property for the amount that it would cost to have them replaced. Inflation is taken into account, too. While this option offers better coverage, it is more expensive.
Homeowners Is Mandatory, Renters Not
Though renters insurance certainly offers protection and offers peace of mind, it isn't mandatory - unless your landlord's lease requires it. Homeowners insurance also offers protection and offers peace of mind, but it is a requirement.
To explain further, if you have a mortgage on your home, your lender will require that you have insurance coverage, as it helps to protect their investment in your property. Additionally, if a home is extensively damaged, it can impact the whole community. For example, if the structure isn't repaired, it can lower the property value of the entire neighborhood.
In other words, homeowners insurance doesn't just protect you, the homeowner; it also protects your lender, as well as your neighbors. Renters insurance isn't mandatory; you can live in a rental without having renters insurance. But, keep in mind that this type of insurance is definitely worth your while. Most policies are very affordable, and in the event that your belongings are damaged or stolen, you'll be able to get assistance with replacing them when you file a claim.
Renters Insurance vs Homeowners Insurance - The Bottom Line
We hope this article on renters insurance vs homeowners insurance has been informative. Now when you are asked what the difference between homeowner and renters insurance is - you will know.