Both renters insurance and homeowners insurance require regular payments. It must be kept in good standing in order for you to claim any settlement in case of damage or loss.
Renters insurance and homeowners insurance are both essential investments that you may need to seriously consider if you want to have peace of mind. To explain the differences simply, homeowners insurance protects homeowners and renters insurance protects renters. While both policies may sound as if they provide the same kind of protection, they have one major difference: homeowners need to get added protection for the structure and contents inside.
Table of Contents
- 1 Homeowners Insurance Explained
- 2 Renters Insurance Explained
- 3 Similarities In Homeowners Insurance and Renters Insurance
- 4 Differences In Homeowners Insurance and Renters Insurance
- 5 What You Need To Know About Landlord Insurance
Homeowners Insurance Explained
Homeowners insurance is not compulsory insurance when you own a home. However, there are plenty of city ordinances, zoning laws, or even homeowners association rules that require this kind of coverage. Most of the time, banks will also require this insurance before a mortgage can be approved. This insurance will typically include four kinds of coverages, personal liability and medical bill coverage, property coverage, additional living expenses, and dwelling coverage.
Renters Insurance Explained
Renters insurance provides protection for people who do not own the property but require coverage for their personal items. If you are a renter, you should know that the property owner’s insurance will not cover your personal belongings in case they are damaged, lost, or destroyed. This insurance will provide coverage for personal property, additional living expenses, as well as, personal liability and medical bill coverage.
Similarities In Homeowners Insurance and Renters Insurance
Types of Coverage
Both homeowners and renters insurance provides coverage for damaged, destroyed, or lost property by the listed perils in your policy. These perils may vary from one policy to another but the most common include:
- Lightning or fire
- Windstorm or hail
- Damage from vehicles (unless caused by the insured)
- Damage from aircrafts
- Riots or civil commotion
- Theft (with limited liability of up to $1000)
- Malicious mischief or vandalism
- Volcanic eruptions
- Falling objects
- Accidental discharge of steam or water
- Weight damage due to snow, ice, or sleet
- Freezing of household systems
- Accidental tearing, cracking, bulging, or burning of pipes or household systems
- Accidental damage due to artificially generated electrical current
Another important thing to note is that both types of insurances have similar exclusions. Excluded perils do not provide protection for flood and earthquakes. Nevertheless, these can be easily purchased as add-on protection to your standard coverage. Additionally, neither insurance will cover for damage to your property while you are inside a car since your auto insurance should be able to cover this.
Both renters and homeowners insurance are qualified for discounts depending on your insurance company. If you want to be able to save money, you may want to check with your company for bundle discounts. For example, you may get a good discount if you purchase auto insurance with the same company.
Differences In Homeowners Insurance and Renters Insurance
Dwelling coverage, also known as hazard insurance, is the major difference between homeowners insurance and renters insurance. Coverage for the structure of your home is included in typical home insurance policies in case it gets destroyed or damaged due to a covered peril. Some insurance companies also offer coverage for other structures in your property such as a detached garage, a small shed, or fences. This is a crucial inclusion for homeowners because structural damage can be one of the most expensive.
Cost of Insurance
Another difference between these two insurance policies is the cost. Data from the National Association of Insurance Commissioners (NAIC), shares that in the United States, the average renters insurance is $185 annually, just about $16 each month. In the meantime, homeowners insurance can be a lot more expensive with an average annual cost of $1,192, which translates to $99 a month.
Homeowners insurance is more expensive than renters insurance because it covers more property. The crucial factor is that structural damage can be one of the most expensive and the most susceptible to the listed perils. For example, fire damage to the structure of the property may be costlier to rebuild or repair than the cost of the items inside the building.
What You Need To Know About Landlord Insurance
Also known as rental property insurance, many renters are mistaken that this provides the same coverage as a renters insurance. In fact, landlord insurance will provide protection only for the structure, a limited number of items, and legal liability that may be related to the landlord. Because landlords own the building, they are responsible for keeping this protected in case of damage. However, any belongings inside are the responsibility of the renter, which can be covered by renters insurance. Moreover, if you are a homeowner and also own a property that you rent out, your homeowners policy will not cover any damage to the rental structure.