Homeowners Insurance vs. Renters Insurance - Which One Is Right for You?

Apr 3, 2023

8

min read

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nsurance is a must-have when it comes to protecting your home and belongings. But with the plethora of options available, choosing one can be tricky. To simplify, two of the most common types of insurance are homeowners insurance and renters insurance. While both offer essential protection, they differ in coverage and purpose. So, which one is right for you? Let's take a closer look.

Homeowner's Insurance

If you own a home, then you need homeowners insurance. It's designed to provide a combination of personal insurance protections that cover losses occurring to a homeowner's property and personal possessions and liability insurance for accidents that may happen at home. These protections can include damages to the house, its contents, and additional living expenses.

What's Covered by Homeowner's Insurance:

Dwelling Coverage

Suppose hailstorms heavily damaged your roof. You are generally covered if you have homeowner's insurance, and the insurance company pays you for the repair.

This is called dwelling coverage, where your homeowner's insurance covers the damage caused to the structure of your house. This can include broken doors and windows to total building demolition. Furthermore, it also covers other structures on your property, such as walls, fences, and even sheds.

But here's the thing, insurance companies have a named peril policy that lists out which events and perils are covered events. The insurance will only pay for the damages if it is caused by the covered events. Most standard policies only cover the most basic perils listed below:

Storm/ Hailstorm
Fire
Lightning or explosion
Falling trees or branches
Subsidence, drag, or landslip
Breakage of glass or sanitary fittings
Damage from escaped water or oil
The shock caused to the house by animals, vehicles, or aircraft

For uncovered events such as earthquakes and floods, you must purchase an additional insurance policy to stay covered.

Personal Property

Apart from the home's structure, ensuring what's inside your house is essential. Thus, homeowners' insurance covers any valuables or home contents stolen from your house. Best thing? Even if the items are not physically in your home, your insurance covers them.

But, as the terms and conditions exist, insurance policies list what is covered and what is not. Usually, insurance does not cover high-priced valuables, so you must purchase a separate policy to stay protected.

Personal Liability Coverage

If your pet accidentally bites your guest, your home insurance covers medical expenses.

This is called liability coverage which protects you from lawsuits filed by others. If someone's injured in your home or sues you for damage to themselves or their property, personal liability insurance comes into play.

Additional Living Expenses

If your house is fully damaged in disasters and you need to live on rent or book a hotel. Your home insurance policy will fully cover your living expenses for you.

What's not Covered by Homeowner's Insurance:

Certain Perils

Your homeowner's insurance typically doesn't cover floods, earthquakes, landslides, or mudslides. You must buy additional insurance coverage, such as a high-risk insurance policy.

Intentional Damage

Apart from this, homeowner insurance policies also do not cover homeowner neglect, meaning damages that could have been prevented by essential maintenance and upkeep.

Vacant property and government demolition

Insurance also does not cover the policyholder if the property has been vacant for a long time and if the building is damaged due to government demolition.

Renter's Insurance

Usually, when you rent an apartment or house, you might think that homeowner's insurance will also cover you. But, in reality, it does not. While homeowner's insurance covers the building damage, your personal belongings are not covered.

Handing House Keys Over — Source : Freepik

This is why you need renters insurance that provides many of the same types of coverage as homeowners insurance, but it is designed for renting people. It protects you from financial losses due to damage or loss of your personal property and liability claims if someone is injured while on your rental property.

What's Covered by Renter's Insurance:

Personal Property

If your rental apartment is broken into and your valuables are stolen, your renter insurance policy covers the losses for you.

It typically covers your personal property, including furniture, electronics, and other belongings. This coverage includes protection against losses due to theft, fire, vandalism, and other covered perils.

Personal Liability

If your guest falls over and damages your rental apartment, your renter's insurance policy may cover their medical bills and other related expenses.

Renter's insurance also provides liability coverage, protecting you if someone is injured while on your rental property.

Insurance Policy Waiver — Source : Freepik

Additional Living Expenses

Suppose your rental property becomes uninhabitable due to a covered loss, such as a fire or flood. In that case, renter's insurance can also help cover the costs of additional living expenses while you are displaced, such as hotel bills and meals.

What's Not Covered by Renter's Insurance

Dwelling Coverage

Since renters don't own their buildings, their insurance won't include dwelling coverage, which means it won't pay for structural damage to the building.

Certain Perils

Renter's insurance typically does not cover damage caused by floods and earthquakes. If you live in an area prone to flooding, you may need to purchase a separate flood or earthquake insurance policy.

Intentional damage

If you intentionally cause damage to your rental property or someone else's property, your renter's insurance policy will not cover the costs.

Certain Types of Personal Property

Some renter's insurance policies may not cover certain types of high-value personal property, such as jewelry or artwork, or may limit coverage for these items. You may need to purchase additional coverage for these items.

Homeowners Insurance vs. Renters Insurance: Which One is Right for You?

Ownership

If you own a home, homeowners insurance protects your house and belongings from potential risks. In fact, homeowner's insurance is compulsory for many mortgage lenders. Similarly, if you rent a home, renter's insurance is best for you since this helps you protect your belongings and offers liability insurance.

Coverage

The most significant difference between homeowners insurance and renters insurance is that homeowners insurance also provides coverage for your home's structure. If you own a home, you need this type of coverage. However, if you are a renter, you do not need dwelling coverage because your landlord's insurance will cover the structure of the building.

Value of Your Belongings

If you own a lot of expensive items, such as jewelry, electronics, or art, you may need personal property coverage. Both homeowners and renter insurance provide personal property coverage but may have some exceptions. You can purchase additional coverage, called a rider or endorsement, to cover specific items or increase the overall limit of your policy.

Cost

Homeowners insurance is typically more expensive than renters insurance. This is because the cost is influenced by the home's value, location, property, age, materials used to construct the house, and the level of coverage needed. The higher the home's value, the greater the coverage required, and the riskier the location, the more expensive the insurance policy is likely to be.

On the other hand, rental insurance is typically less expensive because it only covers the renter's personal property and liability within the rental property rather than the entire structure. The rental insurance cost is affected by the renter's location, the level of coverage needed, and the renter's credit score.

So, if you are on a tight budget, renters insurance may be a better choice for you. After all, having insurance is much better than having none.

What Is the Claim Process?

The process for filing a claim for homeowners and renters insurance can be similar in some ways, but there may be differences based on the specific policies and circumstances involved.

Here are some general steps that may be involved in filing a claim for both types of insurance:

Report the Incident

As soon as you become aware of an incident that may result in an insurance claim, such as a fire or theft, contact your insurance company as quickly as possible to report it. You can file the claim via phone, online, or in person, as required by your insurance company. Be prepared to provide details about what happened and any damage or loss.

Document the Damage or Loss

Take photos or videos of any damage or loss, and list all damaged or stolen items. Keep any receipts or other documentation that can help to support your claim.

Cooperate With the Insurance Company

Your insurance company may need to send an adjuster to assess the damage or loss and may require you to provide additional documentation or information. Cooperate fully with the insurance company throughout the process.

Insurance Agent Chatting — Source : Freepik

Get Repair Estimates

If your claim involves damage to your property, you may need to get repair estimates from contractors or other professionals. Make sure to get multiple estimates to ensure that you are getting a fair price.

Wait for the Claim to Be Processed

Depending on the circumstances, it may take some time for your claim to be processed and for you to receive payment for any damages or losses. Be patient and contact your insurance company with any questions or concerns.

Where to Get Insurance?

You might be confused about where to get insurance since there are so many options. Toh help you with your decision, here are our top picks:

Best Homeowner's Insurance Providers

USAA: If you are from the military and are a veteran, USAA can be the best option. The average annual premium is $969.

Allstate: Allstate may be the right option if you are looking for convenient insurance with online tools and unique coverage options. The average annual premium is $1,340.

Lemonade: If you want a great digital experience and good coverage, consider Lemonade.

Chubb: If you own a luxury home, look no further than Chubb. It offers specialized homeowners insurance policies for luxury homeowners, including risk consulting. The average annual premium is $1,775.

Amica: If you want the best customer experience, then Amica can be the best option. The average annual premium is $2,996.

State Farm: If you are looking for both home and auto insurance, State Farm is a top choice as it offers competitive rates, exceptional customer service, and the most significant average discount for bundling policies. The average annual premium is $1,462.

Want a full review? Click here for the full review of these providers.

Best Renters Insurance Providers

Top Reviewed Insurers — Source : Freepik

Allstate : If you are looking for affordable insurance options with discount opportunities, then Allstate can be the best. The average cost is $106 a year for renters insurance.

Nationwide : If you have poor credit but want affordable renter insurance, look no further than nationwide. The average cost is $126 a year.

State Farm : If you are looking for locally available agents and affordable insurance options, State Farm is a great choice. The average cost is $122 a year.

USAA : If you rent an apartment in the flood risk area, look no further than USAA. It covers flood insurance. Usually, you would need a separate policy for it.

Policygenius : If you want to get multiple quotes to get cheaper renter's insurance, you can opt for Policygenius. While it's not the provider, an online insurance broker helps you find the best policy options from different insurance companies.

Want a full review? Click here for the full review of these providers.

Conclusion

Homeowners insurance and renters insurance are two distinct insurance options that protect your home or rental unit and its contents from potential risks. Although they may seem similar, they offer different coverage options and serve different purposes. Generally, if you own a home, homeowners insurance is essential, and renters insurance is necessary if you rent.

However, other factors such as budget, the value of your possessions, and ownership status also come into play when choosing the best coverage option. Therefore, selecting the insurance coverage that suits your needs and circumstances is crucial.