Many people are unaware that they should carry insurance whether they own or rent their home, but the bottom line is that renters should carry renter’s insurance and homeowners should carry homeowner’s insurance. If you’ve had one type or the other before, you may just think they’re the same. That could lead to some nasty surprises! Learn more before you buy.
Similarities Between Renter’s and Homeowner’s Insurance
- Require payment of a premium in exchange for the coverage.
- Offer protection for you and your personal belongings.
- Replace personal belongings that were damaged or destroyed by vandalism, water damage, fire or theft.
- Offer liability insurance that can protect you in case you’re sued by someone that was hurt while in your home.
- Offer different deductible levels.
- Choice of replacement cost or actual cash value when you suffer a loss and make a claim.
Differences Between Renter’s and Homeowner’s Insurance
- Renter’s insurance only covers the personal belongings inside the house. Homeowner’s insurance covers the cost of the personal belongings and the actual home.
- Homeowner’s insurance provides coverage for additional buildings.
- Homeowner’s insurance is often mandatory whereas renter’s insurance is not.
- The cost of homeowner’s insurance can be added in with the mortgage.
- Additional living expense coverage is included with homeowner’s insurance, but is sometimes excluded from renter’s insurance policies.
- If your home was damaged by a storm, homeowner’s insurance would pay for the damage. However, if a rental home is destroyed by a storm, it’s generally covered under the landlord’s policy.
Is There a Difference in Cost?
In addition to the several other differences between renter’s and homeowner’s insurance, there is also a difference in cost. Although many people believe insurance is insurance and the cost is the same whether you rent or own your home, nothing could be further from the truth. When you’re paying for renter’s insurance, you’re only paying for coverage on your personal belongings. When you’re paying for homeowner’s insurance, you’re paying for coverage on your personal belongings as well as the dwelling and additional buildings. For this reason, homeowner’s insurance is substantially higher than renter’s insurance. The average cost of renter’s insurance is around $200 a year, but the average cost for homeowner’s insurance is around $1,000.
Why Both Types of Insurance are Important
Homeowner’s insurance is generally required if you have a mortgage on the home. Renter’s insurance, on the other hand, may be required by the landlord, but often isn’t. Many people feel that homeowner’s insurance is more important than renter’s insurance because it can protect your actual dwelling. While this may be very true, it’s equally important to have renter’s insurance because you may have a huge monetary loss if all your personal belongings were destroyed and you did not have adequate coverage.