Renters vs. Homeowners Insurance

If you’re not sure about the difference between renters insurance vs. home insurance, you’re not alone. Insurance is one of the hardest parts of adulting because we’re expected to understand it without any education — and it’s complicated.

This article is here to help you, we’ll cover the definition of renters insurance and the similarities and differences between renters and homeowners’ policies. You’ll learn how to choose the best coverage for your needs and save money on your insurance.

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Renters insurance explained

Renters insurance covers the personal belongings of an occupant who doesn’t own the property. Tenants’ furniture, computers, jewelry and other belongings are usually excluded from their landlords’ property owner insurance, so this type of policy exists to give renters coverage.

People who are renting an apartment, storage unit or office space buy these policies to cover their personal property kept inside rented spaces.

If there’s a fire, robbery, flood or another loss event, the tenant will be able to recover the cost of their property under their insurance policy. The policy also covers personal liability for damages to others and provides for living expenses if you have to lodge elsewhere during repairs.

[ Next: Does Renters Insurance Cover Water Damage? ]

If you are running a business from your rented home, or if you keep valuable art, jewelry or other items there, you may need to pay for a rider — add-on to the policy — to make sure those items covered.

Many landlords use leases that require tenants to have their own insurance coverage. Storage units may also require renters insurance to cover the belongings inside the unit against fire or theft.

Home insurance explained

Homeowners insurance is intended for owner-occupied properties. These policies cover the house itself as well as the personal property contained in the space. They may cover damage from fire, theft, storms and other events that cause financial loss.

The policy should provide enough coverage to replace the house, if necessary, plus all the valuable items inside, such as appliances, furniture and electronics. Homeowners also need to buy a rider to cover any high-value items or home-based business activities and equipment.

Like renters insurance, homeowners policies cover personal liability and living expenses in case you need to stay elsewhere while repairs are made.

Most lenders will require you to have homeowner’s insurance to cover the property while you’re making payments on your mortgage. If you own your home outright, homeowners’ insurance is optional, although most homeowners prefer to have this coverage.

What does homeowners cover renters insurance doesn’t?

Cost of renters insurance vs. homeowners insurance

Renters insurance is much less expensive than homeowners because it only covers the items inside the building, while homeowners policies cover all your personal belongings plus the home itself.

Prices vary by region, but according to the Independent Insurance Agents & Brokers of America, the average renters’ policy covers your belongings for up to $30,000 and offers $100,000 in liability coverage and costs about $12 monthly.

Homeowners’ insurance is significantly more expensive because it covers the structure, property and expensive fixtures like the roof, air conditioner, furnace and appliances. The National Association of Insurance Commissioners (NAIC) recently published its 2017 research, which cited the average homeowners premium as $1,211 per year. Almost two-thirds of those policies had coverage amounts between $50,000 and $300,000.

[ More: What Homeowners Insurance Discounts Are Available? ]

The value of your home is one of the most significant factors that influence the cost of a homeowner’s policy. According to the NAIC, homes valued at less than $50,000 incur premiums averaging just $633 per year, while homes valued at $500,000 or more carry an average premium of $2,149.

The state you live in also determines your rate, especially for homeowners’ policies. Houses in Ohio and Missouri have some of the cheapest homeowners insurance rates — averaging just under $900 a year — while Delaware and Maryland homeowners pay the highest premiums.

Are deductibles for home and renters insurance the same?

Your deductible, or the share of an insured loss that you’re expected to pay out of pocket, can vary widely depending on different factors like the deductible you’re willing to pay.

Both homeowners and renters policies usually have a minimum deductible of $500 to $1,000. But you can select a policy with a higher deductible to keep your costs down if you prefer. A high deductible can be a good option if you tend to maintain a large emergency savings fund, and you’re willing to take on some risk to save on monthly expenses.

Homeowners insurance often includes separate disaster coverage — this is usually for regional risks like hurricanes, floods or earthquakes. These extra coverages might have a deductible that is different from your primary policy.

Best insurance companies for home and renters bundles

Companies typically offer both renters and homeowners policies. It’s easy to get quotes online — but be careful about giving out your phone number or email address if you don’t want to be contacted by agents.

Best renters insurance companies for 2020:

• Allstate
• Nationwide
• Liberty Mutual
• American Family
• State Farm
• MetLife
• USAA

Best homeowners insurance companies for 2020:

• Amica Mutual
• Erie Insurance
• State Farm
• Allstate
• Farmers
• Liberty Mutual

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There’s a lot of overlap in those two lists, because a good insurance company is one that offers reasonably priced coverage, pays its claims and provides excellent customer service, regardless of which of their products you’ve purchased.

You can check a company’s reputation by looking at the Better Business Bureau website or check sites like Yelp and Consumer Affairs for reviews.

We welcome your feedback on this article and would love to hear about your experience with the home and renters insurance companies we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.