Homeowners insurance and renters insurance provide financial protection against property damage, legal liability costs, medical payments for others, and the cost of living away from home. The main difference lies in the types of property damage covered.
Home insurance is intended for people who own a house or apartment. It covers both personal belongings and the structure of the home. Renters insurance is bought by renters. It covers damage or theft of personal property, but not damage to the building itself.
What is the difference between renters insurance and home insurance?
What are the costs of homeowners insurance vs. renters insurance?
Renters Insurance Vs. Landlord’s Insurance: Are They the Same?
What is the difference between renters insurance and home insurance?
The primary difference between homeowners and renters insurance is that only home insurance includes coverage for the dwelling. Otherwise, the policies are essentially the same, so you wouldn’t need both renters and homeowners insurance to cover the same residence.
Homeowners insurance has five basic coverages: residence, personal property, personal liability, additional living expenses, and health care payments. Renters insurance has all of these features except the first, so it’s basically cheap home insurance for renters.
Type of Coverage
- Included in renters insurance?
- Is it included in home insurance?
- Residence No Yes
- Personal property Yes Yes
- Personal responsibility Yes Yes
- Other living expenses Yes Yes
- Medical payments Yes Yes
What Does Renters and Homeowners Insurance Actually Cover?
Homeowners and renters insurance provides financial protection against damage caused by sudden or unexpected events. Covered events – also called perils – can vary but are similar across insurance companies. When a hazard damages your property, you can file a lawsuit. If your claim is accepted, the insurance company will pay for the repair or replacement of the damaged items (minus the deductible you choose).
Dwelling Coverage: Includes Home Insurance Only
“Dwelling” refers to the structure of the home. Housing coverage refers to physical damage to the house itself (walls, roof, floors, doors and other parts of the building). If you own a house or apartment, you will need home insurance or condo insurance to protect yourself against the costs of these events. Renters insurance policies do not include dwelling coverage because renters are not responsible for damage to the building that is beyond their control.
Most homeowner’s insurance policies cover a standard set of common home perils. Wind and hail are among the most common causes of damage, while fire and lightning are two of the costliest.
Perils are usually covered by home insurance
- fire
- Smoke
- Whirlwind
- Hail
- lightning
- Explosions
- Vehicles
- Civil disturbances or riots
- Theft
- Vandalism or malicious mischief
- Trees and other falling objects
- The weight of ice, snow and sleet
Water damage due to freezing, bursting or sudden and accidental overflow of a plumbing, heating, air conditioning, fire extinguishing system or home appliance
Whether these perils are covered depends on the type of policy. HO-3 policies, the most common type sold by insurance companies, generally cover all of these perils, but more limited policies like the HO-1 cover less.
However, some specific perils are almost always excluded from home insurance, especially floods and earthquakes. If you have what is called an open peril policy, these exclusions need to be named. If you have a named perils policy, any perils not specifically listed as covered will be excluded from the dwelling cover.
Perils are usually excluded from homeowners insurance
State seizure, demolition, or a requirement to rebuild to meet building codes
Floods
Earth movements, including earthquakes, sinkholes and landslides
Power failure (if the source is outside the residence)
Homeowner’s Negligence
War and nuclear danger
Homeowners and renters insurance includes coverage for personal property, personal liability, other living expenses and medical payments
Homeowners and renters insurance includes four types of insurance. They work the same way.
Personal Property Insurance: Homeowners and renters insurance covers damage or theft of personal property, which can be anything from clothing to furniture and televisions. When you buy homeowners insurance, your personal property coverage may default to a percentage of your home coverage—for example, 50%, but can generally be adjusted prior to purchase.
When shopping for renter’s insurance, the most important thing is to choose coverage for your personal property. It is the main feature and the biggest driver of the policy price.
Like home coverage, personal property coverage does not cover all perils. Here, too, many of the same common exclusions in home coverage, such as flood and earthquake, will apply. Homeowners and renters should also be aware that some high-value items may have sub-limits and may be covered differently than regular items.
For example, your jewelry may have a $2,000 sublimit of coverage. This means that even if your total personal property limit is $20,000, your insurance company will only pay you $2,000 (minus your deductible) for the stolen jewelry. You can usually increase these sub-limits if you buy a confirmation, which is useful if you own a lot of high-value items.
Personal Liability Coverage: Both homeowners and renters policies include liability coverage that protects you from the legal consequences of personal injury or property damage. Suppose someone sues you for accidentally spilling hot coffee on their lap. You would be covered by the legal costs of your defense and the money awarded in the court case. Both homeowners and renters insurance policies have a default personal liability coverage of $100,000, but limits can usually be increased at minimal cost.
Additional Living Expenses (ALE) coverage: ALE, also known as loss of use coverage, protects you from the financial impact of having to live away from home. Both homeowners and renters insurance will pay abnormal living expenses if a covered peril makes your living space unlivable. For example, ALE will cover hotel costs if your apartment is cleaned after smoke damage. You will be covered up to a specified dollar limit or for a certain period of time, such as three months.
Medical Payments Coverage: Unlike personal liability coverage, medical payments coverage is on a no-fault basis, meaning that legal liability does not have to be established. Both homeowners and renters insurance will cover a limited amount of medical bills for someone injured in your home or rental property. Coverage is usually set at around $2,000.
What Are the Costs of Homeowners Insurance Vs. Renters Insurance?
Renters insurance is much cheaper than home insurance. This is because home policies cover everything
