Residing in an apartment, house, or other dwelling comes with certain risks. The right type of insurance can help control these risks by protecting policyholders against legal liability costs, property damage, costs of living out of the home, medical payments to others, and similar issues that could arise.
Renters insurance and homeowners insurance are two of the most common types of insurance for home protection. While these insurances have certain similarities, they also have distinct differences in terms of eligibility and coverage.
What Is Renters Insurance?
Renters insurance protects tenants and their belongings against the unexpected. Although a landlord’s insurance policy may cover the building itself, it does not cover a tenant’s personal possessions. A standard renters insurance policy includes three main types of coverage. These include:
- Personal Property – A renters policy may cover the cost to repair or replace a tenant’s belongings, such as furniture, clothing, and electronics if damaged or stolen. Most policies have a limit, meaning personal property loss over the coverage limit will not be covered.
- Liability – If a tenant accidentally causes damages to another person’s property or accidentally causes someone to experience an injury, the tenant may be responsible for any financial losses. Liability coverage can help pay for third-party property repair or replacement, as well as third-party medical bills.
- Additional Living Expenses – If a tenant’s residence becomes damaged and is deemed uninhabitable, the tenant may be forced to live elsewhere temporarily. A renters insurance policy may pay for any additional costs incurred during this period, such as hotel bills.
Renters insurance is very affordable and can protect against a wide range of perils, such as fire, theft, vandalism, smoke damage, water damage, windstorm damage, and visitor injuries.
Many different types of items are also covered by renters insurance. Some of the most commonly covered items include appliances, electronics, furniture, clothing, and accidental damage to another person’s property. Certain items of value, such as a jewelry or coin collection, may require special coverage. Speak with an insurance agent about adding additional coverage to a renters insurance policy.
It can sometimes be challenging to determine how much coverage a person needs. The value of a person’s belongings can quickly add up so it is important for tenants to consider what they would want repaired or replaced if their possessions were damaged or destroyed.
When shopping for a renters insurance policy, it is important to review different choices that pertain to personal property coverage. Set coverage limits that are appropriate to the situation by creating an inventory of all belongings in the home or apartment.
Also, consider what type of personal property policy to purchase. Policies that provide actual cash value cover items up to their current market value, taking depreciation into account. Policies that include replacement cost coverage replace items at current retail prices.
What Is Homeowners Insurance?
While renters insurance is designed to protect tenants from property damage and liability issues, homeowners insurance covers damages and losses to an individual’s residence, furnishings, and other assets within the home. It also provides liability coverage against accidents that may occur in the home or on the premises.
Homeowners insurance covers interior damage, exterior damage, injuries that may arise on the property, and damage or loss of personal assets. Like renters insurance, homeowners insurance has a limit that determines the amount of coverage that the insured has if an accident should occur. It is important to note that homeowners insurance is not the same as mortgage insurance or a home warranty.
Homeowners insurance and renters insurance are very similar in terms of coverage. A standard policy will cover personal belongings, liability should someone become injured in the home or on the property, and additional living expenses that a homeowner may incur while repairs are being completed.
There are several different types of homeowners insurance that a property owner may purchase. If a homeowner has a mortgage or other type of home loan, they will likely need to carry an HO-3 policy. This is the most common type of homeowners insurance policy and typically includes dwelling coverage, personal property coverage, other structures coverage, medical payments, liability, and additional living expenses.
Each policy is unique in the types of perils that it covers. Standard perils, such as fire, burglary, vandalism, and water damage are covered under most homeowners insurance policies. However, other perils like flood and storm damages may not be covered. If a homeowner would like additional coverage for perils not included on their policy, they may need to purchase it separately.
Despite a common misconception, most states do not legally require property owners to purchase homeowners insurance. However, if a person goes through a bank to acquire a mortgage to buy the property, the mortgage lender may require the person to carry homeowners insurance as part of the transaction.
Even without a mortgage, homeowners insurance is a wise investment that can prevent catastrophic financial losses if the home or personal possessions are damaged or destroyed by a covered peril. A policy can help pay for the cost to repair or rebuild the home, eliminating the need to pay these significant costs out-of-pocket.
The Difference – Dwelling Coverage
The primary difference between renters insurance and homeowners insurance is that homeowners insurance includes dwelling coverage while renters insurance does not. In most other ways, the policies are the same. A dwelling is the structure of a building, whether a house, apartment, condo, or other type of housing.
Dwelling coverage will typically cover physical damage to the home’s structure, such as the roof, walls, floors, and other parts of the structure. Renters insurance does not include dwelling insurance as tenants are not responsible for any damage caused to the building that is out of their control, such as a fire or windstorm.
What Insurance Does Not Cover
One thing that renters insurance and homeowners insurance have in common is the perils that these insurances do not cover. Some of the most common excluded perils that affect both policies include pest infestations, earthquakes, floods, negligence, wear and tear, mold or fungus growth, and maintenance issues.
This means that if a home or apartment is damaged during an earthquake, experiences mold growth due to flooding, or encounters a cockroach infestation, neither a renters insurance nor a homeowners insurance policy would cover damages. If a person lives in an area that is at high risk for earthquakes or flooding, they should consider purchasing standalone earthquake or flood insurance.
The Cost Of Renters And Homeowners Insurance
The cost of renters and homeowners insurance can differ depending on location, the amount of coverage needed, the cost of the building, and other factors. However, most renters insurance policies are considerably cheaper than homeowners insurance policies.
According to NerdWallet’s latest rate analysis, the average cost of renters insurance in the U.S. is $168 per year or about $14 per month. In comparison, the average cost of homeowners insurance is $1,585 per year, or about $132 per month.
The main reason for this difference in price is that homeowners insurance provides more property coverage than renters insurance. It also covers more property that is vulnerable to perils and oftentimes, property that is of a higher value.
The dwelling itself is much more susceptible to covered perils than personal belongings and the repairs needed to repair or rebuild a house are also more substantial than most personal property. For these reasons, homeowners insurance is generally more expensive.
Choosing The Right Insurance Policy
Renters account for more than one-third of all U.S households, according to the National Multifamily Housing Council. In many cases, renting can be less expensive than buying as tenants are not responsible for expenses like home repairs, maintenance, and property taxes. However, renters still encounter certain risks that can be controlled with the right insurance policy.
First, choose the right amount of coverage based on the cost of replacing personal possessions in the event of a theft, accident, or natural disaster. When trying to determine how much coverage is needed, create an inventory of all belongings in the home and how much they are worth presently. Take note of when the item was purchased to get a better idea of its value. This can provide tenants with an estimate of how much coverage to purchase.
Remember that renters insurance does not just cover personal property. It should also include liability coverage to protect against injuries on the property that occurs when guests visit the home. Liability coverage limits can range from $100,000 to $500,000, so consider the amount of coverage based on the level of risk.
In some cases, it may be a good choice to choose a plan with a higher deductible. Choosing a higher deductible means that the policyholder will need to pay more upfront in the event of an incident. However, the monthly premiums will be lower.
Choose homeowners insurance with the same tips in mind. Many property owners can save money by bundling their homeowners insurance with other policies they may already have with their insurance company, such as auto insurance. Some insurance companies also provide discounts on homeowners insurance policies when property owners choose to install a security system or do other things to keep their homes safer.
Speak With A Georgia Insurance Brokerage
Acquiring renters insurance or homeowners insurance to protect against the unexpected is a wise decision that every tenant and homeowner should consider. However, it is important to consider how much coverage is needed and how much you can afford to pay for insurance. For more information about renters insurance or homeowners insurance, or to acquire an insurance policy, contact Southern States Insurance.