Homeowners Insurance vs. Renters Insurance

You want to make sure that  the physical structure and its contents of your home are protected. It will give you peace of mind and ensure you can replace the home and your belongings in case the worst happens — flooding, fire or other disasters. 

If you own a home, homeowners insurance can cover the home and its contents, depending on the type of insurance you select. If you rent, the homeowner will cover the property, but renters insurance can protect your belongings within the home. Read on to understand homeowners insurance vs. renters insurance with key differences, costs and coverage variables. 

What is Homeowners Insurance?

Homeowners insurance is a type of insurance policy that homeowners can take to recover the loss of the home and its contents — to protect the physical structure and your personal property, including furniture, appliances, clothing, jewelry and other valuables.

Some insurance policies cover the home and its contents, while others only cover one or the other. The amount of building insurance will generally cover the cost of replacing the home in the event of a total loss. However, more commonly, homeowners insurance covers the cost of replacing the home and the home's contents in the event of a total loss. 

For example, if a home costs $300,000 to rebuild and the items inside the home cost $100,000 to replace, you'll need a policy that covers the property for $400,000 for comprehensive homeowners insurance,. 

What is Renters Insurance?

Homeowners insurance won't cover a tenant's belongings if the home is damaged or destroyed. If you don't own a home, renters insurance covers your personal belongings inside the home. Renters insurance is a smart option to protect furniture, jewelry, clothing, appliances, computer and office equipment and other valuables. In some cases, renters insurance will also include vehicles or bikes, even if they are stolen while you are at work.

Key Differences between Homeowners and Renters Insurance

Here are major differences between homeowners insurance vs. renters insurance that are important to understand, whether you're a tenant or a homeowner, including coverage type, cost differences and possible add-ons. 

What Does Homeowners Insurance Cover?

Homeowners insurance usually covers the home and its contents. It can also cover your additional living expenses in case you need to evacuate the home, such as the rental costs. Coverage provided by homeowners insurance includes: 

• Coverage for the physical structure
• Personal property coverage
• Additional living expenses in case the property is destroyed 
• Personal liability coverage, including medical payments to others

Note that not all homeowners insurance policies will cover all of these. Some cover only the physical structure or personal property. However, most homeowners insurance covers the structure or dwelling, personal liability, personal property, medical payments to others and additional living expenses during the repair or renovation of the property. 

Homeowners insurance doesn't typically cover floods, earthquakes, cyber liability or theft of high-value items like jewelry. You can purchase separate insurance policies for these issues if you live in an area of high risk. 

What Does Renters Insurance Cover?

Renters insurance covers personal property, liability and medical expenses caused by the renter in specific cases. Specific coverage provided by renters insurance includes: 

• Personal property coverage
• Additional living expenses
• Personal liability coverage

Renters insurance will typically cover personal liability, personal property, additional living expenses and medical payments to others. The renter's insurance doesn't cover the physical dwelling, home or apartment. The landlord's homeowners insurance covers that. 

You can add cyber liability insurance to your renter's insurance if necessary.  Living in a flood or earthquake zone might mean you need to get a separate flood or earthquake insurance policy. 

Like homeowners insurance, renters insurance doesn't typically cover high-value items like jewelry if they are stolen. You'll need a separate insurance policy for these items. 

Cost of Homeowners vs. Renters Insurance

Comparing the costs of homeowners insurance vs. renters insurance, renters insurance is a much less expensive option. Here's how much you can expect to pay for each, along with major factors that can influence your premiums. 

What is the Average Cost of Homeowners Insurance?

Factors determining homeowners insurance costs include location, property value, construction materials, security measures and local risk factors. The total coverage for additional living expenses, liability, medical payments and deductible influences total costs.

For example, for a homeowners insurance policy that covers a home worth $350,000 with $175,000 in personal property coverage, along with $35,000 in additional living expenses and $100,000 in liability coverage, you can expect to pay about $132 a month, or $1,582 annually, with a $1,000 deductible. 

Exact costs vary by location, property type, deductible and other factors, but this represents a reasonable nationwide average. 

What is the Average Cost of Renters Insurance?

Factors that determine renters insurance costs include the location of the rented property, the total value of your personal belongings, your history of insurance claims and any property rental history of insurance claims. 

For a rental insurance plan that covers $15,000 in personal property plus $100,000 in liability coverage, you can expect to pay an average of $14 per month or just $173 annually with a $2,000 deductible. Final prices depend on the factors mentioned above and the deductible amount you choose. 

What Are the Factors Affecting Insurance Premiums

The factors impacting homeowners insurance and renters insurance premiums are similar. This includes the property's value, location, security measures and past claims history. If you add additional coverage policies or the home's age or condition makes it a higher risk, you can expect to pay more for the insurance premium. 

You can reduce insurance premiums by choosing a higher deductible. Some insurance plans may offer discounts for a high credit score or many years without insurance claims. 

Depending on how heavily the insurance company weighs each factor in your overall application, each factor can affect insurance rates differently for homeowners and renters. That's why shopping around for different insurance policies is important to find the best coverage and affordable price. 

Types of Coverage Included in Homeowners and Renters Policies

You can expect to find common types of coverage in both homeowners insurance and renters insurance policies. These include specific covered perils, along with the option for add-ons. Here's what you can look for. 

Covered Perils for Homeowners Insurance

Homeowners insurance covers perils or problems you might face as a homeowner. The most common type of homeowners insurance policy is called an HO-3. This open-perils policy will cover any cause of house damage except for causes specifically listed as exclusions. 

You could also get an HO-5 policy, the highest level of home insurance. This covers your house and property for all perils, except listed exclusions such as floods. Common homeowners insurance exclusions are floods, earthquakes, negligence, normal wear and tear, pets and insects and power failure.

Common perils or issues that cause damage usually covered by homeowners insurance policies include:

• Accidental discharge or overflow of water
• Accidental discharge or overflow of steam
• Aircraft, including spacecraft and self-propelled aircraft
• Civil commotion or riot
• Explosions
• Falling objects
• Freezing
• Hail or windstorms
• Malicious mischief or vandalism
• Lightning or fire
• Smoke
• Sudden, accidental damage from artificially generated electrical current
• Sudden, accidental tearing apart, cracking, burning or bulging
• Theft
• Vehicles
• Weight of ice, sleet or snow
• Volcanic eruption

Covered Perils for Renters Insurance

Renters insurance, like homeowners insurance, will list the perils covered and any exclusions. The covered perils are usually similar, although renters insurance will only cover the interior or your personal property.

16 common perils covered by renters insurance policies include:

1. Accidental discharge or overflow of steam or water
2. Aircraft, including spacecraft and self-propelled aircraft
3. Civil commotion or riot
4. Explosions
5. Falling objects
6. Freezing
7. Hail or windstorms
8. Malicious mischief or vandalism
9. Lightning or fire
10. Smoke
11. Sudden, accidental damage from artificially generated electrical current
12. Sudden, accidental tearing apart, cracking, burning or bulging
13. Theft
14. Vehicles
15. Weight of ice, sleet or snow
16. Volcanic eruption

Common exclusions include floods, earthquakes or theft of high-value items like jewelry. Carefully read and understand policy coverage to ensure adequate coverage for your belongings. 

Additional Coverage Options for Homeowners Policies

Possible additional coverage will depend on the home location, common activities and personal belongings. Additional coverage for homeowners policies can include:

• Flood insurance
• Earthquake insurance
• Cyber liability insurance
• Accidental damage coverage
• Landlord insurance coverage
• Motor burnout coverage
• Personal effect coverage
• Jewelry or high-value item insurance

Should You Get Insurance?

Should you get homeowners vs. renters insurance? That depends on whether you own your primary dwelling. Both insurance policies offer more than peace of mind; they ensure that your belongings are protected in case the worst happens, preventing a major financial loss. That can be a smart move for long-term financial planning. 

What other insurance policies should you consider? Find comprehensive reviews of health insurance and self-employed insurance to help protect your finances and build long-term wealth.

Frequently Asked Questions