Homeowners Insurance vs Renters Insurance: What's the Difference?

A standard homeowners insurance policy offers more coverage than a standard renters policy, which is why home insurance costs more than renters insurance. Homeowners and renters insurance both have personal property coverage, loss-of-use coverage and personal liability coverage. However, unlike renters insurance, homeowners insurance will pay for a house to be fixed or rebuilt when damaged or destroyed. Both homeowners and renters can also purchase optional medical payments coverage to provide extra protection for visitors. Keep reading to see the differences in costs between homeowners insurance and renters insurance and how to lower your monthly premiums regardless of which insurance you have or need.

Homeowner vs. Renter Insurance: Differences Explained

Standard home and renters policy cover many of the same perils, including:

• Fire and smoke
• Hurricanes, tornadoes and other wind events
• Falling objects
• Explosions
• Water damage from an unexpectedly burst pipe
• Damage due to the weight of snow, ice and sleet
• Vandalism and mob violence
• Theft
• Items stolen while away from home.

Dwelling Coverage

Dwelling coverage in a homeowners insurance policy pays for damage to the interior and exterior of the home's structure. Dwelling coverage will also pay for the homeowner's house to be rebuilt when it has been destroyed by a peril named in the policy, up to specified limits.

Renters insurance does not include dwelling coverage.

Personal Property, Loss-of Use and Liability Coverages

A standard homeowners policy and renters policy share these three components:

• Personal property coverage protects the policyholder's clothing, electronics, sports equipment, furniture, rugs and other personal property, up to limits.
  • You can always buy an endorsement or rider to cover more expensive items like valuable jewelry or furs.
• Loss-of-use coverage pays for additional living expenses a policyholder incurs after being forced to evacuate the home due to a named peril. You are only covered by loss of use coverage in these scenarios:
  • Your house or apartment becomes uninhabitable due to a peril covered by your policy.
  • Coverage lasts up to 12 months, though some policies last up to 24 months.
• Personal liability coverage protects the policyholder when a visitor suffers bodily injury or property damage while on the policyholder's property.
• Medical Payments coverage, also called Coverage F, is an optional coverage with limits between $1,000 to $5,000. Medical payments coverage not only increases personal liability limits, but it also pays even when the injured visitor is at fault.

Deductible

A deductible is the agreed-upon dollar amount a policyholder must pay toward a loss before the insurer starts to pay. If a policyholder has a $500 deductible and makes a $6,500 insurance claim, the policyholder will have to pay $500 toward the loss before the insurer will compensate the remaining $6,000.

Homeowners and renters policies both have deductibles. While a deductible serves to discourage frivolous claims, it can also serve to lower your insurance rate. In short, the higher the deductible you choose, the lower your insurance premium will be.

Exclusions

Homeowners and renters insurance will not compensate for losses that exceed the policy's limits. Both types of policies will not compensate for losses caused by a peril that is excluded from the policy. Here are some other exclusions:

• Personal property will not cover your belongings for damage or loss due to negligence or wear and tear.
• Loss-of-use coverage will not pay out if your insurer determines that your home or rental unit is, in fact, livable.
• Liability and medical payments coverage will pay for the medical bills of your family members or anyone else that's living in your household.

Compare Renters Insurance Policies Instantly

Homeowners Insurance vs. Renters Insurance Cost

In 2017, a standard homeowners policy cost, on average, $1249 compared to $179 for renters insurance.

Insurance rates for homeowners insurance and renters insurance are based on many factors, and a big consideration is the location of the residence.

Top 5 Most Expensive States for Homeowners Insurance

Top 5 Cheapest States for Homeowners Insurance

Top 5 Most Expensive States for Renters Insurance

Top 5 Cheapest States for Renters Insurance

Why is homeowners insurance more expensive than renters?

Homeowners insurance covers the structure(s) on a property with dwelling coverage whereas renters insurance does not. This includes personal property protection for other structures on your land such as sheds, fences, or detached garages. Both homeowners and renters insurance cover your belongings.

Get Personalized Renters Insurance Quotes Here

What Perils Homeowners and Renters Insurance Don't Cover

Certain events are not covered by either homeowners or renters insurance:

• Damage due to flooding, earthquakes and mudslides
• Damage due to infestations, like mold
• Damage and destruction caused by terrorism or nuclear war
• Damage to the policyholder's vehicle (vehicle damage is covered by full coverage insurance.)
• State- or court-ordered evacuations

How To Find Homeowners or Renters Insurance

The best way to find the best, cheapest insurance is to shop around, comparing the prices of similar policies from different insurance carriers.  Here are some tips on how to purchase enough coverage:

Buying Renters Insurance

According to the Insurance Information Institute (III), in 2014, only 37% of renters had renters insurance. Since then, renters insurance has become mandatory in many parts of the country.

The cost of home insurance largely depends on the policy's dwelling component, while the cost of renters insurance largely depends on the personal property component.

The personal property portion of your renters policy will largely determine the policy's cost. The best way to determine how much coverage you need is to make a home inventory, with receipts, photos, video and any other documentation you may have. Buy enough insurance to replace your personal belongings if you lose everything.

Most renters policies have a maximum payout limit of $20,000 to $30,000.

Buying Homeowners Insurance

The cost of homeowners insurance depends upon many factors, including the house or condo's location, age and construction type.

The dwelling portion of your homeowners insurance will largely determine the cost of your coverage, so figure out how much it will cost to rebuild your house after a catastrophic event.

See which type of policy makes more sense for you, an actual cash value or replacement cost policy. Actual cash value will only pay out what your house was worth on the open before the catastrophic event. Replacement cost value will pay for your house to be rebuilt just as it was, even if building materials and labor costs have risen due to inflation or scarcity. "Guaranteed" or "extended" replacement cost coverage pays out the most.

How To Lower Your Renters Insurance or Homeowners Insurance Premium

• Shop around for a better deal on renters or homeowners insurance. There are a lot of carriers out there, and they are all competing for your business.
• Purchase your homeowner or renter policy and your car insurance policy from the same carrier. This is called "bundling," and most carriers will give you a discount for it.
• Improve your credit score by paying off your debts and paying your bills on time.
• Choose a higher deductible amount.
• Improve your home's security.

Get Personalized Renters Insurance Quotes Here

Securing Your Home with the Right Insurance

If you have a mortgage, you'll be required to buy homeowners insurance to protect the value of the home. If you are renting a house or an apartment, you may be required to carry a renters policy. The main difference between these two types of policies is that as a renter, you do not have coverage for the home's structure, which belongs to the landlord, not you.

Both home and renter insurance pay for the damage, destruction or theft of personal property, additional living expenses when your home becomes uninhabitable, as well as bodily injury and property damage coverage, in case a visitor suffers a loss while on your property.

Buying adequate homeowners or renters insurance coverage doesn't have to break the bank. Let SmartFinancial find you the best home or renter policy for your needs and budget. Get free quotes that may save you up to 40% by entering your zip code below or calling 855-214-2291 for your free consultation.