The Difference Between Home and Renters Insurance


WRITTEN BY: Mark Romero

UPDATED: NOVEMBER 09, 2022 | 2 MIN READ

There are several differences between the experiences of owning or renting a home, including insurance matters. Whether you’re looking to change between renting and ownership or are still choosing, it’s important to understand your options. To get you started, here is a comprehensive guide to the differences between rental insurance and home insurance.

Difference in Coverage

Owning and renting a home are vastly different experiences, so it’s natural to expect that insurance coverage for each circumstance will also vary. It’s also important to note that different locations are susceptible to different crises, including various natural disasters. 

The bottom line regarding the difference in coverage is that homeowners insurance covers the actual building while renters insurance covers the personal property. Essentially, tenants take out renters insurance to cover property that does not fall under the umbrella of the landlord’s responsibility.

Renters insurance and homeowners insurance cover almost all the same general areas except dwelling coverage.

Dwelling Coverage (Only in Homeowners Insurance)

Dwelling coverage pertains to physical damage to the property itself. This includes walls, roofs, doors, floors, and other parts of the structure. Typically, you will find this coverage in the home, landlord, or condo insurance, but not in renters insurance since tenants aren’t responsible for building damage beyond their control.

While the specifics of different policies vary, there is a standard list of common perils to property that most will cover. The most common (and widely covered) among these include wind and hail, while the more expensive end includes fire and lightning

Coverage typically includes:

  • Smoke/Fire
  • Windstorm
  • Hail
  • Explosions
  • Lightning
  • Vehicle damage
  • Riots and civil unrest
  • Vandalism
  • Theft
  • Falling objects/debris (e.g., trees)
  • Weight of snow, ice, or sleet
  • Water damage from freezing, plumbing problems, heating/air conditioning, sprinkler systems, or appliances

As is the case with any insurance, the details and extent of coverage in these areas will vary, given the specific insurance policy. The most common policies cover all of these areas while more limited policies may exclude a few.

That said, there are also some areas that almost all policies exclude from their dwelling coverage. The most notorious cases are floods and earthquakes

Coverage typically excludes:

  • Flooding
  • Government seizure
  • Earthquakes, sinkholes, or landslides
  • Homeowner neglect
  • War/nuclear hazards
  • Power failures

Overlapping Coverage Areas

Aside from dwelling coverage, the rest of the coverage areas are generally the same. The differences can mostly be found in the details, particularly in terms of pricing.

Personal Property

While property damage is a notable expense to prepare for, you also want to protect your personal belongings in the case of a crisis. Personal property covers anything from clothes to electronics and furniture. 

This is the main purpose of renters insurance, so it’s the most important element to look at if you’re a tenant. As a result, it’s the biggest driver of price between different renters insurance policies.

With home insurance, personal property coverage can be factored in as a percentage of your dwelling coverage. There are typically recommendations for the percentage amount, but it can be adjusted before purchasing.

Personal Liability

This area of insurance protects against legal exposure of property damage or bodily injury caused to others outside the policy. This means if someone falls down the stairs in your home, for instance, you will be financially covered should they sue you for the damages.

The default amount of personal liability coverage for both homeowners insurance and renters insurance is around $100,000 for this coverage area but can be raised for an increase in price should it be beneficial.

Additional Living Expenses

Additional living expenses coverage protects against financial hardships that arise from living outside of your home are typically quite similar between rental and homeowners insurance policies. This includes abnormal living expenses that arise due to your home becoming uninhabitable, such as hotel costs while water damage is repaired. Depending on the policy, your coverage could be a set amount or set time frame.

Medical Payments

Finally, both renters and homeowners insurance include medical payments coverage for no-fault instances. In other words, there is no legal liability requirement as with personal liability coverage. Coverage for this area of insurance is typically around $2,000 and is set aside for accidental injuries that occur in your home.

Difference in Cost

Homeowners insurance is more expensive than renters insurance across the board because it covers more property as well as property that is more valuable and more susceptible to high-cost damage. 

The Overall Numbers

On average, the annual cost of homeowners insurance is around $1,680 while renters insurance costs around $219. This makes sense when you also factor in the reality that the average home costs around $300,000 to build while the average value of a renter’s belongings is $30,000.

The insurance cost will also vary drastically depending on location. Depending on your state, the actual average homeowners and renters insurance rates may be higher or lower than the national average. Typically, homeowners insurance is most impacted as it covers the property itself.

The most expensive states for homeowners insurance include:

StateAvg. Homeowners Insurance RatesAvg. Renters Insurance Rates
Colorado$3,383$181
Oklahoma$3,321$348
Tennessee$3,030$277
Kansas$2,613$218

The least expensive states include:

StateAvg. Homeowners Insurance RatesAvg. Renters Insurance Rates
Delaware$781$230
Vermont$825$156
Pennsylvania$899$195
Maine$982$154

The remaining states fall in between the numbers listed. The differences come from unique risks in each state (such as natural disasters), the average amount of coverage each policy owner purchases, and other factors. The five most expensive states–Colorado, Oklahoma, Tennessee, Kansas, and Texas–spend 77% more per year on homeowners insurance than the national average, mostly due to wildfires and tornadoes.

Important Cost Factors

Of course, renters insurance and homeowners insurance policies will be impacted by various factors. While homeowners insurance will always be more expensive, there are still ways to control costs in both types.

Factors Out of Your Control

Aside from deliberately minding certain elements when choosing your home or rental, there will be factors out of your control. These include:

  • Age of Home: Old, out-of-date homes tend to imply wear and tear that would increase the likelihood of damages and claims.
  • Pets: Pets increase the potential for damage in a home or apartment and come into play with liability coverage in the case of injured guests. Some dog breeds are marked as higher risk, too, and will therefore lead to higher premiums.
  • Location: As mentioned, certain states have higher costs of living and higher insurance premiums. More specifically, if you live in a zip code with higher crime rates or likelihood of disaster, you may experience higher rates.
  • Materials: If your house was constructed with materials more susceptible to fire or other disasters, it could increase your premium. 

Factors In Your Control

Fortunately, not everything impacting insurance costs is left up to chance or your environment. These include:

  • Credit Score: Credit scores are indicators of financial stability in every industry. Some states permit good credit scores to lead to lower rates.
  • Claims History: Much like with car insurance, your claims history is an indicator insurance providers consider when measuring the likelihood of future claims. Filing more claims leads to higher rates, meaning you should carefully consider any claim you do make.
  • Renovations: Making improvements to your home can lower premiums as it makes it more durable and up-to-date. That said, increasing your square footage could also raise your premiums as there is more to cover.
  • Deductibles: Any insurance type details the out-of-pocket expenses you will be expected to pay before the provider takes over. Higher deductibles mean lower monthly costs but can be devastating in the case of a disaster. It’s up to you to choose how much risk you want to take to save monthly.
  • Dwelling Coverage Limit (for homeowners insurance): The value of your home can’t be altered, but choosing between Replacement Cost Value (RCV) coverage or Actual Cost Value (ACV) coverage makes a difference in your policy cost. RCV is more expensive as it covers the full value of rebuilding your home but protects you from covered loss should your home depreciate.
  • Property and Liability Coverage Limits: The standard here rests around $100,000. It’s within your control whether you want to raise or lower this, balancing risk with affordability.
  • Discounts: Most insurance companies will offer discounts or bundling options based on your specific circumstances. Researching available discounts for your needs is a great way to take control of your own insurance savings.

Process for Acquiring Home and Renters Insurance

Finally, there are some differences that come into play when shopping for renters insurance or homeowners insurance. This typically boils down to the differences in what you are looking to insure.

Shopping for Renters Insurance

There is typically less research and legwork involved in renters insurance, but there are still things to note and look for. Whether you secure your policy over the phone, online, or in person, most insurance companies make it fairly easy and flexible to receive your quote and purchase a plan. 

When you’re ready to start contacting providers, be sure to have your basic information (name, address, type of rental, etc.) and a general idea of how much coverage you are looking for. The insurance provider will follow up with any relevant questions about your property and possessions and work with you to find the best policy they can provide.

Be sure to keep your options open, however, and not just restrict yourself to one insurance quote. Comparing insurance rates is vital to ensure you get the best option. While a company will point you toward the best-fitting policy they can provide, they rarely will point you to an even better option elsewhere.

Shopping for Homeowners Insurance

Finding the right homeowners insurance policy has a lot more to do with the specifics of the property itself since that’s what is being insured. As a result, there is a little more involved in this process than with renters insurance.

Much like with renters insurance, you can work with an existing provider (which can be smart if there are quality bundling options) or shop around for quotes specific to home insurance. Questions you may encounter here that doesn’t apply to renters insurance include:

  • The value of the home
  • The age of the roof and other structural elements
  • Whether there is a security system
  • Whether there is a pool
  • Notice of any remodeling

Many of these questions may be difficult for the average homeowner to answer, especially for a new home. Having a professional inspection prior to contacting insurance companies can be immensely helpful in having answers ready to go. You can also use this time to assess any other risks worth noting, such as the possibility of different natural disasters in the area.

FAQs

What is the biggest difference between home and renters insurance?

The primary difference between renters insurance and homeowners insurance is the matter of dwelling coverage. Beyond that, there is also a notable price difference between the two types since homeowners insurance covers more property and takes on higher financial responsibility and risk.

How does renters insurance differ from other home insurance policies?

The unique nature of renters insurance is that it’s geared toward tenants rather than property owners. This means that it doesn’t cover the property itself but rather the personal property of those leasing it. As a result, it is less expensive than other home insurance policies.

Is landlord insurance different from homeowners insurance?

The main difference here is between the type of property insured and thus the type of property insurance required. A landlord insurance policy covers rental properties while homeowners insurance covers a primary residence. In terms of coverage, the main differences can be found in liability protection, and personal property coverage, both of which are more covered by homeowners insurance since the residents are the ones with the policy.

Why do rates between home insurance and renters insurance vary?

Renters insurance will always be cheaper than home insurance because of the difference in the financial risk of what is covered. Different types of home insurance or renters insurance respectively also vary due to the specifics of the policies and factors (location, property type, the value of possessions, etc.) that impact the cost.

Are there bundling options for home and rental insurance?

Yes. Most insurance companies that offer a range of insurance types (auto, home, rental, etc.) and types of coverage will offer bundling options to incentivize policyholders to receive all of their insurance from one provider. This typically incorporates discounts and helps you save money overall.

Finding Home and Renters Insurance

Whether you’re settling on renters or homeowners insurance, it’s important to know the final numbers to pick the best provider and plan for your circumstances. By doing your research, shopping around, and comparing rates, you can rest assured that your home is protected without breaking the bank.