Renters Insurance Policy vs. Homeowners Insurance:
What Is The Difference?
Both homeowners insurance and renters insurance policy provide financial security to the policyholder in case losses happen. Both insurances provide personal property coverage, and liability coverage. Also, both insurance has additional living expenses — should the house or the rented apartment of the insured is uninhabitable, due to covered damages. However, the most significant difference between the two policies is the property they cover. Renters insurance is for tenants or occupiers of a rented apartment or complexes — but renters insurance does not cover the damages to the rented apartment. While homeowners insurance is specifically for individuals or families who own a house, also, homeowners’ insurance could cover the cost of repair to the damages on the dwelling; however, only if the losses are due covered peril only.
Differences Between Renters And Homeowners Insurance Coverages
People often think that there is no difference between the renters and homeowners’ insurance — which is considered as a false belief. Homeowners insurance covers the damages to the dwelling of the insured, while the renter’s insurance does not have coverage for the structure of the rented apartment. However, both insurances have the same other coverage, so if you are renting an apartment — you don’t have actually to buy homeowners’ insurance to cover your personal belongings. While you own a home, you must purchase homeowners’ insurance, but if you decide just to rent an apartment in the future — you need to buy renters’ insurance policy to protect you from covered losses.
| Coverage Of Insurance | Renters Insurance | Homeowners Insurance |
|---|---|---|
| Dwelling Coverage | ❌ | ✔ |
| Personal Property Coverage | ✔ | ✔ |
| Liability Coverage | ✔ | ✔ |
| Additional Living Expenses (ALE) | ✔ | ✔ |
| Medical Payments Coverage | ✔ | ✔ |
Renters And Homeowners Insurance Coverage Overview
Generally, both insurances provide financial protection to the insured against covered damages. This covered damages in insurance terms are what they call a “peril”— on which are commonly on the list, at the declarations page of the insured. When a covered peril damages the property of the policyholder, the insured could file a claim to the insurer. Here at Renters Insurance California, we assess as quickly as possible our client’s claims —to prevent further damages to their properties.
1. Dwelling Coverage
Dwelling coverage could cover the physical damages to the structure of the house of the insured. It could cover the damages to the structure such as the roof, floor, wall, doors, and floor of the dwelling. However, coverage would only be applicable if the damages are due to a covered peril only. Standard homeowners’ insurance policies cover common perils, such as smoke, fire, hail or windstorm, lightning, explosion, theft, vandalism, and malicious mischief, damages from falling objects, weight os snow, ice, and sleet. Besides, it can also cover damages that are due to vehicle, riot, water damage due to bursting of plumbing, or leakage of a fire sprinkler. However, some perils are typically excluded from the coverage. Here we will give you the list of these excluded perils.
2. Perils Excluded From Dwelling Coverage
- Damages due to flood, the homeowner must purchase his flood insurance to protect him from this damages.
- Movements of earth, including damages due to sinkhole landslide, and earthquake, are also excluded from coverage.
- Damages due to the negligence of the homeowner.
- War and nuclear hazards
- Demolition and mandatory rebuilding to keep the building up to the local code
3. Liability Coverage
Liability coverage could cover both the renters and homeowners’ policyholders against liability claims. It could cover the bodily injury and personal property claims against the insured — from a third party person. However, coverage would only be applicable, if the insured is held liable for the injury and damages. For further illustration, consider that a third party person sues the insured for accidentally scratching the other person’s Porsche car. The policyholder could be covered from the cost of setting the legal claim — and the damages that result in legal proceedings.
4. Personal Property Coverage
Both homeowner’s insurance and renters insurance policyholders could be covered for personal property coverage. Personal property coverage could cover the insured’s clothes, television, and furniture. In homeowner’s insurance, the limits for the personal property coverage are in default the 50% of the dwelling limits coverage of the insured — however, the policyholder could adjust his personal property coverage limits base on his preference. While, in renters insurance, the most crucial part is selecting the limits for the personal property coverage — as this is the core coverage feature of the policy and the most significant factor in determining the cost of its policy. Besides, this coverage is much like dwelling coverage. It does not cover damages unless it is due to covered perils.
Take Note:
Both insurances have only a certain sub-limit for the high-value properties of the policyholder. To give an example, suppose that the insured has a $10,000 jewelry, and was stolen. Even though the policyholder has a $20,000 coverage limits for his personal property — the insurer will only pay the insured an amount of $2,000, which is the default sub-limit of most insurance providers minus the deductible rate. However, the payments for personal property coverage of the insured — with regards to its non-high-value properties would depend on the coverage limit of the insured, minus its deductible rate.
Take Note:
Both insurances have only a certain sub-limit for the high-value properties of the policyholder. To give an example, suppose that the insured has a $10,000 jewelry, and was stolen. Even though the policyholder has a $20,000 coverage limits for his personal property — the insurer will only pay the insured an amount of $2,000, which is the default sub-limit of most insurance providers minus the deductible rate. However, the payments for personal property coverage of the insured — with regards to its non-high-value properties would depend on the coverage limit of the insured, minus its deductible rate.
5. Additional Living Expenses Coverage (ALE) )
This coverage could cover the insured cost of living somewhere else, should his insured home or rented apartment is unfit to live in — due to covered damages. It could cover the insured’s cost of renting another place until his house or apartment is repaired. Besides, it can also include the insured’s cost of food, toiletries, and clothing. The insurer could provide reimbursement to the insured up to its coverage limit. Usually, the limit for ALE coverage is $30 per day up to specific months. However, the policyholder could increase its limits before purchasing the insurance policy for up to $50 and $100 per day, depending on the insurance provider.
6. Medical Payments Coverage
Unlike liability coverage, medical payments coverage does not have to establish that the insured is the one who is liable for the injury or property damages of a third party person — because medical payments coverage is a no-fault basis. This coverage can cover the cost of medical bills, for the third party injured — in exchange for not filing a legal claim against the insured. Payments with medical payments coverage are up to a specific amount only, or up to the coverage limits of the policyholder only.
Annual Premium Rate Based On Your Coverage Limit
| Personal Limit | Liability Limit | Annual Renters Insurance Premium |
|---|---|---|
| $15,000 | $100,000 | $123 |
| $15,000 | $300,000 | $132 |
| $25,000 | $100,000 | $152 |
| $25,000 | $300,000 | $160 |
| $50,000 | $100,000 | $224 |
| $50,000 | $300,000 | $236 |
What Is The Difference Between The Cost Of This Two Insurance Policies?
Provided that renters insurance doesn’t have dwelling coverage, the most significant difference between the price of both insurances, is that renters insurance is less pricey than homeowners’ insurance. Typically, renters insurance only costs $20 a month, depending on the risk of the proposed insured, and its insurance provider. Homeowners insurance is much more pricey, but this understandable — since homeowners insurance has coverage for the physical structure of the insured’s dwelling. Generally speaking, homeowners’ insurance is more expensive because homes are more massive than apartment units — and with this case, homes have a lot more personal properties to insure than in an apartment unit.
What Is The Average Cost Of This Insurance Policies?
Homeowners’ insurance is a lot more expensive than renters insurance. Because homeowners insurance covers more property — this property is of a higher value and a lot more prone to damages. In California, the average annual cost of a homeowner’s policy is $1,100, while the renters insurance policy is just $190 annually. Besides, if the homeowner files a damage claim and compares it to a tenant also filing a claim, chances are the insurer will have to pay more on the homeowner, likewise to the insured tenant. It is the exact reason why homeowners insurance is much more expensive than renters insurance.
Factors That Can Affect The Cost Of this Insurance Policy
- The limits of coverages the insured purchases
- Deductible rate the policyholder chooses
- Location of the dwelling and the rented apartment
- Usually, if the dwelling or the rented apartment is near a location that has a high crime rate — and near a disaster zone, the tendency is it will garner a higher premium rate.
Common Questions You May Encounter If You Want To Purchase Homeowners Insurance
- Foundation type of building (basement, slab, foundation)
- Sizes of the patios decks, patios, and porches
- Age of the house’s wiring’s
- Materials of the siding
- Age of the plumbing
- Materials use to the roof.
- Is there is a pool?
- Source of heating
- When was the house built? (year)
- Basement — if there is a basement.
Here at Renters Insurance California, we could provide you a quote for homeowners and renters insurance. Get a free quote from A-rated insurance companies.