What's the Difference Between Homeowners and Renters Insurance? (2024)

Let’s say you’ve rented your place for a few years, and now you’re looking to buy your own home. You’re familiar with renters insurance, but eventually you’ll need a different type of policy to cover you. What should you expect?

Let’s take a quick look at the differences between renters insurance and homeowners insurance.

  • Homeowners insurance vs. renters insurance
  • What renters insurance covers
  • What homeowners insurance covers
  • Cost comparison
  • How much coverage you’ll need

Homeowners insurance vs. renters insurance

Hold onto your seats, because this might come as a shock: Renters insurance (referred to in the industry as an HO4 policy) is for renters, and homeowners (HO3) and condo insurance (HO6) are for policyholders who own their homes.

Not surprisingly, you’ll pay a bit more to insure a place you own than you’d pay to insure a comparable rental property. (We’ll cover costs in more detail below.)

Quick reminder: Lemonade offers HO3 and HO6 policies for homeowners, and provides HO4 coverage to renters.

What does renters insurance cover?

Renters insurance coverage includes everything that homeowners HO3 insurance covers, except for damage to the rental property itself—because you don’t own it. Property damage coverage is part of your landlord’s insurance policy instead.

Renters insurance covers things like:

  • Loss or damage due to certain causes (called perils) like fire,, theft, or vandalism
  • Temporary living expenses if the covered loss is so bad your home’s not livable
  • Personal liability & medical bills for instances in which someone gets hurt at your place in an accident—whether that means hospital bills or legal fees from a lawsuit. It also extends to certain damages that you may cause when you’re away from your home.

It’s very important to note that your renters insurance policy covers your belongings against theft anywhere in the world—whether you’re at home, on the subway, or visiting your favorite restaurant.

You should also read your insurance quote carefully to look for exclusions. These are things that are not covered by your policy. For example, renters insurance usually doesn’t cover pests like mice or (eek!) bed bugs.

It won’t include damage to the personal property of other people who live in your rented home (unless they are a blood relative, spouse, or adopted child) so your roommates each need their own renters insurance policy.

What does homeowners insurance cover?

A typical HO3 policy covers a lot, like damage to your home and your personal property, personal liability, living expenses, and medical fees.

But you’ll still need to check your policy for exclusions. Some common things that you wouldn’t be covered for include:

  • Flooding and some other types of water damage
  • Anything that you could have fixed before it reached the point of causing damage (like creeping mold)
  • Certain natural disasters, like earthquakes
  • Termite infestations
  • People who live in your home but aren’t related to you by blood, marriage, or adoption (but note that you can get additional insurance for them)

You can buy individual insurance policies to cover any gaps in your insurance, like flood insurance or earthquake insurance.

If you have expensive items, like high-end jewelry, expensive cameras, or specialty equipment, you’ll probably need additional coverage for them because a standard homeowners policy won’t cover the replacement cost. The industry refers to this as “scheduled personal property coverage,” but at Lemonade we simply call it “extra coverage.”

Coverage TypeHomeowners InsuranceRenters Insurance
Dwelling YesNo
Personal property YesYes
Loss of useYesYes
Personal liabilityYesYes
Medical payments to othersYesYes

Costs of homeowners insurance vs. renters insurance

In general, you can expect your renters insurance quote to be less than for homeowners insurance. That’s because homeowners insurance includes the building structure itself, which isn’t the case for renters insurance policies.

In both cases, the cost of your insurance policy depends on a few factors, including:

  • Where you live. For the same size home, homeowners insurance costs as little as $781 in Delaware but as much as $3,383 in Colorado.
  • How much deductible you’re willing to pay—the higher the deductible, the lower the insurance premiums.
  • For homeowners insurance, the condition of your home, its size, and its age can all affect premium price. (For renters insurance, this doesn’t make a difference.)
  • Your claims history. If a policyholder has made a lot of insurance claims in the last 5–10 years, they’ll likely have to pay a higher premium.
  • The cash value of your personal items. The higher their value, the more you’ll have to pay to insure them.
  • Your home security set-up, like whether you have burglar alarms, motion-triggered lighting, window locks, and so on.

All these factors make it tough to tell you how much you might have to pay. But we can tell you that on average, renters insurance in the US generally costs between $15 to $30 per month, or $180 to $360 per year, according to the National Association of Insurance Commissioners. Meanwhile, the average annual cost of homeowners insurance is $1,680 per year, or $140 a month.

How much renters or homeowners insurance coverage do I need?

What's the Difference Between Homeowners and Renters Insurance? (2)

“How much coverage do I need?” is a tricky question, and one whose answer depends on your personal situation, as well as your tolerance for risk.

As a baseline, homeowners insurance needs to cover the amount it would cost to totally rebuild your home. For renters insurance, it’s entirely up to you (but the coverage you choose should be aligned with the value of the stuff you own).

Here are some things to consider:

  • How much would it cost to replace your household appliances, furniture, and clothing? You need enough insurance to cover the basics if you lost everything.
  • Which are your most beloved possessions, and how much would it cost to replace them?
  • How much money might you need, beyond your normal daily expenses, if you can’t live at home for a week or two?
  • How much might it cost if your kitchen is out of commission for a couple of weeks and you have to rely on takeout meals?
  • What personal liability coverage might you need? If you have a pool or a pond on your property, or you have a dog and your neighbors have small children, you might prefer a higher coverage than if all your neighbors are adults and you don’t have any hazards in your garden.

When it comes to deciding how much insurance to pay for, the main thing to think about is how much your peace of mind is worth. It’s often worth paying a little more to know that you have enough insurance to cope with (almost) anything that comes your way.

Lemonade and your home insurance needs

There’s a lot to think about before getting insurance, but it’s worth it to rest easy without worrying about the “what ifs”.

Whether you’re renting or you own your own place—and whether you want total coverage for every eventuality, or you’d prefer to go basic and keep the costs as low as possible—Lemonade makes it easy to buy and manage home insurance.

You can use the Lemonade app or website to get a quote, upgrade your coverage, file a claim, and review your homeowners or renters insurance policy.

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What's the Difference Between Homeowners and Renters Insurance? (2024)

FAQs

What's the Difference Between Homeowners and Renters Insurance? ›

The main and most obvious distinction between renters insurance and homeowners insurance is that a homeowners policy safeguards the home's physical structure against covered perils while renters insurance won't protect the home or building occupied by the tenant.

How is homeowners insurance different from renters insurance? ›

Homeowners insurance is for those who own their home or apartment, and it covers both their personal belongings and the structure of the home. Renters insurance is purchased by tenants, and it covers damage to or theft of their personal property, but not damage to the building itself.

Is the stolen property covered by homeowner's or renter's insurance? ›

Does homeowners insurance cover theft from a home? Typical homeowners (including renters and condominium) policies include coverage for your personal property. Loss due to theft is generally included as part of the personal property protection.

What aspects of homeowners or renters insurance do you feel are most important to consider? ›

The most important aspects to consider in homeowners or renters insurance are personal property coverage, liability protection, structural coverage (for homeowners), additional living expenses, deductibles, policy limits and exclusions, potential discounts and bundling, and the reputation and service of the insurance ...

What is the primary difference between homeowners insurance and renters insurance Quizlet? ›

Homeowner's insurance covers the residence. Renter's insurance only covers the belongings in a residence.

Why is renters insurance cheaper than homeowners? ›

If you're looking into homeowners insurance for the first time, you'll notice that the cost of homeowners insurance may be more expensive than renters insurance. This is because a homeowners policy protects your home's structure and will typically offer more coverage than a renters policy.

What does renters insurance cover typically? ›

Renters insurance covers personal property, personal liability, medical payments and additional living expenses or loss of use, up to the limits of your policy.

Which is not typically covered by home or renters insurance? ›

Flooding, earthquakes and sinkholes are all examples of natural disasters that are not covered by a typical renters insurance policy. All three of these events can easily damage your personal property, so you should buy additional coverage if you think you're at risk.

What perils are typically not covered by renters or homeowners insurance? ›

Earthquake, flood, mold, earth movement, and “wear and tear” are some of the perils that are usually excluded.

What is the difference between landlord insurance and homeowners insurance? ›

Think of it this way: You'll want landlord insurance: any time you are renting your entire premises long term and you are not occupying it. You'll want homeowners insurance: if you have a renter staying in part of your home while you still occupy it.

What is the main reason someone would want to have renters insurance? ›

Renters insurance protects your belongings from loss, damage, or destruction following things like burglaries, fires, tornadoes and other covered events. Plus, renters insurance also protects your liability (and your money) if someone is injured at your rental home or apartment.

Which of the following is not covered by a homeowner's policy? ›

Standard homeowners insurance does NOT cover damage caused by flooding, earthquakes, termites, mold, or normal wear and tear.

What does home and renter insurance protect you from a few examples? ›

Renters insurance tends to cover loss or damage to items in the home related to fire, theft, vandalism, plumbing, and electrical malfunctions. Renters insurance can reimburse you based on replacement cost, which pays the full cost of replacing the items with new ones.

What makes homeowners and renter's insurance different from one another? ›

Homeowners insurance covers the building you live in and associated structures such as garages. Most lenders will require you to take out homeowners insurance when taking out a mortgage. Renters insurance is for tenants to cover liability and their personal property.

Which situation would most likely use renters insurance? ›

Insurance for personal property damage is the most common type of damage coverage in a renters insurance policy. Renters insurance also covers personal liability arising from the accidental damage of someone else's property.

What are the two types of homeowners insurance? ›

What are the different types of homeowners insurance?
  • Dwelling coverage is the basis for all homeowners insurance policies. ...
  • Contents coverage protects items including furniture and clothing in your home.

What is the difference between homeowners insurance and property insurance? ›

Homeowners insurance typically provides financial coverage for liability claims and losses of property or personal belongings due to physical damage. On the other hand, property insurance is an umbrella term describing various types of policies that include coverage for floods, earthquakes, and hurricanes.

Why should you purchase renters insurance? ›

Renters insurance can help you repair or replace property after loss due to many types of damage or theft. It can also provide coverage for an accident at your residence. Policies usually have very affordable annual premiums.

What type of insurance would you consider the most important and why? ›

Health insurance is a critical piece of every financial plan. An unforeseen diagnosis or a major accident can leave you with a six or seven-figure medical bill.

Why does homeowners insurance continue to increase annually while renters insurance does not? ›

Answer. Homeowners' insurance continues to increase annually while renters' insurance does not because homeowners' insurance often covers more risk factors such as natural disasters, structure of the property, and homeowner's liability.

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