Homeowners Insurance vs. Renters Insurance

There are different types of insurance coverage for real estate owners. Two examples are homeowners and renters insurance. These two policies serve different purposes, although there are some similarities. In this guide, you'll learn about homeowners and renters insurance and how they work. We'll also answer questions about the best insurance for landlords and rental properties.

What Is Homeowners Insurance?

Homeowners insurance is a type of insurance that provides financial protection against damages to a person's home and the contents inside. The insurance is designed for homeowners and usually covers the following:

• Physical structure: Homeowners insurance covers the physical structure against perils like theft, vandalism and fire. While there are standard protections, it's essential to review your insurance contract to know the exclusions.
• Personal belongings: Homeowners insurance protects your personal belongings, such as appliances and furniture. The level of coverage depends on the kind of insurance you purchase. Covered perils usually include theft and fire, but there could be listed exclusions.
• Additional living expenses or loss of use: Homeowners insurance may cover additional living expenses if you have to live somewhere while your home is undergoing repairs due to a covered event.
• Personal liability: Homeowners insurance can protect you against lawsuits for injuries and property damages that occur on your property. For example, if a visitor slips and falls on your property, the insurance may cover the costs incurred if the visitor sues, depending on the facts of the case.
• Medical payments: Homeowners insurance can cover the medical expenses if someone is injured on your property.

Homeowners insurance is vital because it protects you against covered perils, saving you money and time. It also gives you peace of mind, knowing the insurance company will likely cover unexpected losses.

What Is Renters Insurance?

Renters insurance is an insurance coverage designed for renters of houses or apartments. If you're a tenant, you can get renters insurance to protect you against the following:

• Personal belongings: Like homeowners insurance, renters insurance covers your personal belongings in the event of theft, fire or other covered perils. It does not cover the rental property itself. The owner's homeowners insurance may cover the losses if the house or apartment is damaged.
• Personal liability: Renters insurance can provide coverage against lawsuits when someone is injured while on the rental property. It may also cover liability for damages that occur on the property.
• Additional living expenses: Renters insurance can help pay for temporary living arrangements like hotel expenses if your rental property becomes uninhabitable due to a covered event.
• Medical payment to others: Like homeowners insurance, renters insurance may cover medical expenses for guests injured in your rental unit.

Renters insurance protects tenants against financial losses in covered situations. It's a valuable investment to protect yourself and your belongings while renting a property.

What Are the Similarities Between Homeowners Insurance and Renters Insurance?

Here are some of the similarities between homeowners and rental insurance:

• Personal property coverage: Both types of insurance usually cover personal belongings like furniture and appliances against covered perils like theft and fire. However, expensive items like jewelry may require additional coverage.
• Liability protection: Both policy types usually provide liability coverage. The coverage can help protect you if someone is injured on the property and you incur lawsuit costs.
• Additional living expenses: Both insurance policies may cover additional living expenses if your home or rental property becomes uninhabitable due to a covered event and you need to live elsewhere temporarily.
• Medical payments to others: Both homeowners and rental insurance usually include coverage for medical payments to people injured on the premises.

While these similarities exist, there are some apparent differences.

What Are the Differences Between Homeowners Insurance and Renters Insurance?

The main difference between homeowners insurance and renters insurance is that homeowners insurance covers the building whereas renters insurance does not.

Homeowners and rental insurance are different in the following ways:

• Dwelling coverage: While homeowners insurance covers the dwelling, renters insurance does not. In other words, homeowners insurance provides financial protection for the physical structure if the covered perils occur. If the physical structure in which a tenant resides is damaged, the landlord's insurance and not the renters insurance will cover the losses related to the structure.
• Persons covered: Homeowners insurance is designed for homeowners, whereas renters insurance is designed for tenants. A person who owns a home but decides to rent in a different location for an extended period may purchase rental insurance to protect their belongings. Similarly, a landlord's insurance only covers the building, not its content, so tenants need renters insurance to protect their belongings.

What Factors Should You Consider When Choosing Insurance?

Before choosing insurance, it's best to consider the following:

• Coverage needs: Are you a renter or a homeowner? What assets do you want to protect? Answering these questions will help you know which insurance type to select.
• Policy coverage: Choose a coverage depending on potential risks. Understand what the policy covers and the exclusions, then ensure it aligns with your needs.
• Premium costs: In most cases, the premiums determine your coverage. You should compare premiums from different insurance companies and balance affordability and coverage.
• Policy limits: Ensure the policy limits are sufficient to cover potential losses. While some payouts are done according to the asset's actual cash value, others are done according to the replacement costs.

Frequently Asked Questions (FAQs)

Here are answers to some of the frequently asked questions:

Is Homeowners Insurance Required When Renting out Property?

While homeowners insurance is optional when renting out your property, purchasing coverage is crucial. Homeowners insurance protects the physical structure while the tenant lives there. Their rental insurance will not cover the physical structure or dwelling.

What Is the Difference Between Landlord Insurance and Homeowners Insurance?

The home insurance you need for a rental property is called a landlord policy. This insurance is designed for owners who rent out their properties, usually for an extended period. Conversely, homeowners insurance is designed for owners who live on the property. The coverage may also differ. For example, most landlord policies do not cover personal belongings, but homeowners insurance does. Also, landlord insurance covers loss of income instead of loss of use.

Does Homeowners Insurance Cover Rental Property?

Homeowners insurance covers the dwelling when you rent out the property. If the physical structure is damaged while the tenant lives on the property, the owner's insurance may cover the losses to the home but not to the tenant's personal belongings.

Do You Need Both Homeowners Insurance and Landlord Insurance?

You can purchase homeowners insurance if you live on the property or plan to have tenants only occasionally. But if you intend to rent the property for an extended period, you'll likely need a landlord policy. If you have two houses where one is a rental property and the other is your primary residence, you can get both homeowners and landlord insurance — one for your home and the other for the rental property.

What Insurance Do You Need if You Rent out Your House?

You can get a landlord policy if you rent your property for most of the year and the property is not your primary residence. Landlord insurance protects the building while the tenant lives there. If you rent out a room in your home a few times a year, like during an event or holiday, you'll likely still need homeowners insurance. However, the circumstances can change, so it's best to consult a professional for tailored advice.

Do You Need to Change Your Homeowners Insurance if You Rent out Your House?

If you rent out your primary residence for an extended duration, you can replace your homeowners insurance with a landlord policy. However, the coverage and prices may differ, so you must consult your insurer for guidance and information.

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American Heritage Property Management (AHPM) provides full-service property management services to real estate owners in Pennsylvania. We have over 3,000 assets under our management with more than 40 years of experience. We can help you determine which insurance type you need, given your circumstances. Do you need strategic and practical solutions? Contact us now!