Renter’s Insurance Vs. Homeowner’s Insurance

Renter’s insurance (also called tenant insurance) and homeowner’s insurance (or simply home insurance) are both types of property insurance. Both forms of insurance offer a variety of coverages that can help protect you, but the coverages they offer are distinct. A homeowner should not purchase renter’s insurance, and someone who is renting should not purchase homeowner’s insurance (unless they have a home they need to insure that they’re not living in).

Let’s explore the differences and similarities between home insurance and tenant insurance. 

What Each Form of Insurance Covers

Renter’s insurance and homeowner’s insurance both offer similar coverage for three different categories:

Personal belongings coverage protects your personal belongings, including clothing, furniture, tools, and most other forms of personal belongings.

Additional living expenses coverage helps pay for things like food and hotels if you cannot live in your home or rental space due to an event that’s covered by your policy.

Personal liability coverage protects you in the event that you accidentally injure someone or damage their property, and they choose to pursue damages in a liability suit. 

Homeowner’s insurance and renter’s insurance differ from there, however. Here are some of the ways in which coverage differs:

Renter’s Insurance

Renter’s insurance may offer coverage for what are known as improvements—changes that you make to your rental space that could be considered permanent upgrades. When you add permanent shelving or other permanent upgrades to your rental suite, tenant insurance protects the value of those upgrades. It also protects all your belongings in the rental.

Homeowner’s Insurance

Homeowner’s insurance provides coverage for your house, as well as for detached structures like sheds and fences. Tenants do not need this type of coverage, because they don’t have any financial stake in the building they live in. 

Dwelling Coverage

Dwelling coverage is the coverage most people think of when they think of homeowner’s insurance; it’s the coverage that protects the value of the building you live in. Dwelling coverage can be for hundreds of thousands or even millions of dollars, depending on the value of your home. Many policies also offer guaranteed replacement cost coverage, which means rebuilding your home will be covered by the policy, even if the cost of rebuilding exceeds the limit listed on your dwelling coverage.

Homeowners need dwelling coverage, and it’s included in all homeowner’s insurance policies. Tenants do not need dwelling coverage, as they have no financial stake in the building they live in—as such, renter’s insurance does not include dwelling coverage. 

The Cost of Renter’s Insurance Vs. Homeowner’s Insurance

Renter’s insurance costs significantly less than home insurance, as there’s no need for dwelling coverage. This means a renter’s insurance policy offers hundreds of thousands, or even millions, less in coverage.

Insurance companies are in the business of managing risk. When a policy covers more, the insurance company takes on more risk—and they need to recoup the costs of taking on that risk by charging more for the policy. 

Which Type of Coverage Do I Need?

Determining the type of coverage you’ll need is simple: If you own a home, you need homeowner’s insurance. If you’re renting, you need renter’s insurance.

The only exceptions to this rule are corner cases where you both own a house and rent from someone else. In these circumstances, we highly recommend speaking with one of the brokers at Nation West Insurance. We can help you determine whether you need two forms of coverage, or if home insurance will be sufficient to cover you, even while you’re renting.