Renter’s insurance is exclusively for insuring your personal liability and assets, belongings or property while renting a home or apartment.
Homeowner’s insurance covers belongings, the building itself and your personal liability when you are the owner.
Only one policy is needed depending on whether you rent or own your home. However, for those who are just starting to shop for their first home, it’s important to understand the difference between homeowner’s and renter’s insurance.
The Price Difference
Renter’s Insurance is likely the cheapest insurance you will ever own, with policies from $100 - $300 per year. The cost of insuring the building is on the landlord, requiring you to purchase renter’s insurance to protect your belongings in an event of a theft, fire or other disaster.
Homeowner’s insurance in contrast is much more expensive. In addition to covering your belongings, policies cover your home and personal liability. Rates are affected by the age of your home, where you live and claims are more common for homeowners vs. renters. On average, you can expect to pay $1578 in Texas.
Replacement Cost vs. Actual Cost Value
For both Renters and Homeowners policies, it is recommended to buy replacement cost vs. actual cash value insurance. Getting replacement cost insurance pays for the value of an item new in a claim, while actual cash value estimates the depreciation of an asset. For example, replacement cost insurance might pay you $3,000 for that LED TV you purchased 5 years ago, while actual cash insurance might pay $500 because the TV is nearly worn out.
Are Either Required?
Although renter’s insurance isn’t required by the state, many apartment complexes and landlords require coverage at a minimum of $100,000 in liability. Often, these landlords are receiving discounts on their policies if they require residents to purchase and show proof of renter’s insurance.
Even if renter’s insurance isn’t required by your landlord, it is inexpensive and can even lower your auto insurance policy when combined under the same carrier.
Homeowner’s insurance is also not required by law, although with most homeowner’s borrowing through a mortgage would find that banks require homeowner’s insurance. So many things can go wrong with owning a home, it should be the goal of every homeowner to protect themselves, their family, their belongings and property with a homeowner’s policy.
Renter’s insurance deductibles average from $50 to $1,500 while homeowner’s deductibles can range from $1,000 to $10,000+. In Texas, it’s generally 1% of the value of the insurance carried on the home. Since homeowner’s insurance policies cost more than renter’s policies, they do have higher deductibles. Regardless of your insurance need, access your chance of a claim and consider paying a higher deductible to reduce your overall policy cost. If you have a healthy income and can afford to pay $2,000 out of pocket, then increase your deductible and experience a lower yearly insurance bill. Insurance policies should only cover what you can’t afford. (Some mortgagee’s won’t let you go above a 1% deductible.)
Payment of a renter’s policy is best up front for the year. With policies near $100 - $300, it can often be more of a hassle to pay for renter’s insurance policies monthly. You will also see a reduced cost for most carriers by paying for the entire year in one lump sum.
Homeowner’s insurance policies are much more expensive, making monthly payments more reasonable. With Homeowners insurance, your mortgage lender will likely set up an escrow account. This requires you to pay for your policy up front and give a monthly amount to your lender for them to pay the renewals.
Both Don’t Cover Every Claim
Renter’s as well as Homeowner’s insurance will probably have limits on certain belongings including guns, jewelry, money and more. Basically, if you own several thousand dollars’ worth of specialty items, your renter’s insurance will pay only up to the limit, leaving you on the hook for the rest. There will also be items excluded such as your car parked in the apartment lot.
Homeowner’s policies will often exclude or limit flooding, earthquakes, certain breeds of pets, updates to the home required by law and disasters caused by homeowner negligence such as running your car into your own house. The limit on the policy will also be all that would be paid in the event of a serious loss. The limits that you purchase have to be adequate to rebuild your house, clean up the mess, put you up in a hotel, and rebuy your belongings. Also realize that rebuilding costs go up following a natural disaster such as a tornado. Don’t cheap out and purchase inadequate limits. You’ve already spent good dollars with a basic policy. Enhancing the policy costs pennies on the dollar at purchase time and avoids tens of thousands of dollars of uncovered claims.
Make sure to carefully review your renters and homeowner policies to ensure you are covered. Find out more information about homeowners insurance and renter's insurance throughout Texas by visiting hettlerinsurance.com.