At first glance, the difference between homeowners insurance and renters insurance seems obvious. One is for people who own a home and one is for people who rent. There are, however, other large distinctions concerning the two.
Homeowners insurance focuses first and foremost on rebuilding your home. Companies quote rates based on two factors: quality and size.
- Quality: The age of your home, the materials used to build it, and the value of the appliances all contribute to your home’s quality.
- Size: The size does not just include the total square footage of the house. Insurance agencies also take into consideration the number of belongs a house of your size likely contains.
The primary purpose of renters insurance is to replace personal property. This is why renters can purchase renters insurance for a fraction of the cost of homeowners insurance. Renters are not paying to insure a house in addition to their possessions. While there are many reasons why renters should purchase renters insurance, it is not always mandatory. This is in stark contrast to homeowners insurance.
Homeowners insurance is mandatory for a variety of reasons. The loss of a house affects not only the homeowner but the surrounding neighborhood as well. This is similar to liability insurance for car owners. These types of insurance policies protect the individual as well as neighbors and other around them.
One major similarity between renters and homeowners insurance are exclusions. Both types of insurance often come with exclusions in the fine print. Neither policy covers disasters such as earthquakes and floods. Individuals who live in areas prone to such natural disasters often have to purchase separate insurance to provide coverage.
To learn more about the differences between homeowners and renters insurance, contact the specialists at Leverity.