By: Shakeel Mustafa
#1 Coverage for the Structure
One of the main differences between the two types of policies is that homeowner’s insurance covers the house you live in as well as any other building structures on your property. Of course this comes with limitations related to coverage amounts, valid claims, and exclusions. If you live in a rental unit though, your rental insurance doesn’t cover the building, as your landlord has insurance on the actual property. If a small fire breaks out due to an electrical short, your landlord’s insurance will cover the damage to the building simply because the fire wasn’t your fault. On the other hand, if you’re the heating element in the rental property and a fire that’s your fault — intentionally or not — damages your unit, the liability portion of your rental insurance will help cover repair costs.
#2 Cost
Because renter’s insurance doesn’t have as much cost attached to the claims made, a signature difference between this and homeowner’s insurance is the cost. Renter’s insurance is very affordable, and can cost as little as $20 per month. Homeowner’s insurance is much more expensive, but understandably so since you’re insuring an entire house. Generally, houses are larger than most apartments and townhouses, which also means homeowners often have larger amounts of personal belongings. Additionally, homeowners tend to have more valuable personal property too, investing in higher value items like furniture that they plan on keeping for years. If you take a catastrophic homeowner claim and compare it to a catastrophic rental claim, chances are the insurance company will have to pay much more to the homeowner — the exact reason why homeowners insurance premiums are so much more expensive.
#3 Personal Property Insurance
Don’t assume your landlord’s insurance will cover your belongings. This is one of the primary reasons renters seek out insurance. While it doesn’t cover any structural units, it provides protection for personal belongings. Whether they’re stolen or damaged in an accident, renter’s insurance can help replace the damaged items.
One thing renters and homeowners both need to keep in mind when purchasing insurance is the value at which they insure their structure and/or personal belongings. This is where the policies begin to become more similar. You have two options when insuring your belongings to their value: actual cash value or replacement value. Replacement value is the more expensive option, but it insures your house and belongings at the same price it would cost to replace them. This takes inflation into account, and on the structural side, covers entire rebuilding costs for homes. If your house was built in the 1970s, it would be prohibitively more expensive to reconstruct it today, but if it’s insured at replacement cost, you have much more protection.
Actual cash value is a more budget-friendly option, but you need to understand the risk you assume by choosing this method. If you’re a renter insuring your personal belongings at actual cash value, and then experience a devastating fire, the total sum of your belongings’ worth at the time of the incident is the benefit you’d receive. Why is this incredibly important? Consider the costs of everything now, from electronics to kitchen items. You may have furnished your entire apartment with Goodwill findings, but the $300 dollars you receive from the insurance company isn’t going to help you start from scratch and replace every single thing in your home.
Imagine turning your home upside down — everything that would fall out is your personal property. Now imagine what it would be like to have to replace everything, from your toothbrush to your lucky pair of socks. According to a 2012 Allstate study, even the average renter owns $30K of personal property, and respondents estimated that it would take about three years to replace everything they owned in the event of a total loss. Imagine what it would be like to replace everything in a two-story home, where years of personal property have accumulated. In both situations, obtaining adequate personal property coverage is imperative. Unless you’re a hoarder (can’t wait to see you on A&E!), the amount of personal property is relevant to the size of a home, meaning both need adequate personal property coverage as badly as the other.
About the author: Shakeel Mustafa lives and works in San Francisco, California. As a senior claim adjuster he has in depth knowledge of Insurance Policies
Shakeel Mustafa was raised in South Africa. During the decade of conflicts he saw the rise of Nelson Mandela, guiding the black majority to freedom. He moved to San Francisco after completing his Bachelor's Degree in Finance from Washington State University, Seattle, Washington and started to work for the State Farm Insurance Company as a Claim adjuster. His primary role was to provide competitive auto insurance quotes to the new State Farm Insurance customers. His expertise was focused on investigating the claims submitted for insurance fraud.
#1 Coverage for the Structure
One of the main differences between the two types of policies is that homeowner’s insurance covers the house you live in as well as any other building structures on your property. Of course this comes with limitations related to coverage amounts, valid claims, and exclusions. If you live in a rental unit though, your rental insurance doesn’t cover the building, as your landlord has insurance on the actual property. If a small fire breaks out due to an electrical short, your landlord’s insurance will cover the damage to the building simply because the fire wasn’t your fault. On the other hand, if you’re the heating element in the rental property and a fire that’s your fault — intentionally or not — damages your unit, the liability portion of your rental insurance will help cover repair costs.
#2 Cost
Because renter’s insurance doesn’t have as much cost attached to the claims made, a signature difference between this and homeowner’s insurance is the cost. Renter’s insurance is very affordable, and can cost as little as $20 per month. Homeowner’s insurance is much more expensive, but understandably so since you’re insuring an entire house. Generally, houses are larger than most apartments and townhouses, which also means homeowners often have larger amounts of personal belongings. Additionally, homeowners tend to have more valuable personal property too, investing in higher value items like furniture that they plan on keeping for years. If you take a catastrophic homeowner claim and compare it to a catastrophic rental claim, chances are the insurance company will have to pay much more to the homeowner — the exact reason why homeowners insurance premiums are so much more expensive.
#3 Personal Property Insurance
Don’t assume your landlord’s insurance will cover your belongings. This is one of the primary reasons renters seek out insurance. While it doesn’t cover any structural units, it provides protection for personal belongings. Whether they’re stolen or damaged in an accident, renter’s insurance can help replace the damaged items.
One thing renters and homeowners both need to keep in mind when purchasing insurance is the value at which they insure their structure and/or personal belongings. This is where the policies begin to become more similar. You have two options when insuring your belongings to their value: actual cash value or replacement value. Replacement value is the more expensive option, but it insures your house and belongings at the same price it would cost to replace them. This takes inflation into account, and on the structural side, covers entire rebuilding costs for homes. If your house was built in the 1970s, it would be prohibitively more expensive to reconstruct it today, but if it’s insured at replacement cost, you have much more protection.
Actual cash value is a more budget-friendly option, but you need to understand the risk you assume by choosing this method. If you’re a renter insuring your personal belongings at actual cash value, and then experience a devastating fire, the total sum of your belongings’ worth at the time of the incident is the benefit you’d receive. Why is this incredibly important? Consider the costs of everything now, from electronics to kitchen items. You may have furnished your entire apartment with Goodwill findings, but the $300 dollars you receive from the insurance company isn’t going to help you start from scratch and replace every single thing in your home.
Imagine turning your home upside down — everything that would fall out is your personal property. Now imagine what it would be like to have to replace everything, from your toothbrush to your lucky pair of socks. According to a 2012 Allstate study, even the average renter owns $30K of personal property, and respondents estimated that it would take about three years to replace everything they owned in the event of a total loss. Imagine what it would be like to replace everything in a two-story home, where years of personal property have accumulated. In both situations, obtaining adequate personal property coverage is imperative. Unless you’re a hoarder (can’t wait to see you on A&E!), the amount of personal property is relevant to the size of a home, meaning both need adequate personal property coverage as badly as the other.
About the author: Shakeel Mustafa lives and works in San Francisco, California. As a senior claim adjuster he has in depth knowledge of Insurance Policies
Shakeel Mustafa was raised in South Africa. During the decade of conflicts he saw the rise of Nelson Mandela, guiding the black majority to freedom. He moved to San Francisco after completing his Bachelor's Degree in Finance from Washington State University, Seattle, Washington and started to work for the State Farm Insurance Company as a Claim adjuster. His primary role was to provide competitive auto insurance quotes to the new State Farm Insurance customers. His expertise was focused on investigating the claims submitted for insurance fraud.
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