Whether you rent or own your home, the property as well as its contents should be protected with insurance. For those who own homes, homeowners insurance can protect the home and the home's contents. If the home is a rental, the owner of the home would insure the property, while the renter is responsible for insuring the contents of the home. Both homeowners and renters insurance require regular payments that can range from monthly up to one lump annual payment, and a policy must be in good standing in order to pay out on a claim. Both also require the payment of a deductible for claims, unless otherwise specified in the policy.

A homeowners insurance policy is taken out by the owner of the home. A property owner is not obligated to insure his or her property unless there are special circumstances, but a homeowner who has a mortgage is required to take out an insurance policy. The amount of insurance generally covers the cost to replace the home in the event of a total loss, and additional insurance can be added to cover the replacement value of the items in the home. If a home costs $200,000 to rebuild and the items inside the home cost $150,000 to replace, a homeowner who wanted to cover everything would need to insure the property for at least $350,000.

Renters insurance is for occupants who do not own the property but want to protect their personal belongings that are in the home or on the property. It is important for renters to note that the property owner's insurance policy does not cover them, and their items are lost in the event they are damaged or destroyed. Renters insurance policies will reimburse a renter for the replacement cost of property that is lost or damaged while on the property.

The Advisor Insight

Homeowner's insurance covers the actual building you live in (and associated structures like garages), while renter's insurance does not. With renter's insurance, the landlord will be expected to have coverage on the building while your insurance will cover your personal property. Most standard homeowner's policies will have personal property coverage as well. It is becoming more common for landlords to require their renters to buy renter’s insurance. Since you are insuring a more substantial asset with homeowner's insurance, the expected cost will be higher as well. Most homeowner's and renter's insurances will also have liability coverage associated with them. If you mortgage your home, homeowner's insurance will almost always be required.

Alexander Rupert

Laurel Tree Advisors

Cleveland, OH