Renters vs. homeowners insurance: Key differences explained

In 2024, 6.1 million American homeowners skipped home insurance, according to the Consumer Federation of America. Without coverage, they risk paying tens of thousands of dollars out of pocket for repairs, replacements or liability claims when disasters or accidents happen. That’s why getting the right coverage is essential.

But do you need renters insurance or homeowners insurance? That depends on your ownership status. Both types protect your belongings but offer different coverage scopes based on whether you rent or own.

Find out how affordable the right insurance policy could be.

Renters vs. homeowners insurance: Key differences explained

“The main difference between renters and homeowners insurance is renters don’t pay for dwelling coverage … which covers the rebuilding of a home,” explains Michael Orefice, SVP of operations at SmartFinancial.

This fundamental distinction affects the cost and extent of coverage. Renters insurance is typically more affordable than a home insurance policy because a renter doesn’t have any stake in the rental home’s structure. They only need to insure their possessions.

What renters insurance protects

Don’t assume your landlord’s insurance will protect your belongings. 

“Most landlords’ insurance only provides coverage for the building and damages due to negligence,” says Michael Cracchiola, a State Farm Agency owner. Your landlord’s policy won’t help if personal items are damaged by a fire or stolen during a break-in.

A standard renters insurance policy fills this gap with the following protections, up to your policy’s limits:

• Personal property coverage: Safeguards your belongings (e.g., furniture, electronics, clothing) against theft, fire, vandalism or other covered perils
• Liability coverage: Protects you if someone gets injured in your rental home and files a lawsuit against you for it
• Loss of use coverage: Pays for temporary housing and select living expenses (e.g., short-term rental, storage unit, food bills) if your rental becomes uninhabitable
• Medical payments coverage: Covers your guests’ minor injuries, regardless of fault

Compare your coverage options online now.

What homeowners insurance protects

A standard homeowner’s insurance policy includes all the protections found in renter’s insurance — up to your policy’s limits. But it adds two key structural protections:

• Dwelling coverage: Pays to repair or rebuild your home after covered damage
• Other structures coverage: Pays to repair or rebuild your detached buildings such as garages, sheds and fences after covered damage

“[Ensuring you have] the correct coverage for your dwelling, personal property and liability is key,” stresses Cracchiola. This way, you don’t suffer a financially devastating loss if you experience a fire, theft or windstorm.

What insurance doesn’t cover

Both kinds of insurance have coverage gaps you should know about.

Most standard policies don’t cover the following items:

• Flood damage: Flood insurance is an option if you live somewhere prone to flooding
• Earthquake damage: This requires additional earthquake coverage
• Normal wear and tear: Regular maintenance and aging are excluded
• High-value items: Expensive jewelry, art or collectibles may need extra coverage
• Business equipment: Items used for business may need separate coverage depending on how much they’re worth

“Pay attention to every component of your policy to ensure all bases are covered,” advises Orefice. You may need additional coverage depending on where you live and what you own.

What impacts insurance rates?

A couple of key factors affect your insurance rates, according to the experts we interviewed:

Location and natural disaster risk

“Whether it’s flooding, windstorms, earthquakes or wildfires, the state you live in largely determines what you pay,” Orefice points out. Some states face such high risks that finding affordable coverage can be challenging.

Your home’s proximity to emergency services also matters. Barrett Insurance Agency’s co-principal, Mike Barrett says properties within five miles of the fire department and 1,000 feet of a hydrant often get the best rates.

Personal factors and policy choices

Your personal profile and policy decisions impact rates, too. 

“Insurance companies look at credit scores in most states,” Orefice says. “This applies to renters and homeowners insurance.” Your claims history also affects rates.

Finally, the deductible you choose determines how much you pay for coverage each month. While a higher one means paying more out of pocket when you file a claim, it can substantially lower your monthly premiums.

The bottom line

While renters and homeowners insurance aren’t required by law, “don’t skimp on coverage,” Orefice warns. “Rebuilding your life after a disaster is hard enough … having to reach deeply into your wallet makes it harder.”

If you have a car, consider bundling with auto insurance for better rates. Rates and coverage options vary, so compare quotes from the best home insurance companies. Most importantly, work with a licensed insurance agent to find a suitable policy within your budget.