Homeowners and renters insurance: a breakdown of costs
Homeowners pay more
Because homeowners usually have more room for insurance and a higher average replacement cost, they will pay much more.
How much you will pay as a homeowner depends on your state, your location, your liability risk and the cost of replacing your home.
The National Association of Insurance Commissioners estimates that the average annual homeowner fee in 2016 was $1,192, which is about $100 in monthly payments. Since then, the price has only gone up; homeowners can pay anywhere from $400 to $3,000 a year.
Tenants typically pay less than $30 a month.
In 2016, renters paid an average of only $185 a year, or about $16 a month, for their policies. The cost varies depending on circumstances, but these days renters insurance is still less than $30 a month for most renters.
I pay about $10 a month. I took a brief inventory of my property before choosing a policy. Although I chose the smallest amount of coverage available, I still had a fairly large replacement cost above the cash value of my belongings.
You will have a deductible for both types of policies
Both types of policies require that you meet the deductible (as opposed to health insurance) before you file a claim. Depending on your insurer, you will pay a small monthly amount or a larger annual lump sum.
A few factors that can raise your rates:
– Location in a disaster area.
– An older home or one that requires frequent repairs.
– A larger home.
– A history of filing multiple insurance claims.
– Your credit (some states offer lower insurance premiums for homeowners or renters with good credit history).
In some cases, the insurance premium may be carried over to the mortgage. Keep in mind that this will increase your mortgage debt and affect the terms of your loan.
Which insurance is right for you?
The answer will usually depend on whether you own or rent. Mortgage lenders usually require borrowers to have homeowners insurance coverage, and landlords may require renters insurance coverage.
Renters should make sure they have a policy that protects their personal property, not just their landlord’s liability.
If you own a home and rent rooms
A landlord’s policy makes sense if you live in the building permanently or if you have furniture and belongings you want to protect.
Landlord’s policies usually do not cover damage caused by tenants, so your tenants should be encouraged to purchase their own insurance.
If you don’t live in the building, you may be considered a renter, which means you may not need a standard landlord policy. Different insurance companies have different policies. However, when in doubt, it’s best to get full coverage, including home insurance.
If you live in a rental unit
More often than not, you will be considered a renter until you buy the house. As a renter, you will need renter’s insurance.
Once you officially own the house, you will have to pay for homeowner’s insurance, but not before.
If you live in a co-op or condominium
These housing arrangements may have special insurance requirements. However, condominium owners generally want homeowners policies to include homeowners insurance.
Co-op owners only own a percentage of their building, so renter or tenant policies should be sufficient