Homeowners vs. Renters Insurance: What's the Difference?
Graduating from renting to owning? Here's what you can expect
- Homeowners insurance vs. renters insurance
- What does homeowners insurance cover?
- What does renters insurance cover?
- Real-world scenarios: homeowners vs. renters insurance in action
- Switching from renters to homeowners insurance: what to expect
- Costs of homeowners insurance vs. renters insurance
- Lemonade and your home insurance needs
Let’s say you’ve rented your place for a few years, and now you’re looking to buy your own home. You’re familiar with renters insurance, but eventually you’ll need a different type of policy to cover you. What should you expect?
Let’s take a quick look at the differences between renters insurance and homeowners insurance.
TL;DR
- Renters insurance (HO4) covers your personal belongings, personal liability, and temporary living expenses – but not the building you live in. That’s your landlord’s responsibility.
- Homeowners insurance (HO3) covers all of the above, plus the physical structure of your home, making it more comprehensive and more expensive.
- Renters insurance averages $23/month. Homeowners insurance averages $179/month. The difference comes down to building coverage.
- When transitioning from renting to owning, you’ll need an HO3 policy in place before closing — most mortgage lenders require proof of coverage before funding the loan.
Homeowners insurance vs. renters insurance
Hold onto your seats, because this might come as a shock: Renters insurance (referred to in the industry as an HO4 policy) is for renters, and homeowners (HO3) and condo insurance (HO6) are for policyholders who own their homes.
Not surprisingly, you’ll pay a bit more to insure a place you own than you’d pay to insure a comparable rental property. (We’ll cover costs in more detail below.)
Quick reminder: Lemonade offers HO3 and HO6 policies for homeowners, and provides HO4 coverage to renters.
What does homeowners insurance cover?
A typical HO3 policy covers a lot, like damage to your home and your personal property, personal liability, living expenses, and medical fees.
But you’ll still need to check your policy for exclusions. Some common things that you wouldn’t be covered for include:
- Flooding and some other types of water damage
- Anything that you could have fixed before it reached the point of causing damage (like creeping mold)
- Certain natural disasters, like earthquakes
- Termite infestations
- People who live in your home but aren’t related to you by blood, marriage, or adoption (but note that you can get additional insurance for them)
You can buy individual insurance policies to cover any gaps in your insurance, like flood insurance or earthquake insurance.
If you have expensive items, like high-end jewelry, expensive cameras, or specialty equipment, you’ll probably need additional coverage for them because a standard homeowners policy won’t cover the replacement cost. The industry refers to this as “scheduled personal property coverage,” but at Lemonade we simply call it “extra coverage.”
| Coverage Type | Homeowners Insurance | Renters Insurance |
|---|---|---|
| Dwelling | Yes | No |
| Personal property | Yes | Yes |
| Loss of use | Yes | Yes |
| Personal liability | Yes | Yes |
| Medical payments to others | Yes | Yes |
What does renters insurance cover?
Renters insurance coverage includes everything that homeowners HO3 insurance covers, except for damage to the rental property itself-because you don’t own it. Property damage coverage is part of your landlord’s insurance policy instead.
Renters insurance covers things like:
- Loss or damage due to certain causes (called perils) like fire,, theft, or vandalism
- Temporary living expenses if the covered loss is so bad your home’s not livable
- Personal liability & medical bills for instances in which someone gets hurt at your place in an accident-whether that means hospital bills or legal fees from a lawsuit. It also extends to certain damages that you may cause when you’re away from your home.
It’s very important to note that your renters insurance policy covers your belongings against theft anywhere in the world-whether you’re at home, on the subway, or visiting your favorite restaurant.
You should also read your insurance quote carefully to look for exclusions. These are things that are not covered by your policy. For example, renters insurance usually doesn’t cover pests like mice or (eek!) bed bugs.
It won’t include damage to the personal property of other people who live in your rented home (unless they are a blood relative, spouse, or adopted child) so your roommates each need their own renters insurance policy.
Real-world scenarios: homeowners vs. renters insurance in action
Understanding the difference between HO3 and HO4 coverage is one thing. Seeing how each policy actually responds when something goes wrong is another. Here are four real-world situations that show both policy types in action.
Scenario 1: A fire breaks out in your rented apartment
You’re renting a two-bedroom apartment when a kitchen fire causes $15,000 in damage to the unit and destroys your laptop, furniture, and clothing. Your landlord’s insurance covers the cost to repair the apartment walls, flooring, and built-in appliances. But nothing you own is covered under their policy.
Your renters insurance (HO4) steps in to replace your personal belongings, covers your hotel stay while the apartment is being repaired, and handles any liability if the fire spread to a neighbor’s unit due to an accident in your kitchen. Without renters insurance, every one of those costs lands directly on you.
| Claim detail | Covered by |
|---|---|
| Apartment walls, flooring, built-in appliances | Landlord’s policy |
| Your laptop, furniture, and clothing | Your HO4 renters insurance |
| Hotel stay during repairs (loss of use) | Your HO4 renters insurance |
| Liability if fire spreads to neighbor’s unit | Your HO4 renters insurance |
| Your out-of-pocket cost (with renters insurance) | Deductible only |
Scenario 2: A guest slips and falls at your home
You’re a homeowner hosting a dinner party when a guest slips on your icy front steps, breaks their wrist, and requires surgery. Medical bills total $22,000 and the guest’s attorney sends a demand letter. Your HO3 homeowners insurance policy’s personal liability coverage handles both the medical expenses and legal defense costs, up to your policy’s liability limit. Without homeowners insurance, you’d be paying out of pocket, potentially putting your home equity at risk.
| Claim detail | Amount |
|---|---|
| Surgery and medical bills | $22,000 |
| Legal defense costs | Covered by insurer |
| Your deductible | Policy deductible only |
| Your out-of-pocket cost (with HO3) | $0 beyond deductible |
| Coverage type responding | Personal liability (HO3) |
Scenario 3: Transitioning from renter to homeowner mid-year
You close on your first home in July after renting for three years. Your HO4 renters policy ends on your move-out date. Before closing, you’ll need to secure an HO3 homeowners insurance policy. Most mortgage lenders require proof of coverage before funding the loan, so this isn’t optional. The premium difference is significant: your renters policy cost $18/month, while your new homeowners policy runs $160/month, largely because it now covers the dwelling itself, which your lender has a financial interest in protecting.
| Detail | Renters insurance (HO4) | Homeowners insurance (HO3) |
|---|---|---|
| Average monthly cost | ~$18/month | ~$160/month |
| Covers the building structure | No | Yes |
| Required by mortgage lender | No | Yes |
| When to purchase | Before move-in | Before closing |
| What happens to old policy | Cancel on move-out date | N/A |
Scenario 4: Theft while traveling
A renter’s laptop is stolen from a coffee shop in another city. A homeowner’s camera gear is stolen from their car during a road trip. In both cases, the personal property coverage in both HO4 and HO3 policies typically covers theft of belongings away from home, subject to deductibles and coverage limits. However, high-value items like professional camera equipment may require scheduled personal property riders, since standard policies cap reimbursement on certain categories.
| Detail | Renter (HO4) | Homeowner (HO3) |
|---|---|---|
| Laptop stolen at coffee shop | Covered | Covered |
| Camera gear stolen from car | Covered | Covered |
| Standard policy sub-limits apply | Yes | Yes |
| High-value items need extra coverage | Yes | Yes |
| Deductible applies | Yes | Yes |
Switching from renters to homeowners insurance: what to expect
Making the move from renter to homeowner is exciting. The insurance transition is straightforward, but timing matters. Here’s what to expect:
1. Purchase your HO3 policy before closing. Most mortgage lenders require proof of homeowners insurance before they’ll fund your loan. Start shopping at least two to three weeks before your closing date to avoid any last-minute delays.
2. Coordinate the start date carefully. Your HO3 policy should go into effect on or before your closing date, not after. A gap in coverage, even a single day, means you’re unprotected if something happens to the property before you move in.
3. Cancel your HO4 renters policy after you move out. Don’t cancel it too early. Keep your renters coverage active until your move-out date so your personal belongings stay protected during the transition. If you’ve prepaid your renters policy, you’re typically entitled to a prorated refund for any unused months.
4. Expect a premium increase. Renters insurance averages around $23/month nationally. Homeowners insurance averages around $179/month. The jump is significant, but so is what you’re covering. Your HO3 policy now protects the physical structure of your home, not just your belongings and liability.
5. Review your coverage limits from scratch. Your old renters policy covered your personal property up to a limit you chose when renting. Now you need to think about dwelling coverage (enough to fully rebuild your home), personal liability limits, and whether any high-value items need scheduled coverage. Don’t just port your old coverage amounts over. Start fresh.
Costs of homeowners insurance vs. renters insurance
In general, you can expect your renters insurance quote to be less than for homeowners insurance. That’s because homeowners insurance includes the building structure itself, which isn’t the case for renters insurance policies.
In both cases, the cost of your insurance policy depends on a few factors, including:
- Where you live. For the same size home, homeowners insurance costs as little as $717 in Delaware but as much as $2,339 in Colorado.
- How much deductible you’re willing to pay-the higher the deductible, the lower the insurance premiums.
- For homeowners insurance, the condition of your home, its size, and its age can all affect premium price. (For renters insurance, this doesn’t make a difference.)
- Your claims history. If a policyholder has made a lot of insurance claims in the last 5–10 years, they’ll likely have to pay a higher premium.
- The cash value of your personal items. The higher their value, the more you’ll have to pay to insure them.
- Your home security set-up, like whether you have burglar alarms, motion-triggered lighting, window locks, and so on.
All these factors make it tough to tell you how much you might have to pay. But we can tell you that on average, renters insurance in the US generally costs $23 per month, or $180 to $360 per year, according to the National Association of Insurance Commissioners. Meanwhile, the average annual cost of homeowners insurance is $2,151 per year, or $179 a month.
How much renters or homeowners insurance coverage do I need?
“How much coverage do I need?” is a tricky question, and one whose answer depends on your personal situation, as well as your tolerance for risk.
As a baseline, homeowners insurance needs to cover the amount it would cost to totally rebuild your home. For renters insurance, it’s entirely up to you (but the coverage you choose should be aligned with the value of the stuff you own).
Here are some things to consider:
- How much would it cost to replace your household appliances, furniture, and clothing? You need enough insurance to cover the basics if you lost everything.
- Which are your most beloved possessions, and how much would it cost to replace them?
- How much money might you need, beyond your normal daily expenses, if you can’t live at home for a week or two?
- How much might it cost if your kitchen is out of commission for a couple of weeks and you have to rely on takeout meals?
- What personal liability coverage might you need? If you have a pool or a pond on your property, or you have a dog and your neighbors have small children, you might prefer a higher coverage than if all your neighbors are adults and you don’t have any hazards in your garden.
When it comes to deciding how much insurance to pay for, the main thing to think about is how much your peace of mind is worth. It’s often worth paying a little more to know that you have enough insurance to cope with (almost) anything that comes your way.
Lemonade and your home insurance needs
There’s a lot to think about before getting insurance, but it’s worth it to rest easy without worrying about the “what ifs”.
Whether you’re renting or you own your own place-and whether you want total coverage for every eventuality, or you’d prefer to go basic and keep the costs as low as possible-Lemonade makes it easy to buy and manage home insurance.
You can use the Lemonade app or website to get a quote, upgrade your coverage, file a claim, and review your homeowners or renters insurance policy.
Homeowners vs. renters insurance FAQs
Can my landlord require me to have renters insurance?
Yes, and it’s more common than you might think. Many landlords include a renters insurance requirement in the lease agreement. If yours does, you’ll need to show proof of an active HO4 policy before moving in – and keep it active for the duration of your lease. Even if your landlord doesn’t require it, it’s worth having. The average renters policy costs around $23/month, and the protection it provides far outweighs the cost.
Does renters insurance cover my roommate's belongings?
No. A standard HO4 renters insurance policy only covers the policyholder and their immediate family members living in the same home. Your roommate’s personal belongings, liability, and living expenses are not covered under your policy. Each person in a shared rental needs their own renters insurance policy to be protected.
What is loss of use coverage and when does it apply?
Loss of use coverage – included in both HO3 and HO4 policies, pays for temporary living expenses if your home becomes uninhabitable due to a covered loss. That means hotel stays, short-term rentals, and additional food costs above your normal spending are all potentially covered while repairs are underway. It kicks in when a covered peril, like a fire or major water damage, makes your home unsafe to live in.
Is it cheaper to get renters and homeowners insurance from the same company?
Often, yes. Many insurers offer a multi-policy discount when you bundle multiple insurance products together. If you’re transitioning from an HO4 renters policy to an HO3 homeowners policy, staying with the same insurer – or moving both policies to a new one, can reduce your combined premium. At Lemonade, bundling any combination of insurance products unlocks savings across your policies.
What happens if I don't have renters insurance and my apartment is broken into?
Without renters insurance, the full cost of replacing stolen belongings falls on you. Your landlord’s insurance covers the building, not your personal property. There’s no reimbursement pathway, no temporary housing coverage if the break-in caused damage that made your unit unsafe, and no liability protection if a third party was somehow involved. A standard HO4 renters policy covers theft of personal property both at home and away, and typically costs less than a streaming subscription per month.
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of the policies issued, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states. Please note that statements about coverages, policy management, claims processes, Giveback, and customer support apply to policies underwritten by Lemonade Insurance Company or Metromile Insurance Company, a Lemonade company, sold by Lemonade Insurance Agency, LLC. The statements do not apply to policies underwritten by other carriers.
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