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Understanding homeowners’ and renters’ insurance

Whether you own your home or rent, having the right insurance is crucial to protect your investment and belongings. Both types are comprehensive policies designed to safeguard you from the unexpected.

Types of coverage

A Standard rental or home insurance policy typically includes this basic coverage:
1. Dwelling coverage (homeowner' insurance only):

This covers the structure of your home, including the walls, roof, foundation, and built-in appliances. It protects against damage from covered perils such as fire, windstorms, hail, lightning, vandalism, and theft.

2. Personal property coverage:

This covers the belongings inside your home or rented space, such as furniture, electronics, clothing, and appliances. It typically protects against the same perils covered under dwelling coverage in a house or condo, as well as theft in rentals.

3. Liability coverage:

This protects you if someone is injured on your property or rented space, and you’re held responsible. It can cover medical expenses, legal fees, and judgments or settlements against you.

4. Additional living expenses (ALE) coverage:

If your home becomes uninhabitable due to a covered peril, ALE coverage helps pay for temporary housing, meals, and other living expenses while your home is being repaired or rebuilt.

In addition to these standard coverages, you may have the option to add additional homeowners' coverage for specific risks such as floods, earthquakes, or sewer backups. Some homeowners also choose to purchase umbrella insurance for additional liability protection beyond what’s offered in their standard policy.

Factors affecting insurance rates

Several factors influence the cost of both homeowner’s and renters’ insurance premiums. Some of the most common include:

  • Locations: Due to the increased risk, homes and rentals in areas prone to natural disasters, such as hurricanes or wildfires, may have higher premiums.
  • Coverage amount: The more coverage you need for your dwelling (homeowners) or personal property (renters), the higher your premium tends to be.
  • Security features: Homes and rentals with security systems and safety features may qualify for premium discounts. • Insurance score: In many states, insurers use credit-based insurance scores to help determine premiums. A good insurance score often leads to lower rates.
  • Claims history: Your premiums may be lower If you have less claims activity.
  • Additional coverage: Adding optional coverage, such as flood insurance or earthquake insurance, can increase your premium.

There are a few specific factors that may only apply to homeowners insurance premiums, including:

  • Home value and rebuilding costs: The more valuable your home and the more it would cost to build, the higher your premium will likely be.
  • Construction materials: Homes and condos built with more expensive materials and features may require high-value home insurance.
  • Age and condition: Older homes or those needing repairs may have higher premiums on homeowners’ coverage.
  • Additional structures: The presence of additional structures on your property, such as detached garages, barns, sheds, or pools, can affect your insurance needs and premiums. These structures may require additional coverage and can increase the overall insured value of your property.

Choosing the right policy

Selecting the right homeowners’ or renters’ insurance policy means reviewing your needs to find the policy that works best for you.

Consider the following factors when making your decision:

  • Assess your needs: Evaluate the value of your home and belongings, location risks, and budget. Determine the coverage limits you need for each type of coverage to provide adequate protection.
  • Compare policy options: Get home insurance quotes from multiple insurers to compare coverage options, limits, deductibles, and premiums. Don’t just focus on the price; carefully review the details to ensure the policy meets your needs.
  • Review the fine print: Familiarize yourself with the exclusions and limitations of each policy. Some may not cover certain types of damage or may have limits on items like jewelry or collectibles.
  • Ask about discounts: Ask insurers about discounts that can help lower your premiums. Typical discounts include bundling multiple policies with the same insurer, installing safety features, and maintaining a good claims history.

Common Home and Rental Insurance claims and how to help prevent them

Even with the best insurance policies, prevention is always the best cure. Knowing what kinds of common claims can help you take proactive steps to maintain your home and protect its belongings.

House burning with a firefighter trying to put the fire down.

Fire damage

Fire is one of the most devastating events in a home or rental unit. To maximize fire safety:

  • Install smoke detectors and test them regularly.
  • Proactively protect heating systems and chimneys with regular professional inspections and maintenance.
  • Practice kitchen safety especially with gas stoves and plumbing.
  • Have a fire extinguisher handy in areas prone to fires.
  • Create and practice a fire escape plan.
Family walking down the street with their child and stroller in hand.

Water damage

Water damage can be just as devastating as fire and come from various sources. To mitigate the risk:

  • Inspect and maintain plumbing regularly. 
  • Clean gutters and downspouts (homeowners). 
  • Know where your water main is for shut off.
Burglar leaving the house.

Theft

Theft is another common concern for homeowners and renters. These practices can help deter burglars and protect your belongings:

  • Secure doors and windows. 
  • Consider a home security system. 
  • Don’t advertise valuables. 
  • Get to know your neighbors for community vigilance.
Family having fun.

Lawsuits

Liabilities claims can arise from accidents that occur on your property. To protect yourself:

  • Keep your property well-maintained, or contact your rental manager when issues arise. 
  • Be cautious with pets. 
  • Consider umbrella insurance for additional liability coverage. 

These preventative measures can help you significantly reduce the risk of experiencing a claim and ensure your home and belongings are well-protected.

Understanding renters’ and home insurance exclusions and limitations

While homeowners’ and renters’ insurance provide valuable protection, it’s crucial to be aware of their exclusions and limitations. These are specific situations or items that your policy may not cover, requiring you to consider additional insurance or alternative solutions.

Common exclusions:
  • Floods: Standard homeowners and renters insurance policies typically exclude coverage for flood damage. If you live in a flood-prone area, you can purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or private flood insurance.
  • Earthquakes: Like floods, earthquakes are usually excluded from standard policies. If you live in an earthquake-prone region, you can purchase separate coverage or an endorsement to add to your existing policy. 
  • Maintenance issues: Damage from a lack of maintenance or gradual wear and tear is generally not covered. It can include roof leaks, termite damage, or mold growth that regular upkeep could have prevented. 
  • Intentional acts: Damage intentionally caused by the policy owner, or a member of their household is not covered. It can include acts of vandalism or arson.
Limitations:
  • High-value items: While personal property coverage protects your belongings, coverage may be limited for high-value items like jewelry, fine art, or collectibles. You may need to purchase high-value item insurance to help protect these possessions. 
  • Business: If you run a business from home, your homeowners’ or renters’ policy may not cover liability related to business activities. You’ll need a separate business insurance policy for these risks. 
  • Certain dog breeds: Some insurance companies may restrict specific high-risk dog breeds. If you own a dog, check with your insurer to see if your breed is covered. 
  • Vacant homes (homeowners): If your home is vacant for an extended period, your coverage may be limited or voided. Check your policy to understand the vacancy clause and notify your insurer if you plan to leave your home unoccupied for a long time.

If you have questions or concerns, don’t hesitate to contact your insurance agent or company for clarification.

Common exclusions:
  • Floods: Standard homeowners and renters insurance policies typically exclude coverage for flood damage. If you live in a flood-prone area, you can purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or private flood insurance.
  • Earthquakes: Like floods, earthquakes are usually excluded from standard policies. If you live in an earthquake-prone region, you can purchase separate coverage or an endorsement to add to your existing policy. 
  • Maintenance issues: Damage from a lack of maintenance or gradual wear and tear is generally not covered. It can include roof leaks, termite damage, or mold growth that regular upkeep could have prevented. 
  • Intentional acts: Damage intentionally caused by the policy owner, or a member of their household is not covered. It can include acts of vandalism or arson.

Limitations:
  • High-value items: While personal property coverage protects your belongings, coverage may be limited for high-value items like jewelry, fine art, or collectibles. You may need to purchase high-value item insurance to help protect these possessions. 
  • Business: If you run a business from home, your homeowners’ or renters’ policy may not cover liability related to business activities. You’ll need a separate business insurance policy for these risks. 
  • Certain dog breeds: Some insurance companies may restrict specific high-risk dog breeds. If you own a dog, check with your insurer to see if your breed is covered. 
  • Vacant homes (homeowners): If your home is vacant for an extended period, your coverage may be limited or voided. Check your policy to understand the vacancy clause and notify your insurer if you plan to leave your home unoccupied for a long time.

If you have questions or concerns, don’t hesitate to contact your insurance agent or company for clarification.

additional tips

Tips for lowering home or renters’ insurance premiums

While insurance is a necessary expense, there are ways to make it more affordable. Here are some tips to potentially lower your home or renters’ insurance premiums:

  1. Increase your deductible: The deductible is paid out of pocket before your insurance coverage kicks in. Picking a higher deductible can reduce your premium. However, ensure you have enough savings to cover the deductible in case of a claim. 
  2. Bundle your policies: Many insurance companies offer discounts if you bundle your home or renters’ insurance with other policies, such as auto and life insurance. 
  3. Improve home security: Installing security systems, smoke detectors, deadbolts, and fire extinguishers can make your home safer and may qualify you for discounts. 
  4. Ask about other discounts: Ask about other potential discounts, such as those for alums, retirees, or members of some organizations. 
  5. Maintain a good insurance score: In many states, insurers use credit-based insurance scores to help determine premiums. A good insurance score can lead to lower insurance rates. 
  6. Shop around and compare quotes: Compare insurance quotes from multiple providers to find the best coverage and rates for your needs. 
  7. Review your policy annually: As your needs and circumstances change, so might your insurance requirements. Review your policy annually to help ensure you have adequate coverage and are taking advantage of discounts.

Frequently Asked Questions

Home insurance is a comprehensive policy that typically covers the dwelling, personal property inside, liability from accidents, and additional living expenses for temporary needs during a covered event.

The main difference is in what each policy covers:

  • Homeowners insurance: Homeowners is for when an insured owns the property. Protects the structure of the house, as well as personal belongings, liability, and additional living expenses. 
  • Renters insurance: Renters is for an insured who does not own the property. Protects personal belongings, liability, and additional living expenses but does not cover the structure of the rented property.

The amount of coverage you need can depend on several factors, including:

  • Home value: For homeowners, the dwelling coverage should be enough to rebuild your home in case of a total loss. 
  • Personal property value: The personal property coverage should be enough to replace your belongings if damaged, destroyed, or stolen. 
  • Liability risks: Consider your lifestyle and the potential risks of someone getting injured on your property. Choose a liability limit that adequately protects your assets.

If your claim is denied, don’t panic.

  • Review your policy to understand the reasons you were denied. 
  • Gather any documentation that supports your claim, such as photos, receipts, or repair estimates. 
  • Contact your insurer to discuss the denial and provide any additional information they may need. 

If you are still unable to resolve the issue, you can file a complaint with your state’s insurance department.

In most cases, homeowners’ insurance premiums are not tax-deductible. However, there may be some exceptions for certain situations. It’s always best to consult a tax professional for specific advice on your circumstances.

Considering these factors and comparing different policies can help you find the homeowners or renters insurance that best suits your needs and budget, providing you with peace of mind and financial protection. If you still have questions, consult an insurance agent to assess your individual needs and determine the appropriate coverage type and amounts for your situation.

Get the best homeowners insurance policy with AAA.

If you need home insurance coverage, learn more about AAA Home Insurance or get a quote today. Homes are unique, and with AAA Home Insurance, you can tailor a policy that fits your budget and needs, protecting your personal property and peace of mind.

Help protect the place you call home and build a policy that fits your budget and needs.

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