Homeowners and renters insurance protect your belongings, but homeowners goes a step further

• Homeowners and renters insurance protects personal belongings.
• Renters insurance is cheaper because it only covers personal property.
• Homeowners insurance is more expensive because in addition to personal property, it also protects the home itself.
• See Business Insider's picks for best homeowners insurance companies and our picks for best renters insurance companies.

Homeowners and renters insurance offer protection for homeowners and renters, but unlike car insurance, homeowners insurance and renters insurance are not required by state law.

In 2014, only 37% of renters had renters insurance, according to the Insurance Information Institute. Although homeowners aren't required to have homeowners insurance, if there is a mortgage, the lender will require it to protect the investment.

Homeowners vs renters insurance

The first difference between homeowners and renters insurance is glaringly obvious: one is for people who own their home, and one is for people who rent.  

Once you get that out of the way, the big difference between homeowners and renters is coverage, a difference that can be attributed to the nature of ownership. A home is the biggest asset most Americans have, according to Mike Gulla, director of underwriting at Hippo. He told Business Insider that unlike renters insurance, which is basically liability coverage for your personal belongings, homeowners own their home and therefore have an interest in making sure it is well maintained. 

Here's what each of the policies typically cover. Note that the single asterisks indicate add-on policies that may be available, but are not the default.

*Available as add-on coverage if not part of policy

**Required if you are in a flood zone, but most homeowners experience some flood 

***Depends on the type of coverage you select

What is homeowners insurance?

Homeowners insurance protects the dwelling, your belongings, and offers liability coverage for injuries that happen on your property. If the mailman slips and falls on your sidewalk, the dog bites a guest, a tree falls on your roof, or the neighbor's kid injures himself doing a cannonball in your swimming pool, homeowners insurance can protect you. 

Unlike car insurance, homeowners insurance is not required by the state. If you are purchasing a home with a mortgage loan, your mortgage lender will require homeowners insurance for loan approval, according to Hippo Insurance.

Types of homeowners policies

There are several types of homeowners policies. However, they all fall within two categories: peril policy or open peril policy. A "peril policy" covers you for listed events, like a fire, storm, or theft, whereas an "open peril" policy covers just about anything that might happen, unless your policy specifically notes that it's not covered. 

What is renters insurance?

The landlord has insurance to cover the building and structure. However, your belongings inside the rental unit are your responsibility. On a basic level, renters insurance covers your belongings from theft, damage, and unexpected events. Renters insurance policies cover up to a certain amount, usually around $20,000 or $30,000 worth of coverage.

Yael Wissner-Levy, vice president of communications at Lemonade Insurance, told Business Insider that renters insurance covers three instances:

1. Things that happen to your stuff
2. Things that you're responsible for
3. Events that force you out of your home

Basic home belongings are covered, but you may need additional coverage for specialty items like wedding rings or jewelry, cameras, artwork, bicycles, or musical instruments. Some renters insurance policies will cover a portion of your costs if you have to temporarily relocate because your apartment was damaged.

Wissner-Levy noted that as a renter, you are protected from anything that suddenly causes water damage without any prior known issues, like the accidental overflow of water or steam from plumbing, heating, AC, or sprinkler systems. You're also protected if your apartment sprinklers go off and soak all your belongings, or if your pipes freeze in the winter and burst.

How much do homeowners and renters insurance cost?

The latest study from J.D. Power, a consumer research company that conducts consumer surveys, shows that renters care more about price when they're shopping for a policy, but homeowners are more concerned with an insurance company's customer service and reputation. Therefore, although cost is a consideration, it is not as important for homeowners who want responsiveness from the insurance company if they file a claim.

The average cost of renters insurance is around $15 a month, or $180 yearly. Some factors that go into determining your premium are the amount of coverage you want, where you live, if you own a pet, and your credit score. If you already have auto insurance, you may get discounts from your provider for bundling your renters and auto insurance.

Homeowners insurance is more expensive than renters insurance because it includes the cost to replace or rebuild the home, whereas renters insurance simply covers loss of personal belongings.

For homeowners, the age of your home, roof, pipes, air conditioning system, the appraised value of your home, size of your home, your location, and whether you own pets are factors in calculating insurance premiums.

Additionally, homes in weather-zones or disaster prone areas — flood zones, hurricanes, tornadoes, wildfires, mudslides, hail, and earthquakes — will have increased premiums because they're not included in basic coverage and will need to be add-on policies using what is known as a rider. 

Here's how much homeowners insurance costs on average by home value in the United States, according to the NAIC:

*The above table uses data from the NAIC.

How to find homeowners or renters insurance

If you currently have homeowners or renters insurance, review your policy coverage yearly. If your homeowners or renters insurance company hasn't provided the level of service you expect, maybe it is time for you to select a new provider.

How to get homeowners insurance

For homeowners, remember that a cheap price doesn't mean good customer service. The average cost for homeowners insurance will vary based on the state you live in and whether you are urban or rural. Focus on customer satisfaction rankings, like those from J.D. Power, and comparison shop. This is especially important for those living in disaster-prone areas.

How to get renters insurance

Like homeowners insurance and car insurance, renters insurance can vary a lot by state. Where you live will play a big role in your quote, and each company will consider that differently. 

To be sure that you're getting the best price for your renters insurance coverage, you'll want to shop around and get quotes from several different insurers. Compare the quotes, and look for the most coverage types and limits. Then, look for the lowest premiums that fit your budget. 

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