Be it a renter or a landlord, everyone’s safety matters. Several insurance policies and security deposits are there in the market to save the landlord’s from fraud tenants and to save the tenants from dangerous landlords.
Renter’s Insurance vs Security Deposit
The main difference between Renter’s Insurance and security deposit is that Renter’s Insurance belongs to the family of insurance policies in which money can be invested for safety purposes in the hope of claiming it later at the time of any catastrophic incident of the tenant. However, the security deposit is a deposit amount of money that is given to a landlord by a tenant at the time of shifting to a rented house.
Tenants’ insurance is another name for renter’s insurance. It does not, however, constitute structure or dwelling coverage, albeit a renter can make minor changes. It is not possible to get a refund on the renter’s insurance. If a catastrophe occurs as a result of a fire, vandalism, or theft, the renter can file a claim with the Renter’s Insurance and receive a financial reimbursement to cover the damages or losses. Typically, the renter’s insurance is paid every month. It can, however, be paid three-monthly, six-monthly or even yearly.
Earnest money is the substituted term for a security deposit. The term “security deposit” refers to a sum of money held in trust as part of the initial payment when purchasing anything. The Security Deposit may or may not be repaid, depending on the arrangement reached between the tenant and the landlord during the initial meeting. With the security deposit, no reimbursement is given. When the original agreement is made, the security amount is paid just once.
Comparison Table Between Renter’s Insurance and Security Deposit
| Parameters of Comparison | Renter’s Insurance | Security Deposit |
| Also known as | Tenants’ insurance. | Earnest payment. |
| Definition | It is a form of claiming money that aids in the provision of landlord’s insurance benefits. However, it does not constitute structure or habitation coverage, albeit a renter can make some minor changes. | A security deposit is an amount of money held in belief and trust as part of the initial payment when purchasing something. |
| Refund details | Non-refundable | Can be refunded or non-refundable |
| Reimbursement | Financial reimbursement can be claimed if damages occur due to fire, vandalism or theft. | No reimbursement. |
| Payment | Monthly, annually, quarterly, half-yearly. | Only once |
What is Renter’s Insurance?
Renter’s Insurance is a variant of the insurance policy. Tenants’ insurance is the term that can be substituted for Renter’s Insurance. This policy gives tenants protection with the landlord’s insurance benefits. It does not, however, cover the construction of the dwelling, though a tenant may make minor changes. It is not possible to get a refund for your renter’s insurance.
If a catastrophe occurs as a result of a fire, vandalism, or theft, the renter can file a claim with the Renter’s Insurance company and receive a financial reimbursement to cover the damages or losses. In most cases, the renter’s insurance is paid every month. It can, however, be paid quarterly, semi-annually, or annually.
What is Security Deposit?
Earnest payment is another name for a security deposit. A security deposit is that sum or amount of money held in faith, trust and belief as part of the original payment when purchasing something. The Security Deposit may or may not be repaid, depending on the arrangement reached during the initial negotiation between the tenant and the landlord. With the security deposit, there is no reimbursement.
Assume you are a tenant, and your landlord requests that you pay a security deposit at the time of signing the lease. When you choose to leave the rented residence, the amount you pay can be reimbursed, and you won’t have to pay rent anymore. When the advance is paid, this money is only paid to the landlord once.
Main Differences Between Renter’s Insurance and Security Deposit
- Renter’s Insurance is also popularly known as tenants’ insurance. On the other hand, the substitute term used for security deposit can be an earnest payment.
- Renter’s Insurance helps in providing homeowners’ insurance benefits, and it is a variety of insurance policy. However, it does not constitute structure or dwelling coverage, but a tenant can make some small alterations. On the other hand, when some amount of money is held in belief and trust as a part of initial payment at the time of purchasing something, it is called a security deposit.
- Renter’s Insurance is non-refundable. However, Security Deposit can be refunded or can not be. It depends upon the agreement done at the time of initial discussion between the tenant and the landlord.
- If some mishaps due to fire, vandalism or theft occur, then the tenant can claim the Renter’s Insurance and get a financial reimbursement to compensate the damages or losses. However, no such reimbursement is being provided with the security deposit.
- Renter’s Insurance is usually paid monthly. However, it can be paid quarterly, half-yearly or annually also. On the other hand, the security deposit is only paid once at the time the initial agreement is done.
Conclusion
Security deposit and Renter’s Insurance policy are two different concepts. However, they serve north-south purposes or different purposes. Let’s assume you are a tenant and your landlord asks for paying you a security amount at the time of agreement. The amount you pay can be later compensated when you wish to leave the rented house, then you need not pay the rent anymore. This money is paid to the landlord only once when the advance is being paid.
However, if you are a tenant and you are worried about your safety from any kinds of theft or vandalism, then you can opt for Renter’s Insurance. This insurance policy would take care of your damages if they occurred by theft or any other mishap. Moreover, damages caused by natural disasters such as Tsunami, earthquake or cyclone is not included in this insurance policy.
Therefore, choosing either of the two, Renter’s Insurance and security deposit, is an individual’s choice. However, one can claim both as a part of personal safety and according to the agreement done at the time of signing the contract.
References
- https://ieeexplore.ieee.org/abstract/document/8946151/
- https://www.frbsf.org/community-development/files/ci_vol26no2-Rent-Reporting-and-Importance-of-Credit-Building.pdf