Commercial Real Estate Insurance vs. Homeowners Insurance

As a property owner, it’s crucial to protect your investment with the right insurance coverage. When it comes to insuring properties, two common types of insurance that are often confused are commercial real estate insurance and homeowners insurance. While they share similarities, they also have distinct differences in terms of coverage and scope. In this blog post, we’ll delve into the details of real estate insurance and homeowners insurance, helping you understand their differences and how they can safeguard your property.

On a high level, the important thing to understand is that homeowners insurance is a type of real estate insurance. But if you’re a real estate investor, you want to make sure your rental properties are not insured with homeowners policies.

What is Real Estate Insurance?

Real estate insurance, also known as property insurance, is a type of insurance that provides coverage for physical properties such as buildings, structures, and land. It protects against various risks, such as fire, theft, vandalism, natural disasters, and liability claims. Real estate insurance is generally required by mortgage lenders and is purchased by property owners to safeguard their investment in the property.

Real estate insurance typically includes coverage for the physical structure of the property, including the building, fixtures, and other improvements. It may also cover the land on which the property is situated. Real estate insurance is a broad term that encompasses various types of properties, including residential, commercial, and vacant properties. It can be tailored to meet the specific needs of different property types and owners.

Types of Real Estate Insurance

Real estate insurance can come in different forms depending on the type of property being insured. Some common types of real estate insurance include:

1. Commercial Property Insurance

This type of real estate insurance is designed for commercial properties, such as office buildings, retail stores, warehouses, and industrial properties. Commercial property insurance typically covers the physical structure of the property, including the building and its contents, as well as liability protection for injuries or damages that may occur on the property.

2. Residential Property (Homeowners) Insurance

This type of real estate insurance is tailored for residential properties, including single-family homes, duplexes, townhouses, and condominiums. Residential property insurance, also known as homeowners insurance, provides coverage for the structure of the home, personal belongings, liability protection, and additional living expenses in case the home becomes uninhabitable due to a covered event.

3. Vacant Property Insurance

This type of real estate insurance is designed for properties that are vacant or unoccupied for an extended period of time. Vacant property insurance typically covers the physical structure of the property and may also provide coverage for vandalism, theft, and liability protection.

4. Builder’s Risk Insurance

This type of real estate insurance is intended for properties that are undergoing construction or renovation. Builder’s risk insurance provides coverage for the property during the construction process, including the building materials, fixtures, and equipment, against risks such as theft, vandalism, fire, and weather-related damages.

What is Homeowners Insurance?

Homeowners insurance is a specific type of real estate insurance that provides coverage for residential properties. It is designed to protect homeowners against various risks and liabilities associated with owning a home. But that’s the key word: homeowners. The property covered must be your personal residence, not a rental property for someone else.

Homeowners insurance typically includes coverage for the structure of the home, personal belongings, liability protection, and additional living expenses. The North Carolina Department of Insurance’s guide is an all-you-need-to-know resource for homeowners insurance.

Coverage under Homeowners Insurance

The main components of homeowners insurance are:

1. Property Coverage

This provides protection for the physical structure of the home, including the building, fixtures, and other improvements. If the home is damaged or destroyed by covered risks such as fire, windstorm, or vandalism, the property coverage can help cover the repair or replacement costs.

2. Personal Belongings Coverage

This provides protection for personal belongings within the home, such as furniture, appliances, electronics, and clothing. If these belongings are damaged, destroyed, or stolen, the personal belongings coverage can help reimburse the homeowner for the loss, subject to certain limits and exclusions.

3. Liability Protection

This protects homeowners against claims or lawsuits filed by third parties for injuries or damages that occur on the property. For example, if a guest is injured on the property or if the homeowner’s dog bites someone, the liability coverage can help cover the medical expenses, legal costs, and potential damages associated with the claim.

4. Additional Living Expenses

This provides coverage for additional living expenses if the home becomes uninhabitable due to a covered event, such as a fire or a storm. It can help cover the cost of temporary housing, meals, and other necessary expenses while the home is being repaired or rebuilt.

Are you a real estate investor in the Winston-Salem area?

Or any area, for that matter. Let’s make sure you get the coverage you need at the best possible price.