Under a rent-to-own agreement, you live in a house and pay rent to a landlord, but a portion of your rent is set aside as a lease fee. If you end up buying the house, you can put the accumulated amount toward a down payment. If you do not, the amount belongs to the landlord. Meanwhile, you are not the legal owner. This begs the question — should you buy homeowners insurance or renters insurance when you rent-to-own? The answers are below.

What Type of Insurance Do You Need as a Rent-to-Owner?

Before the Purchase

During the rental phase, while you’re subject to the terms of a lease and haven’t signed a purchase agreement, you are not the legal property owner and cannot purchase homeowners insurance. Your landlord's policy will cover the structure of the building and any personal property they use to run the business and maintain the house — appliances, lawn equipment, painting supplies, etc. — kept on the premises. Your personal belongings are not covered under the landlord’s policy. To protect yourself and your stuff, purchase renters insurance. This covers theft and damage to your belongings, provides some personal liability coverage in case you accidentally injure someone or damage their property, and also pays for the additional living expenses if the home becomes uninhabitable due to a natural disaster.

After the Purchase

After you have accumulated a down payment and arranged financing for the home's purchase, you can buy the property. Once you have closed on the sale, you can then purchase homeowners insurance. This will cost more than your renters insurance policy because it covers damages to the building as well as its contents. Neither renters insurance nor homeowners insurance is required by law in Missouri, but it’s an essential risk management tool. Moreover, if you finance the purchase of the home, your lender will almost certainly require you to buy enough coverage to protect their financial interest in the property.

To purchase renters or homeowners insurance for your dwelling, contact Farmers Insurance Group in Mountain Grove, MO. We serve clients throughout the Ozarks, and also specialize in auto, health, life, and business insurance. We’re a one-stop solution for all your coverage requirements! Call us at (417) 926-7900 or visit the website to request an insurance quote.