What Is Tenant Insurance?
Unfortunately, many renters think they don’t need to buy insurance because they’re protected under their landlord’s policy.
This is not the case.
Your landlord’s policy only applies to the structure and won’t protect you or your belongings.
Tenant, or renter’s insurance, can offer the protection you need.
However, insurance policies can vary greatly so it is important to understand what a policy includes and excludes before you buy.
Is Tenant Insurance Mandatory?
Even though Canadian law does not mandate tenant insurance, your landlord may require it before they will rent you a place.
Even if your landlord doesn’t require it, you are leaving yourself open to many risks unless you buy a policy.
For instance, if your neighbour’s fish tank springs a leak and water seeps into your apartment and ruins your things, your landlord won’t cover it.
There’s no guarantee your neighbour has insurance and even if they do their policy may offer little or no coverage for your loss.
Equally, if you are at fault for a kitchen fire and it spreads to your neighbour’s apartment, you are liable for their damages.
If you don’t have insurance, they could sue you to recoup their losses.
What Can Tenant Insurance Cover?
Coverage depends on the insurer and the policy.
Typically, you should start by examining the basic protections the policy offers such as personal property, personal liability, and additional living expenses.
Later, you can tweak it to meet your specific needs by increasing limits or buying additional coverages.
Personal Property Coverage
This coverage protects your belongings against loss or damage.
Some policies protect against “all perils” and consequently cost more.
However, most policies list the specific “named perils” within the policy and these may vary.
The most common perils covered are fire and lightning, wind and hail, smoke damage, vandalism, theft, and water damage caused by a sudden event such as a burst pipe.
However, insurers often exclude certain perils too.
For instance, water damage caused by flooding or a sewer backup usually isn’t covered under tenant insurance.
Other common exclusions include earthquake, sinkholes, mould, and pests.
Read the fine print carefully.
Sometimes you can buy additional coverage for exemptions such as earthquakes, sewer backup, and flooding.
However, coverage may not be available for certain exclusions such as mould and pest damage.
An important part of your personal property coverage is the value you estimate for your belongings.
This value affects how much you can claim if you experience a loss and your premiums.
Insurers recommend a home inventory for an accurate valuation.
You should always pinpoint any high-ticket items you own such as jewelry, artwork, antiques, collections, musical equipment, electronics, watercraft, and expensive sporting equipment.
Policies usually include special limits on these items and they are often too low.
For instance, the limit on your electronics may be 10% of your overall personal property coverage.
If you buy a policy with a personal property limit of $40,000, the most you claim for a loss on electronics is $4,000.
However, you can usually increase these limits for a reasonable amount.
Luckily, once you have a policy it protects your personal property both in your unit and elsewhere, provided you usually keep the property at home.
Coverage extends to items stolen or damaged while on vacation or from your vehicle.
Personal Liability Coverage
This coverage can protect you financially if you accidentally cause property damage or bodily injury to others.
This includes incidents in your home and elsewhere.
This coverage may pay legal fees, court costs, settlements, and medical expenses, up to the limits stated in the policy.
Additional Living Expenses Coverage
This coverage offers financial compensation if you’re forced out of your rental unit due to an insured loss.
For instance, a fire could leave your building apartment uninhabitable and it could take weeks before you can live there again.
Additional living expenses coverage can help you pay for moving costs, alternative accommodation, and meals while your place undergoes repairs.
Replacement Cost vs. Actual Cash Value Coverage
When you’re considering a tenant insurance policy you need to know how you will be paid under the policy.
Policies either offer replacement cost or actual cash value.
Replacement cost covers the repair or replacement of an item with one of equal value and like-kind.
Actual cash value pays you for the value of the item, less depreciation.
Understandably, replacement coverage costs more than actual cash value coverage.
What Is the Standard Tenant Insurance Policy?
As mentioned, there’s no such thing as a standard tenant policy.
However, most offer personal property, personal liability, and additional living expenses coverage.
Insurers calculate your premiums based on the estimated amount of your belongings and any endorsements or floater policies you add to your coverage.
Most offer the ones mentioned earlier and often many more.
Typically, tenant insurance policies offer up to $10,000 in contents coverage and $1 million in liability coverage, with the option to increase these limits.
Additional living expenses coverage can vary greatly between insurers.
Every renter’s insurance policy also includes a deductible.
This is the amount you pay before your insurance kicks in when you file a claim.
Generally, a higher deductible leads to lower premiums.
However, your premium should never be higher than you can comfortably afford to pay from savings.
Frequently Asked Questions
- Is It Worth Getting Tenant Insurance?
Yes. You probably own far more than you realize. The cost to replace your clothing, household goods, furniture, and electronics could easily justify the reasonable cost of a renter’s policy.
If you are financially independent and living on your own you need protection. Someone could injure themselves in your place or you could accidentally injure someone elsewhere. If you’re at fault, you are financially liable. Considering this could seriously impact you now and your future earnings, it’s just not worth the risk.
- Does each roommate need tenant insurance?
You can share a policy with your roommates if they’re related to you or their names are on your policy. However, you probably won’t want to do this for several reasons.
First, if one of your roommates files a claim it affects your insurance record. This can lead to higher premiums.
Second, the value of the belongings of roommates are seldom equal. How will you split the premiums if one roommate owns more expensive things?
Finally, a roommate could leave before the end of the policy. You would need to absorb their portion of the premium and you may need to update your policy or get a new one.
Considering the cost of a renter’s insurance policy, it’s probably easier and safer for each roommate to have their own.
If you’re unsure of the coverage you need, seek the advice of an experienced insurance agent or broker. They offer free advice, access many products, and can recommend the best possible policy at the most reasonable cost.