Tenant insurance is a type of home insurance that benefits renters. Namely, it protects them against liability claims and the cost of damage or losses to their personal belongings. That said, there is some confusion about whether buying a tenant insurance policy is required. We dive into the topic today.
Tenant insurance defined
What is tenant insurance? Let us set the record straight right off the bat. Tenant insurance, which you may also hear referred to as renters insurance, is a type of insurance that protects policyholders from the risks that come with renting a home. As a form of home insurance, there is a lot of overlap between homeowner’s insurance policies and renters insurance policies, with both offering contents coverage, liability coverage, and additional living expenses coverage.
In addition, you can often add the same types of extra protection to both types of policies, like overland water coverage or sewer backup coverage. One key difference between the two types of policies is that homeowner’s insurance includes dwelling coverage, which protects against damage to the physical structure of the home, whereas tenant insurance does not.
This is due to the fact that the tenant does not own the home they are residing in, and therefore, damage to the physical structure of the unit is not their responsibility but the responsibility of the landlord. When you purchase tenant insurance and an incident occurs, you must file a claim with your insurance provider to receive compensation.
Is renters insurance mandatory in Canada?
“ Do I need tenant insurance?” is a question that many renters in Canada ask themselves. Renters insurance is not a legal requirement in Canada. In other words, there is no law that requires renters to buy tenant insurance coverage. This means that most people choose to purchase it for two reasons. First, for the safety and peace of mind it offers, and second, because they are obligated to do so according to the terms of their lease agreement.
If you aren’t sure whether you are obligated to purchase tenant insurance, speak with your landlord or ask a home insurance specialist at BrokerLink to review your lease agreement. One of our licensed brokers can let you know if tenant insurance is required, and if so, they can help you purchase a high-quality policy at a price you can afford.
Can landlords require tenant insurance in Canada?
The answer is yes. A landlord is within their rights to require that all tenants purchase renters insurance as part of their lease agreements. In fact, landlords are free to include a number of conditions or stipulations in rental agreements in Canada. When it comes to renters insurance, a landlord can not only require that a tenant purchase this type of coverage, but they can also specify the amount of coverage that must be purchased, e.g. $2,000,000 in liability renters insurance.
If a landlord requires tenant insurance, they will most likely ask for a copy of your policy before the move-in date. Although you might feel frustrated by having to pay this additional expense on top of rent, it’s worth remembering that tenant insurance doesn’t just benefit the landlord; it also benefits the tenant. By purchasing tenant insurance coverage, you will be protected against various types of damage to your unit, including types of damage not covered by landlord insurance.
Should I buy tenant insurance?
Whether you’re considering buying Ontario tenant insurance or Alberta tenant insurance, the answer to the question of should you buy it is a resounding yes! No matter what province you live in or what type of property you rent, whether it be a condo, apartment, townhome, basement suite, duplex, triplex, or multi-storey home, tenant insurance is a must. Why? Due to the protection it offers. If something went wrong and you didn’t have a tenant insurance policy, you would have to pay for the cost of damages out of pocket.
Depending on the extent of the incident, such as if a thief stole your most valuable belongings or a fire ravished your condo and you lost everything inside of it, the cost of the damage could be extremely expensive. The same goes for if a third party, such as a guest, was injured in your leased space and decided to sue you. At the end of the day, buying tenant insurance is a smart decision, whether your landlord requires you to have it or not.
Standard tenant insurance coverage in Canada
What does standard tenant insurance look like in Canada? While policies vary between tenants, most standard renters insurance coverage takes the following form, featuring these three types of coverage:
Contents coverage
Contents coverage is the main type of coverage that tenant insurance offers. This type of coverage offers financial compensation in the event that the personal belongings in your rented space are damaged or lost due to an insured peril. For example, if a fire breaks out in your apartment and your most prized possessions are damaged or a thief gains entry into your condo and steals expensive electronics, contents insurance can cover you. Keep in mind that contents coverage will only protect you from damage caused by insured perils, which will be clearly stated in your policy.
Some of the most common types of insured perils are fire, wind, water damage, theft, lightning, and vandalism. Further, contents coverage will only cover you up to the policy limit, so make sure that the limit you pick reflects the value of your personal belongings. You will also need to figure out if your policy is an actual cash value policy or a replacement cost policy. Most tenant insurance plans in Canada feature actual cash value coverage, which accounts for depreciation in the event of a loss. Thus, the contents coverage limit you choose should reflect the value of your items with depreciation factored in. Find out more about how to calculate the actual cash value by contacting BrokerLink.
Additional living expenses coverage
Additional living expenses coverage is a second type of coverage that is standard in tenant insurance policies. It will protect you if you have to leave your rented space temporarily due to damage to the unit. For example, if a fire destroys your rental unit, you may not be safe to stay in your unit during the repairs. Therefore, you would need alternative living arrangements.
During this time, additional living expenses can pay for your alternative living arrangements, such as the cost of renting a hotel room or booking an Airbnb. Additional living expenses coverage may also be paid for delivery fees, a storage unit to store your belongings until the unit is fixed, or extra food costs. Please note that additional living expenses coverage can only be claimed if the damage to the unit that forced you to relocate was caused by an insured peril in your policy.
Liability coverage
Liability coverage is another component of standard tenant insurance policies in Canada. It offers protection if someone should file a third-party claim alleging bodily injury or property damage against you. Whether this third party is a friend visiting your home or a repair person who entered your unit to fix something, liability coverage can pay for the fees associated with a claim, like legal costs, medical expenses, property repair bills, and more.
Given how expensive hiring a lawyer and fighting a lawsuit can be, not to mention any settlements that may be owed, liability coverage is one of the most important types of tenant insurance coverage. This is why policyholders tend to purchase high amounts of liability coverage, like $1,000,000 or $2,000,000.
Extra protection for tenants in Canada
Other types of coverage that you may wish to add to your tenant insurance policy in Canada are as follows:
Overland water coverage
Overland water coverage will protect policyholders against the harsh reality and high costs of flood damage. This type of flood insurance can be added to most home insurance policies and it specifically safeguards policyholders against damage caused by above-ground water flooding, like overflow from a nearby lake or river, melting ice, or heavy precipitation.
Sewer backup coverage
Sewer backup coverage is another type of flood insurance that protects policyholders from a form of water damage known as a sewer backup. Sewer backups are when sewage or wastewater backs up and into your home. It most commonly affects basements and can lead to a completely flooded basement, which is why tenants who live in basement suites or units close to ground level should think about adding this protection to their policy. By purchasing this type of coverage, your insurer may reimburse you for the cost of repairing or replacing any personal belongings damaged or lost due to a sewer backup.
Identity theft coverage
Identity theft coverage is another type of coverage that is available to tenants. It can protect you from the expenses that come with having your identity stolen. These expenses may include the cost of recovering your stolen identity or information, as well as any costs incurred by the thief who stole your identity, such as credit card charges. Examples of important pieces of identification that may be stolen include your driver’s licence, credit card, passport, or social insurance number.
Personal valuables coverage
Personal valuables coverage is one last type of extra protection that may be worthwhile adding to your tenant insurance policy. It is especially worthwhile if you have many items of high value in your home, as it offers broader protection than contents coverage. Though it functions similarly to contents coverage, it has fewer restrictions. It can even compensate policyholders if their most expensive personal belongings are stolen, whether the items in question are fine jewellery, artwork, vintage wine, musical instruments, or something else.
What is not covered by renters insurance in Canada
Now that you know what renters insurance covers in Canada, let’s find out what it doesn’t cover. The truth is that insurance policies don’t cover everything. You should always read the terms and conditions of your policy carefully to confirm what is and is not covered. If you need help understanding your policy, reach out to BrokerLink and ask an insurer to review it for you. They can answer any questions you have about your coverage, including what is and is not covered. However, generally speaking, the following is a list of what your tenant insurance policy will not cover:
Certain types of weather-related incidents or natural disasters
As mentioned above, policyholders are only protected against damage caused by insured perils. Even if you purchase all perils coverage, there are several types of risks, namely weather-related ones, that will not be included. Examples of natural disasters that tenant insurance policies typically do not cover include sinkholes and earthquakes. Flooding and sewage backups will also not be covered unless you add overland water coverage and/or sewer backup coverage to your policy.
Intentional damage
Any damage intentionally inflicted by the tenant will not be covered by tenant insurance.
Tenants living in units illegally
If you are illegally occupying a unit or you do not have a legal contract outlining the parameters of your lease, your tenant insurance policy is unlikely to cover you.
Bug and pest infestations
Tenant insurance policies do not cover damage caused by bugs or pest infestations. Thus, if your unit falls victim to bed bugs, termites, or cockroaches, you will need to cover the cost of damages, including extermination fees, on your own.
Unique or valuable items
Unless you purchase personal valuables coverage, most standard tenant insurance policies do not cover you for highly unique or valuable items. Examples of such items include antiques, jewellery, musical instruments, rare coins, artwork, or particularly expensive electronics.
Factors that impact tenant insurance rates
How are tenant insurance rates calculated in Canada? Ultimately, it varies between insurance companies but you can bet that there are several factors that are used to calculate your premium. A few of these factors are listed below:
- Property type, e.g. the size of your home and whether you live in a condo, townhome, single-family home, etc.
- Location, e.g. the crime rate in the neighbourhood where you live and how prone it is to natural disasters.
- The value of your belongings.
- Your credit score.
- If you live with other people, and if so, how many.
- If you have pets, and if so, what species and breed of animal.
- The materials used to build your home.
- The condition of the roof on your home.
- The types and conditions of the plumbing, heating, and electrical systems in your home.
- Your personal insurance claims history.
- The deductibles and coverage types you select for your policy.
- The insurance discounts that you are eligible for, if applicable.
How to buy tenant insurance in Canada
Are you ready to take the plunge and purchase renters insurance in Canada? Then you probably want to know how to buy tenant insurance. Thankfully, doing so is easy, especially with a licensed insurance advisor by your side. Continue reading to learn how you can buy tenant insurance in six easy steps:
1. Do your due diligence by researching what’s out there
Start by researching the different tenant insurance policies that are out there. This will give you an idea of what types of coverage are available to you, as well as how much coverage costs. Not only will researching tenant insurance coverage help you understand how such coverage works and protects you but it will also allow you to make the best decision for your needs and budget.
2. Ask a licensed insurance broker for help
The next step is to ask a licensed insurance broker near you for help. Insurance brokers are incredible resources when buying any type of insurance, including tenant insurance. They can explain how coverage works, unlock discounts on your behalf, obtain quotes and compare them for you, and much more. Plus, if you have any questions about tenant insurance, they can answer them. For example, many tenants need help understanding the differences between landlord and renters insurance and landlord and tenant responsibilities. A BrokerLink home insurance specialist can help with that and much more.
3. Get free quotes from at least three insurance companies
The only way to know if you’re getting a competitive rate for your tenant insurance policy is to request quotes from multiple insurance companies. As this process can be a bit tedious, we recommend having your insurance broker do it for you. The insurance brokers at BrokerLink have existing relationships with Canada’s top insurance companies and can reach out on your behalf to get a quote. From there, they will take the time to compare them so that they can present you with the best possible options.
4. Pick the tenant insurance policy that’s right for you
Step number four is to review the policies that your insurance broker presents to you and choose the one that best aligns with your needs. Don’t hesitate to ask questions during this part of the process. You can also ask your broker for their professional opinion on which policy offers the best coverage.
5. Choose a start date and payment schedule
Before your coverage is finalized, you will need to select a start date, i.e. the date that your coverage will begin, as well as a payment schedule. Most policyholders select their policy start date as the day they move into their new home, or the day that an existing policy ends. Just make sure that the date you choose is on or before your move-in date, as if you wait until after you’ve moved in and something goes wrong before the start date, you won’t be covered. In terms of a payment plan, policyholders usually have the option of picking a yearly payment schedule or a monthly one.
6. Purchase a policy and get covered
The sixth and final step to buying tenant insurance is to pay for your policy - either the entire thing upfront or the first month - and sign on the dotted line!
Contact BrokerLink to learn more about tenant insurance requirements in Canada
If you want to learn more about tenant insurance requirements in Canada, or about anything else related to renters insurance, reach out to BrokerLink today. We are experts in all things home insurance, and that includes tenant insurance. We can explain the benefits of tenant insurance, as well as whether it is mandatory in your situation. One of our licensed insurance advisors can also provide tips for first time renters and offer insight into other types of home insurance, like additional interest home insurance. Plus, we offer free, reliable tenant insurance quotes with no obligation whatsoever. Get started today by using our online quote tool, giving us a call, or visiting us in person - BrokerLink has over 200 locations across Canada!
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