Nearly 70 percent of families in Canada own their homes, and just over 30 percent rent - but while almost all homeowners have some form of homeowners insurance, only 50 percent of renters carry tenant insurance, leaving them unprotected against losses and liability claims.
Who needs tenant insurance?
Anyone who rents a home in Canada should carry tenants insurance. Without insurance, your personal property is left completely unprotected, and if you accidentally caused a fire that spread to surrounding buildings or residences, you could be personally sued.
Tenant insurance vs. homeowners insurance
A homeowners' insurance policy has many sections. One section covers the structure itself, insuring it against fire, wind and other perils. Another section covers personal property kept on the premises, including furniture, clothing, electronics, and other items. A third section covers liability, in case a third party is injured on the premises. There is also typically additional separate coverage for specific perils, endorsements to cover high-value items, and allowances for living expenses in the event of a catastrophe.
A tenants' insurance policy is somewhat more straightforward. The tenant is under no obligation to insure the structure. Tenant policies are primarily designed to protect the tenant's personal property, third-party liability coverage for damage and injury caused by tenants, and living expenses for forced relocations.
What specifically does tenant insurance cover?
Tenant insurance will typically cover the following:
Personal property. This includes items damaged by an incident such as fire, wind, burglary etc. You should have a complete home inventory listing your items, their date of purchase, and the original purchase price (attach receipts and photos if available.) This can provide proof of value in case of a loss.
Third-party liability. This includes coverage in the event you are sued for damage to surrounding properties caused by your negligence or if someone is injured in your home. Liability could be used to pay to defend yourself against such a lawsuit or to pay damages up to your policy limits if a lawsuit against you were to be successful.
Additional living expenses. If the home you are renting is severely damaged by an insured peril, you may be forced to relocate. Renting a comparable space while yours is being repaired can be expensive if you don't have this coverage. Make sure you understand what your insurance policy will cover. For example, if your living expenses are capped at $24,000, you would only be able to get a condo or a rental apartment for $2,000/month for 12 months. Is that enough?
What is not covered by tenant insurance?
Tenant insurance will typically not cover:
Subletting. If you lease out your rented home or use it as an Airbnb property, damages caused by your own tenants are not covered. You would need to have any people staying in the property purchase their own tenant insurance, or you will be liable.
What options are available with tenant insurance?
You can purchase tenant insurance with higher personal property limits if you own a lot of high-end luxury items or expensive electronics that could amount to more than standard coverage. Living in an area where costs could be high to cover losses caused by negligence can also mean higher limits.
You may also opt between actual cash value insurance, or replacement cost coverage. The second is a slightly higher premium but could mean the difference between being able to replace a majority of your belongings and being able to replace only a fraction of your items.
Finally, you can choose between a named peril policy, which only provides coverage for scenarios and types of items specifically laid out in the policy, or an all risks policy, which covers more types of items and circumstances. Again, the latter costs a little more in premiums but can provide significantly more coverage.
Many landlords make buying a tenant insurance policy part of the rental agreement, but even so many tenants allow coverage to lapse after a short time. Don't leave yourself and your property unprotected.