Whether you are renting a house, condominium, or apartment, having coverage for your belongings is essential. Homeowners in Canada buy coverage for the building itself but do not cover the contents.
Rental insurance offers protection for you and your possessions. It helps cover the cost of replacing your belongings in the event of unexpected damage, such as fire, theft, or a natural disaster.
Most Canadians do not have rental insurance because they believe they don’t own a home and are not likely to get any insurance benefits. But with rental insurance, you can get financial reimbursement for your lost property and any legal fees resulting in accidents for which you are liable.
Rental insurance helps you replace your treasured belongings cost-effectively and protects you from financial pitfalls if something terrible happens in your living space. This article discusses all you need to know about rental insurance, why you need it, and what it covers and does not cover.
What is Rental Insurance?
Rental insurance, also known as renter’s insurance or tenant insurance, is an insurance policy designed to cover your personal belongings and protect you from liability. Though rental insurance is not mandatory in Canada, most Canadian landlords do not lease their houses to tenants unless they have coverage.
Canadian landlords have insurance to cover the entire building and big stuff like pipes, appliances, and other things. Their insurance doesn’t extend to your personal belongings like entertainment equipment, furniture, or jewelry.
If your personal belongings suffer any damage due to severe events, your landlord can only say, ‘I’m so sorry to hear that,’ and that’s the most they can offer. You must ensure all your personal belongings are covered so you can replace them without additional hassle.
If you are not insured and cause a grease fire that damages your apartment with smoke, you would have to pay for more damages. If someone slips and falls in your apartment, the financial responsibility falls on you, not the landlord.
Tenant insurance is here to protect you in instances like these and more. According to the Insurance Bureau of Canada (IBC), renters are legally responsible for property damages and injuries their visitors suffer.
Suppose you accidentally cause damage to your neighbor’s property or your visitor is injured in your apartment, and they decide to sue. In that case, tenant insurance offers personal liability protection and covers you in this case. Also, if your apartment is rendered unfit to live in because of a hazard, rental insurance covers the cost of temporary accommodation till your unit is repaired.
Shop around and compare quotes from the best insurance providers in Canada to get rental insurance at the best rate.
Why Should You Get Rental Insurance?
You don’t own the building you live in but own almost everything inside. You have invested time and money into making your apartment a sweet home. Can you afford to replace everything if something unexpected happens to your apartment?
Replacing every damaged possession without insurance will cost thousands of dollars. Most landlords don’t cover tenants’ personal belongings if destroyed or unintentionally damaged, so it’s essential to have the peace of mind that comes with having rental insurance to cover your treasured items.
Here are a few reasons why you should get rental insurance:
- To protect your belongings: In the event of fire or theft, your personal belongings are not covered by your landlord’s home insurance. The cost of repairing and replacing your belongings, like furniture, electronic devices, jewelry, clothes, etc., are covered by your rental insurance.
- To cover your liability: Rental insurance covers any unintentional bodily injury or property damage you may have caused someone who doesn’t live with you. If you cause your visitor’s injury or your neighbor’s apartment damage, your rental insurance covers you.
- To cover relocation expenses in the event of a loss: Suppose something like fire damage or some other type of damage happens, and you cannot live in your apartment for a certain period. In that case, your rental insurance covers additional living expenses like hotel costs till you can return to your apartment.
What’s Covered By Rental Insurance?
It is essential to understand what is covered by your tenant insurance policy. You can buy a standard package and add other optional endorsements to suit your coverage needs.
A standard rental property insurance package offers three types of coverage:
1. Contents Insurance
Contents insurance offers coverage for everything in your home, from your furniture to all your electronics. It also provides protection for your personal belongings while you travel, like in your car or in another country.
It covers the cost of replacing and repairing the items in your possessions if they are damaged or stolen. Things such as vehicle contents, furniture, clothing, entertainment equipment, and other possessions are fully covered by your policy.
If you want valuable belongings like fine art or jewelry to be covered, you should add an endorsement or rider to your policy. The coverage amount on your policy will be based on the value of your possessions and your choice between actual cash value and replacement cost value.
2. Living Expenses
Suppose you cannot live in your apartment and need to live elsewhere due to perils like flood or fire; your rental insurance policy covers the accommodation cost and any additional living expenses like food bills, delivery services, etc.
The policy covers only additional costs above and beyond your regular expenses. For example, if you pay rent for $1,500 monthly and pay $2,000 monthly for hotel bills, your policy covers the additional $500.
3. Liability
Your rental insurance policy offers coverage if someone injures themselves in your apartment or you cause damage to an adjoining unit.
If you damage your neighbor’s stuff, the policy also covers you. The typical liability limit for rental insurance is $1 million, but you can increase the amount for additional peace of mind.
Always confirm the amount of liability coverage before you purchase the policy because you can increase or lower the amount based on your needs.
Optional Types of Rental Insurance Coverage
While the standard tenant insurance policy provides these three basic coverages, there are a few optional coverages (endorsements) that you can ask your insurer about.
1. Overland Water
An overland water endorsement protects you from damage due to above-ground water flooding. If you live close to a large body of water, heavy rainfall can cause it to overflow into your home. This coverage helps you pay for any financial repercussions.
2. Sewer Backup
Sewer backup endorsements protect you if sewage from the main city drains overflows from heavy rainfall and backs up in your basement. If you don’t have a backflow preventer on your home’s main drain, consider adding this endorsement to your tenant insurance coverage.
3. Identity Theft
Identity theft endorsements protect you if a third party steals your personal information and uses it to commit a crime. Your insurance provider can help compensate the funds for recovery or any incurred financial loss.
4. Additional Contents
There are limits to your content coverage. If you have valuable belongings in your rented property, you should add an additional content endorsement to your policy.
The average amount for content insurance is $25,000, and there are limits for specific items; jewelry is capped at $2,500. You can add a rider to your policy to cover special items to their full amount and receive compensation for their full value if something terrible happens.
What Rental Insurance Does Not Cover
Not everything is covered by rental insurance. Specific perils are not covered unless they are clearly stated in your rental insurance policy. They include:
- Your building: Any damage to the significant components of the building is not covered by your rental insurance policy. Damage to the structure of the building, pipes, or the roof, is generally the landlord’s responsibility and should be covered by their homeowner insurance.
- Business equipment: If you operate a home office and have business-related equipment in your home, you should consider buying small business insurance. Rental insurance does not cover items related to running your business, like laptops and cell phones.
- Car damage and theft: Rental insurance only covers the belongings in your car but not the vehicle itself. If you want the car covered, you should buy auto insurance.
- Roommate’s belongings: Your rental insurance doesn’t cover the possessions of your roommates. They have to get their own policy to protect their belongings.
- Damage from rodents and pets: Any damage to your belongings caused by pests or rodents like rats, squirrels, or bed bugs is typically excluded from your policy.
How Much Does Rental Insurance Cost in Canada?
There is no fixed rate on the rental insurance for everyone. The standard rate for rental insurance in Canada is around $15 to $30 monthly. Premiums differ based on multiple factors, including:
- Property type: Whether renting a basement apartment, a whole house, or a condominium, you can get rental insurance. However, the larger your space, the more your monthly premiums will cost. If you rent a penthouse, you cannot pay the same premium as someone in a basement apartment.
- Credit score: Your credit score isn’t necessary for tenant insurance, but having a high credit score can save as much as 25% off your rate. Most insurance providers in all provinces (except Newfoundland) consider your credit score as an indicator of your personal risk. While your credit score will never negatively affect your premium, a good credit score can help you save big.
- Your belongings: When it comes to content insurance, there is a difference between actual cash value and replacement cost value. The actual cash value policy pays out the depreciated value of your belongings, while the replacement cost value policy pays out enough funds to buy brand-new belongings.
- Location: If you reside in an area known for theft, break-ins, crimes, vandalism, or stolen properties, expect to pay more premiums. If you live in an area near water with a higher chance of flood, expect high insurance rates.
- Past claims history: If you have a history of frequent claims, insurers will see you as a higher risk, and your premiums will cost more. The more claims you submit, the higher your premiums will be.
How Do I Get Cheap Rental Insurance?
With rent prices so costly, you may want to look out for cheap rental insurance options to help you save on your budget. Most cheap rental insurance costs less at the time but may compromise your coverage limit in the future, which can cost you more.
Looking for affordable rental insurance options that suit your coverage and budget needs is best. There are many ways to save on your rental insurance policy and make it more affordable. Here are a few ways:
- Shop around and compare quotes
- Bundle your tenant and auto insurance together to get discounts
- Have monitored alarm systems installed In your unit to get discounts
- Increase your deductibles and pay lesser premiums
- Pay annual premiums instead of monthly
- Take advantage of alumni and professional preferred rates
Final Thoughts on Rental Insurance
Buying tenant insurance for your belongings is pretty simple. You can compare quotes by phone, online, or in person between the different insurance providers in Canada.
When you find an excellent policy and sign up, your insurance provider will give you a proof of insurance document to show your landlord.
FAQs on Rental Insurance
Does each tenant need rental insurance?
It depends on the living situation of every tenant. Each tenant needs their own rental insurance policy unless they open a policy together. Common-law partners and married couples may open policies together, and they will both be covered under the policy.
If you have a roommate, it’s better to keep separate policies because the name on the policy has a higher power. So, unless you have a dedicated relationship or a long-term co-living situation on good terms, it’s best to have your own policy.
What is the average price of tenant insurance in Ontario?
The average cost of rental insurance in Ontario costs around $20 to $30 per month, but averages can be misleading for any property insurance product.
Can my landlord force me to buy tenant insurance?
Landlords are within their rights to ask you to get tenant insurance and can stipulate it in the lease. So, if you refuse to get tenant insurance, you are breaking the terms of the lease, and your landlord has the right to evict you and rent to somebody else.
Is rental insurance the same as tenant insurance?
Yes, rental insurance and tenant insurance are the same things.
Do I need home insurance when renting?
No, home insurance is for homeowners and landlords. As a renter, you need coverage for your personal belongings and not the physical structure of the building.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
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