You may believe that landlord insurance covers your possessions if you rent a home, but this is not the case.
Landlord insurance only insures the building in which you live, including the structure and permanent fittings and fixtures. It will not assist you if your possessions are stolen or destroyed.
This is where renters insurance can come in handy.
What is Renters Insurance?
Renters insurance, often known as tenant insurance, is a type of insurance intended specifically for tenants who rent a house. It protects you when your landlord insurance coverage does not. Your personal items are protected by a renters insurance policy. Your gadgets, jewels, and furniture are safe from theft, fire, water, and other perils.
The cost of renters insurance is determined by a variety of factors. In Canada, premiums typically range from $10 to $50 per month. In general, the higher the premiums, the more personal belongings coverage you get.
Some insurance companies require a certain level of coverage, while others do not. If you don't have a lot of personal belongings, you might choose to go with a company that doesn't have a minimum coverage amount.
What Does Tenant Insurance Cover?
What is covered by a renters insurance policy will vary depending on the insurance carrier. Typically, a standard renters policy includes three types of coverage:
- contents coverage
- personal liability insurance
- additional living expense.
We explain each of these types in detail below:
This includes all personal belongings that might be stolen or damaged. Generally, your belongings will be covered from damage caused by events such as:
- theft (as long as there are signs of forced entry)
Some renters insurance policies pay out if cash is stolen from your house, while others cover things like food spoilage. Food spoilage coverage covers you if the food in your freezer or refrigerator spoils due to a technical problem or power loss.
Contents coverage is essential since you would otherwise have to pay out of pocket to replace a stolen or damaged personal belonging.
How much contents coverage should you get?
Consider purchasing at least $20,000 in coverage for electrical equipment (such as the TV and laptop) and furniture. If you have a lot of pricey goods, consider purchasing more coverage.
Personal liability insurance
Personal liability can be useful if someone sues you for personal injuries experienced while staying in your rental. Personal responsibility, for example, will cover legal fees and any pay-out that the court requires you to make if a neighbour stumbles on your newly-polished hardwood floor and files a lawsuit.
Personal liability also protects you if you inadvertently harm someone else's property. Assume you leave a bathroom faucet running overnight, causing damage not only to your property but also to the apartment below. Naturally, your neighbour would try to recoup the costs of the property damage. If your renters insurance policy contains liability coverage, the insurance company will cover their cost.
Additional living expenses
This component of renters insurance covers the cost of renting a space, moving expenses and restaurant meals, if your rental is not livable following a covered event.
For instance, if your apartment is damaged by a fire, you will not have to worry about sleeping on your friend’s couch while your property is being repaired. Instead, you can stay in comfort in an Airbnb property or hotel until your place becomes habitable.
What is Not Covered by Tenant Insurance?
Like most insurance products, renters insurance usually comes with a few exclusions. We recommend you read the fine print to find out what will not be covered by your policy.
Generally, renters insurance includes the following exclusions:
- Theft or damage caused to your personal belongings by unforced entry. For instance, you will not be covered if your house gets burglarized because you left a window open. Likewise, if a guest steals something, the insurer will not pay out the claim.
- Damage caused to your belongings because of wear and tear.
- Damage caused after leaving your property vacant for longer than 30 consecutive days.
- Any personal belonging whose value exceeds your policy’s single-item limit, unless it was listed separately. Renters policies come with a single-item limit, which is the maximum amount they pay for any possession that is stolen or damaged. If any of your belongings is worth more than your policy’s single-item limit, you have the option of naming it separately. But keep in mind that doing so will likely increase your monthly premiums.
- Items used for work. (For these you need business insurance)
How much is Renters Insurance?
According to estimates, more than half of Canadian renters prefer not to purchase tenants insurance. Some do so because they believe their landlord's insurance will cover their goods in the event they are stolen or destroyed. Others believe that renters insurance is prohibitively expensive.
However, your landlord does not cover your personal things, and renters insurance is prohibitively expensive. The monthly premiums range between $10 to $50, depending on where you live and other circumstances.
What Factors Affect the Cost of Renters Insurance?
Insurance companies will consider several things while deciding your premium rate. These include:
- Your belongings
The more rental insurance coverage you need, the higher the monthly premium. The cost of insurance will also depend on whether your policy pays the replacement value or the actual value of your items. Unsurprisingly, a policy that pays the actual value will cost more, other things being equal. For instance, it will cost a lot more to replace a 10-year-old home theater than pay its depreciated cash value.
Most rental insurance plans (if not all) also cap the maximum amount they will pay for an item. That said, you can list expensive items — like jewelry — separately on your policy. The more separate items you have on your renters policy, the higher the insurance cost.
- Your deductible
A deductible is the amount that you must pay in the event of an insured loss before the insurer chips in. Deductibles are usually a specific dollar amount, although they can also be a specific percentage of the total coverage amount. The lower your insurance deductible, the higher your monthly premium rate will be.
- Your address
Unlike life insurance, the location of your residence influences the cost of renters insurance. If you reside in a high-crime area, expect to pay a larger premium. You will also most likely pay more than the usual fee if you reside distant from a fire station or in a flood-prone location.
In general, houses are more expensive to insure than apartments. This is due to the fact that flats are typically equipped with sprinkler systems and smoke detectors, as well as restricted outdoor space.
Houses with a lot of outside space that needs to be maintained cost extra to insure. The same is true for properties that have swimming pools.
- Age of your home
If you reside in an old building, you will most certainly have to pay more for renters insurance. Premiums are cheaper for newer properties or those with recent modifications to electrical systems, heating systems, and roofing.
Some appliances can raise your renters insurance rates. A wood stove is a nice example. Because a home with a wood stove is more likely to catch fire and emit carbon dioxide, it is more expensive to insure than a home with an electric stove.
- Your credit and claims history
A poor credit history will increase your premium rate. If you have a substantial claim history, then you will also pay more. On the other hand, if you have previously owned a renters insurance policy and did not file a single claim, insurers will reward you with a lower rate.
Is Tenant Insurance Mandatory in Canada?
Unlike car insurance, tenant insurance is not required by law in Canada. However, as part of the residential lease agreement, some landlords demand renters to have coverage.
Even if your rental agreement does not need renters insurance, you should still consider purchasing one. It guarantees that you will not have to pay out of pocket if your personal belongings are destroyed or stolen.
How to Reduce the Cost of Renters Insurance?
Even though tenants insurance is relatively inexpensive in Canada, there are steps you can take to make it even cheaper.
- Pay annually
Most insurers offer a discount to policy holders who pay annually rather than monthly.
- Choose a higher deductible
Choosing a higher deductible will lower your cost of coverage. But make sure the deductible amount is within your budget. Otherwise, you may struggle to replace everything that you have lost.
- Choose the replacement value
Renters insurance policies pay either the replacement value or the actual value of a stolen or damaged item. Policies that pay the actual value of items tend to be more expensive. You can reduce the cost of coverage by opting to receive the replacement value instead.
- Improve security
Speak to your landlord to see if she is willing to install a burglar alarm system or stronger locks on doors. Apart from reducing your premiums, such a move could lower her cost of renters insurance, too.
Is renters insurance right for you?
Renters insurance is a good thing to have, since renters insurance does not cover your personal belongings if they are damaged or stolen. The cost of renters insurance depends on many factors, but premiums are relatively inexpensive. So, you have no excuse for not protecting yourself financially with the right coverage. Dundas Life works with some of the top insurance companies in Canada and can help you buy a renters insurance policy at an affordable rate.