There are many types of home insurance in Ontario, and one of them is tenant insurance. If you rent a home anywhere in Canada, purchasing a tenant insurance policy is a wise choice. Otherwise, you will have no protection if something goes wrong, such as items from your home being stolen or damaged. Continue reading to find out how to buy tenant insurance.
What is tenant insurance?
Before we explain how to buy tenant insurance, we need to answer the question, “What is tenant insurance?” The truth is that tenant insurance, also known as renters insurance, is a type of home insurance. However, rather than protecting homeowners, it is designed to protect renters. There are many similarities between homeowner’s insurance and tenant insurance. For instance, tenant insurance policies also have contents coverage, liability coverage, and additional living expenses coverage, just as homeowner’s insurance policies do. The main difference between the two types of policies is that renters insurance does not feature dwelling coverage. Why? Since they do not own the unit, damage to the physical structure is instead covered by landlord insurance.
In other words, it is not the responsibility of the tenant. Therefore, while homeowner’s insurance offers financial protection against damage to both a home’s physical structure and its contents, tenant insurance mainly covers physical damage to the policyholder’s personal belongings. Both cover the policyholder in the event of third party liability claims. No matter if you have a homeowner’s insurance policy or a tenant insurance policy, if an incident occurs, you will need to file an insurance claim with your insurer if you want to be reimbursed for the cost of the damages.
Is tenant insurance required in Canada?
You might be wondering, “Do I need tenant insurance?” To this, we offer two answers. First, is tenant insurance mandatory in Canada? No. It is not government-mandated by any provincial or municipal government. That said, some landlords require it. The landlord will usually tell you this upfront, and it will be clearly stated in the lease agreement. While some simply state that tenant insurance coverage must be purchased, others specify an amount of liability coverage that is needed. Ask your landlord directly or ask a broker to review the terms of your lease agreement to ensure you purchase coverage that complies with these terms. If a landlord requires you to have tenant insurance and you sign a lease with this landlord, then you are contractually obligated to purchase coverage. Most will even ask for proof of coverage before the deal is done.
Our second answer to this question is less about the legality of it and more about the importance of tenant insurance. If you aren’t sure whether you need tenant insurance, as in whether tenant insurance will benefit you, we are here to tell you that you do, and it will. If you rent a home, no matter the type of residence or where it is located, purchasing tenant insurance is a wise choice. You won’t be financially protected in the event of damage unless you purchase tenant insurance. So, if you don’t want to have to pay to replace all of your belongings if they are damaged in a fire or flood or stolen from your unit, then buying tenant insurance is critical. The same goes for if someone files a lawsuit against you. If you don’t want to be on the hook for paying expensive legal fees, medical expenses, and more, purchasing tenant insurance coverage is the way to go.
What does tenant insurance coverage look like?
Tenant insurance coverage in Canada takes many forms. Ultimately, it’s up to you to decide what forms of coverage to include in your policy. That said, most tenant insurance policies feature three basic types of coverage: contents coverage, additional living expenses coverage, and liability coverage. We break down each of these coverage types below before examining a few additional forms of protection that you may wish to add to your tenant insurance policy:
First up is content coverage. Contents coverage is commonplace in almost any home insurance policy. It is the coverage that will pay to repair or replace your belongings if they are damaged due to a covered peril. Covered perils vary between providers but typically include risks like fire, theft, vandalism, water, wind, and other natural disasters. It is worth noting that the types of personal items that are protected by contents coverage may also vary between providers. That said, common belongings like clothing, electronics, sporting equipment, future, musical instruments, and more are usually covered. If you want your contents coverage to cover you in the event of a total loss, such as a fire ravishing your condo unit, then you will have to think carefully about how much coverage you want to add to your policy.
When adding almost any type of coverage to your policy, you will get to pick a coverage limit. This limit is especially important for content coverage, as you want to make sure it reflects the value of the items you have in your rented space. For instance, if you have many items of high value, like expensive jewellery, original artwork, or vintage wine, then choosing a higher limit will make the most sense. Alternatively, if you are a student with only basic belongings like clothing and used furniture, a lower coverage limit may adequately protect you. In order to determine which contents coverage limit is best suited to your needs, try to calculate the total worth of your belongings.
After calculating the approximate worth, consider whether your policy comes with actual cash value or replacement coverage. If it comes with actual cash value coverage, the more popular option, then you should calculate the actual cash value of your personal items by factoring in depreciation. This will give you a good idea of how much coverage to buy.
Additional living expenses coverage
Additional living expenses coverage is another basic form of tenant insurance. This coverage type will reimburse policyholders for the cost of living elsewhere if they are forced to leave their rented space temporarily due to damage. For additional living expenses coverage to kick in, the damage to the unit must have been caused by an insured peril, like fire, water damage, theft, lightning, or vandalism. If the damage was caused by a risk not listed in your policy, then you won’t be able to claim additional living expenses. That said, assuming this type of coverage applies, then you can be compensated for a wide range of expenses relating to your temporary relocation, like the cost of a hotel or home share, a storage unit for your belongings, delivery services, any additional food costs, and more.
Liability coverage is one final type of coverage that you are likely to find in your tenant insurance policy. Also known as personal liability coverage or third-party liability coverage, this type of insurance is designed to protect policyholders against third-party claims or lawsuits. These could arise if a guest or visitor enters your home and injures themselves while there. It could also arise if someone’s personal property is damaged due to your rented home. The reality is that one incident that ends up in a lawsuit can be extremely expensive unless you have tenant insurance. With a tenant insurance plan that features liability coverage, you will be compensated for the cost of legal fees, medical bills, property repair bills, etc., if a third party sues you for bodily injury or property damage. Most tenants in Canada purchase $1,000,000 or $2,000,000 in liability coverage.
What other coverage can I add to my tenant insurance policy?
The three coverages listed above are not the only forms of protection available to tenants. For greater peace of mind, many insurance companies allow renters to add the following forms of protection to their policies:
Overland water coverage
Overland water coverage is a type of flood insurance that protects tenants against the high costs of water damage. By adding overland water insurance to your policy, you can receive an insurance payout if your personal items are lost or damaged due to above-ground water flooding, such as overflow from a nearby lake or river, melting ice, or heavy precipitation.
Sewer backup coverage
Sewer backup coverage is a second type of flood insurance that many tenant insurance policyholders choose to add to their policies. Given how extensive and expensive water damage can be, sewer backup coverage is important, especially if you live in a space prone to flooding, such as a basement. Sewer backup coverage works as follows: if sewage or wastewater backs up into your home, flooding it and damaging your personal belongings in the process, your insurer may issue a payout to help you replace your damaged belongings.
Identity theft coverage
Identity theft coverage offers many advantages to tenants. For example, if a third-party steals your personal ID, like your driver’s licence or passport, or other information, like your credit card number or social insurance number, this type of coverage can compensate you for the associated costs. These costs may range from the expenses incurred to get your identity back to the money lost or spent by the thief who stole your identification.
Personal valuables coverage
One final type of protection that tenants may wish to add to their renters insurance policies is personal valuables coverage. Although it might sound like content coverage, personal valuables coverage is a distinct type of coverage, offering broader protection than the former. In essence, personal valuables coverage picks up the slack as it can cover you for lost or damaged items that contents coverage doesn’t offer protection for. In fact, personal valuables coverage is specially designed to protect items of high value, like jewellery or artwork. So if you have lots of expensive items in your rented unit, then it may be worth adding this type of coverage to your tenant insurance plan.
How much does tenant insurance cost?
Tenant insurance costs money, just like every other type of insurance. But how much does it cost? This varies from policyholder to policyholder. There are several factors that influence how much you will pay for tenant insurance coverage in Canada. While each insurance company uses its own risk calculation formula, you can generally expect the following factors to come into play:
The type of home you rent will impact your rates, as living in a basement suite comes with different risks than living in a high-rise condo, duplex, or single-family home.
Where your rented home is located will also influence your rates. Homes in areas with high crime rates or that are prone to natural disasters, like floods or wildfires, may come with more expensive premiums.
The estimated value of your personal belongings
The value of the items inside your home will also impact your rates. Tenants with lots of expensive belongings usually pay more for renters insurance than those with inexpensive belongings.
Your credit score
A policyholder’s credit score can impact their insurance premium, as one’s credit score is an indication of their financial responsibility. The better your credit score, the more financially responsible you will appear, and the lower your rates may be.
Whether or not you have roommates, and if so, how many roommates you have. Your living situation, in terms of how many people you live with, can also affect how much you pay for insurance. The more people in your home, the more insurance you will need.
Whether or not you have pets, and if so, how many and what species and breed they are. The presence of pets can increase your insurance rates, especially if they are an animal breed that is known to be aggressive.
Details on the property, such as the building materials, including the roof, plumbing, heating, and electrical. New, energy-efficiency materials and systems can result in older or more dangerous systems, like knob and tube wiring.
Your personal insurance claims history
If you have a history that shows you file an above-average amount of insurance claims, this could lead to more expensive rates.
Your chosen deductible amounts
The deductibles you pick can have a direct impact on how much you pay for insurance. Higher deductibles translate to lower tenant insurance premiums and vice versa.
If you are eligible for certain insurance discounts, this can lower your rates. Reach out to BrokerLink for a list of insurance discounts that you could qualify for.
Step-by-step guide to buying tenant insurance
Ready to buy tenant insurance? Follow this step-by-step guide and we promise that purchasing renters insurance will be a breeze:
1. Research your options
The first step is to research what’s out there. This is the only way to ensure that you are making the best possible decision, both for your home and your wallet. When it comes to researching your options, we mean looking into different tenant insurance policies offered by insurance companies across Canada. Find out what types of coverage they offer and at what price.
2. Enlist the help of a licensed insurance broker
The second step in buying tenant insurance is to enlist the help of a licensed insurance broker, like those at BrokerLink. A home insurance expert at BrokerLink can help you with step number one, research options and comparing quotes, as well as give you a professional opinion on the best policy for your needs. Even better, a BrokerLink insurance advisor can explain the differences between landlord and renters insurance and how landlord and tenant responsibilities differ, as well as help you save money on renters insurance by unlocking discounts on your behalf.
3. Obtain free quotes from multiple insurance providers
The next step is to obtain tenant insurance quotes from multiple insurance providers. Do not just settle for the first policy you find. Instead, request a quote from at least three insurance companies to give you an idea of exactly how much the same type of policy will cost from each company. If you don’t have time to do this, a broker can do it for you. In fact, having a broker reach out to their list of contacts is usually even more efficient than doing it yourself. Plus, you will receive free advice from a professional about which policy is right for you.
4. Choose the policy that best suits your needs
The next step is to choose the best tenant insurance policy for your needs. Carefully assess and compare your options to make sure that the one you select offers the best coverage at the lowest price.
5. Select a start date and payment plan
Once you’ve chosen your preferred policy, choose a start date and payment plan. The start date of your policy should be the day that you move into your rented home. You don’t want to run the risk of starting the policy after you’ve already moved in as coverage will not apply until the start date. Further, when buying any type of insurance policy, you will need to pick a payment plan. Most insurance companies offer yearly or monthly payment plans.
6. Purchase coverage
The final step to buying tenant insurance is purchasing coverage. Depending on the payment plan you selected, you will either be required to pay for the full cost of the policy upfront or pay for one month.
Reach out to BrokerLink for more information on how to buy tenant insurance
If you still have questions about how to buy tenant insurance, call BrokerLink today. We can help you buy the best possible policy for your needs, as well as offer tips for first time renters and explain how other types of home insurance work, like additional interest home insurance. Find your ideal tenant insurance policy today by reaching out by phone, email, or in person. You can also use our online quote tool to request and receive a free tenant insurance quote in minutes.
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FAQs on buying tenant insurance
What is not covered by tenant insurance?
Tenant insurance does not cover everything. Specifically, it will not cover intentional damage to your belongings or damage to a unit that is caused by war or an act of terrorism. It also won’t cover tenants who rent units illegally.
Is flood insurance available to tenants?
Yes. Most insurance companies allow tenants to add two forms of flood insurance - overland water coverage and sewer backup coverage - to their renters insurance policies. With these coverages, you can be protected if water leaks into your home and damages your personal belongings.
What are some of the most common types of renters insurance claims?
A few types of common renters insurance claims that are common in Canada include those relating to theft, liability, fires, and water damage, such as a flooded basement.
If you have any questions, contact one of our local branches.