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Many landlords invest in properties to rent out to tenants. Because some investment properties are residential, a landlord might mistakenly assume that homeowners insurance will cover everything they need for their investment property. Unfortunately, that isn’t the case. If you own a rental property, you’ll want to invest in specific insurance for landlords. 

Landlord insurance offers you protection if the property is ever damaged or if your tenants get injured. That said, different policies offer different types of coverage, and the right policy for you depends on a variety of factors. 

Let’s take a closer look at landlord insurance to help you determine what type of coverage best fits your unique needs. 

What Is Landlord Insurance? 

Landlord insurance protects your property in the event of certain incidents that cause damage to the property or otherwise result in a financial burden on the landlord. Similar to traditional home insurance, landlord insurance offers both property coverage and liability coverage. However, homeowners’ insurance does not offer property or liability coverage if the property in question is not your primary residence. That’s where your landlord insurance will be required. Let’s take a deeper look into the specifics of what landlord insurance covers, and what it doesn’t cover. 

Buying a rental property? You’ll need to get a landlord mortgage.

What Does Landlord Insurance Cover? 

There are 3 main areas of coverage that your landlord insurance can offer you:

Property Coverage

This coverage protects you financially against damage caused to structures on the property, and to any items within the property belonging to the landlord. There is a list of perils, also known as risks or anything that damages the property, that property coverage will apply to. Some examples of perils that property coverage cover include:

  • Theft
  • Objects that fall from the sky
  • Fire
  • Vandalism

For example, if someone burglarizes your investment property and steals a $1,000 painting that you, the landlord had hanging in the living room, your insurance will cover it. 

Liability Coverage

This coverage covers damage or injury to someone on the property in the event that you are responsible. If a tenant slips and falls on ice that you were responsible for maintaining, for example, your liability coverage would protect you if your tenant sues you for damages. 

Rental Default Insurance

Certain characteristics of a property may deem it uninhabitable, such as severe mould, termites, a severe rat infestation, or a sinkhole. These problems make it impossible for a tenant to have reasonable enjoyment of a unit, and it would be quite difficult (and illegal) for you to rent out such a property. Rental default insurance offers coverage on rent you otherwise would have collected from tenants, had it not been for the problems making the unit uninhabitable. 

Landlord insurance for Canadian homeowners is not always the same. The policies can differ considerably from landlord to landlord, depending on what is required. For example, if you are renting out a fully furnished property, it may be possible to take out a landlord insurance policy that covers contents as well, negating the inconvenience of requiring a separate policy.

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Additional Areas of Coverage to Consider

There are also a few additional areas of coverage that although are not as important as the three mentioned above, can be a great help in certain situations. 

Flood Insurance

Most landlord insurance policies do not cover the financial repercussions of a flood if the flood resulted from a natural disaster or municipal plumbing. If your property is in a flood-prone area, you should consider adding this coverage. 

Guaranteed Income Insurance

As a landlord, you might come across a situation where your tenant cannot pay their rent. Even if it takes them a bit of time and they pay it eventually, you might want to consider guaranteed income insurance, which can provide you with the rent if your tenant is severely delayed, or doesn’t pay at all. 

Emergency Coverage

Sometimes, a tenant might call you with an emergency issue on the property. This could be a broken pipe, faulty heater, or even the tenant needing new keys after being locked out of their house. Emergency coverage helps prepare you financially for these kinds of situations. 

Construction Expenses in The Event of Damage

If your property is damaged and that damage causes the property to no longer be up to building code, this coverage will help you cover the construction expenses necessary to bring the building back up to code. 

Make sure you discuss all of the coverage outlined above with your insurance broker to find a plan that is suited to your needs. 

Check out how a HELOC or home equity loan can help cover your property’s repairs.

What’s Not Covered Under Landlord Insurance? 

Similar to home insurance, there are certain situations in which you cannot make a claim with landlord insurance provider. Landlord insurance will not cover damages as a result of:

  • Flooding
  • Freezing, specifically indoor plumbing or pipes freezing
  • Termites, rodents, other pests
  • Earth movements such as earthquakes 
  • General wear and tear
  • Tenant damage
  • Legal costs of non-injury legal claims such as wrongful eviction
  • Loss of income from eviction or non-paying tenants
  • Damage from your intentional acts
  • Unsanitary housekeeping by your tenants
  • Repairs made by your tenant with your consent

If any of the above are required, an additional rider may need to be purchased. Further, landlord insurance does not cover personal liability protection for your tenants or their own belongings. As such, landlords are encouraged to require that tenants buy their own tenant insurance policy prior to signing off on a lease.

Need to switch insurance providers? Check out how to cancel your home insurance.

Do Your Tenants Need Insurance if You Have Landlord Insurance? 

Landlord insurance does not cover the cost of any damages inflicted on the tenants’ belongings. Now, landlords can even make tenant insurance a condition of a renter’s tenancy. Many landlords are encouraging tenants to purchase tenants insurance to protect themselves financially in the event of damage to their belongings. For example, if a bed bug infestation forces a tenant to throw away their furniture, tenant insurance will cover the cost. If someone breaks into the property and steals a tenants’ belongings, tenant’s insurance will cover that as well. Tenants insurance, however, does not cover the following:

  • Damages to tenants’ belongings caused by floods or earthquakes
  • Damages caused by a subletter

What Affects Your Landlord Insurance Premiums?

Landlord insurance costs vary from province to province. different provinces within Canada. However, a general rule of thumb is to assume your landlord insurance will be 15% more expensive than traditional home insurance. There are also a few factors that will affect your landlord insurance, including:

  • Cost value of rebuilding the property
  • Cost value of replacing belongings
  • Age and condition of the dwelling
  • Amount of rental properties (multiple properties might result in a multi-policy discount)
  • The type of heating, electrical, plumbing and roof
  • The occupancy of the property
  • Level of coverage (if you add additional coverages such as flood and emergency coverage)
  • Price of rent, and
  • Risk of natural disaster (if your property is in an area with a higher risk for natural disasters like floods or fires)

Learn more about insurance and how to choose the right insurance policy for you.

Landlord Insurance FAQs

How is landlord insurance different from regular home insurance?

Landlord insurance offers rental default in the event of your home being uninhabitable, therefore causing you to miss out on payments that you would have otherwise received from a tenant. Furthermore, landlord insurance covers liability and property damages if you do not live on the property, while regular home insurance only covers it if you live on the property. 

Is my landlord’s insurance tax deductible? 

Yes, your landlord’s insurance is deductible. For more information about deducting landlord insurance from your income, visit the CRA’s website

Does landlord insurance insure your tenant’s properties? 

No, landlord insurance does not insure your tenant’s belongings. Landlords might want to consider making it a condition of tenancy for a tenant to purchase tenant insurance. 

Do I need good credit to get landlord’s insurance?

  Although having good credit may result in a lower premium for your landlord insurance, good credit is not a requirement for obtaining landlord’s insurance. 

Is landlord insurance mandatory?

There is no legal requirement for landlords to have landlord insurance on their rental properties. However, lenders will usually require that a policy is in place before a mortgage is issued. As such, landlords will typically need to take out a policy when purchasing an investment property and taking out a mortgage to finance it. 

Is damage from pets covered?

If your tenant has a pet who lives on the premises and it causes damage to the property, your landlord insurance policy will not cover repairs. 

Final Thoughts

Make sure you consider buying landlord’s insurance for your rental property. Being a landlord can help you bring in considerable income, but you want to ensure that you’re prepared for any unexpected costs that can arise from damages to the property. 

Chrissy Kapralos avatar on Loans Canada
Chrissy Kapralos

Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.

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