Whether you rent a private residence from a homeowner or a unit in an apartment complex, the individual or business entity that owns the property is responsible for paying for property insurance. This type of insurance is required on residences, particularly if they are mortgaged, as lenders will require proof that the property is insurable before a loan is issued.
But even though the owner of the property has an insurance policy on the property, do you as a tenant need one too? And if so, for what?
While not mandatory, you may want to take out some form of an insurance policy as a renter. Tenant insurance won’t cover the actual building itself, or even the walls and floors of your unit. But it will cover your own personal belongings if they are damaged or stolen as a result of theft or vandalism. Your landlord doesn’t really have a legal obligation to compensate you for your personal possessions.
Not only that, but you as the tenant are financially responsible for any damage that your belongings may cause to any part of the complex that you live in or to any resident or visitor of the property.
Luckily, tenant insurance covers this, as well as your possessions.
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As mentioned, tenant insurance covers your personal belongings, as well as any damage that you may do to the property. It also covers you against any litigation in the event that you or your possessions cause harm to any other person who lives on the property or any person who visits. For instance, if you put a barbeque out on the deck and it starts a fire that spreads to adjacent units, you could be on the hook for covering the damage caused.
Tenant insurance also covers you and your belongings even when you and your possessions are not physically present in your unit. Whether you’re away on vacation or just out for the day, anything that happens while you are not there may be covered by tenant insurance. If your home becomes uninhabitable as a result, your tenant insurance policy will cover any living expenses that you require until you’re able to move back in or find somewhere else to live.
If you have to file a claim, you will need to provide proof of your policy and the damage caused or items lost, as well as their cost. For this reason, it’s helpful to have these belongings itemized along with how much you paid for them, as well as any documentation that can prove their worth. Further, you may want to store these electronically so that they don’t get damaged or lost in the event that your home is destroyed or damaged.
Tenant insurance is an insurance policy designed for people who rent their homes. It provides some of the perks of traditional property insurance in that it covers the loss or damage of items within the home. However, it doesn’t include coverage for the actual home or unit itself, except for minor alterations that the tenant makes to the property.
If you rent your home, it’s recommended that you take out a tenant insurance policy to financially cover you if your belongings are damaged or stolen, or if it’s deemed that you are responsible for damage to the property or harm to another individual on the property.
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Tenant insurance covers very specific things, including the following:
Everything in your home is covered, including your furniture appliances, electronics, and valuables. It also protects your belongings when you take them with you on your travels.
If your home becomes unlivable because of extensive damage, your tenant insurance policy will cover any necessary living expenses, up to your coverage limit.
If someone gets hurt or another unit is damaged because of you or your possessions, this portion of your policy will protect you against litigation and will cover the financial costs associated with the damage.
Generally speaking, there are two ways that you can be compensated under your tenant insurance policy:
This type of insurance will cover the cost of either restoring the item to its original condition or purchasing a new item of like kind and quality compared to the one damaged or lost. No deduction for depreciation is involved.
For instance, if your stereo system is stolen, you will be covered to purchase a new stereo with similar features and calibre as the one that was lost or damaged. Since the same model is probably cheaper now (based on how long ago you bought the item), the payment you get will likely not be the same as what you originally paid for the stereo.
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Unlike replacement cost, actual cash value takes into consideration any depreciation involved. Your claims payment will be based on how much it costs to buy a similar item in a similar condition to the one lost, factoring in depreciation.
For instance, if your stereo system is five years old and was damaged in a fire, your tenant insurance policy will establish the current value of that model in used condition and provide you with that amount as compensation. So, any wear and tear of your stereo system will be taken into account. Your insurance provider can determine whether or not an item is to be repaired or replaced.
Be sure to read over your policy very carefully to find out exactly what you are covered for before you ever have to file a claim.
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Not only is it important for you to determine what you’re covered for with your tenant insurance policy, it’s also important to know what’s not covered. Your policy will not cover the following:
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Luckily, tenant insurance is usually pretty affordable. Depending on where you live, you can buy a policy for as little as $12 a month. That said, there are certain factors that will influence the cost of your policy, including the following:
Before you settle on an insurance provider, you may want to do some homework first. Fortunately, doing some comparison shopping is easy thanks to the internet. You can visit sites that will populate a list of various insurance companies available to you and will outline their rates and offerings.
In addition to that, you may want to check out what online reviews are saying about the companies you’re thinking of buying a policy from. Just be sure to visit reputable review sites that verify the reviews left behind.
Consider also the type of customer service the companies offer. Are they easy to reach? Do they provide various ways to communicate with them? This will be a big factor, especially when you have an emergency claim to make.
You’ll also want to determine the company’s financial stability. After all, if you make a claim, you want to know that the company has the financial health to be able to pay out what you are owed according to your policy.
Lastly, determine how you want to purchase your tenant insurance policy. These days, you can buy a policy directly from the company itself, or you can work with an insurance broker (either in person or online). Alternatively, you can work with an insurance aggregator, which is a comparison shopping site, much like Expedia is to travel.
When choosing an insurance policy to buy, consider the following:
Before you take out a tenant insurance policy, you’ll want to find out exactly what your landlord’s property insurance covers. That way you’re not overlapping anything or leaving anything out. Then, you can determine what you need covered and can take out a policy based on the coverage required.
You should also find out how much coverage is standard tenant insurance. Generally, the liability coverage is $1 million for regular insurance, but $25,000 is typical for contents insurance. Further, there may be caps on coverage for certain kinds of items.
Like with any insurance policy, your deductible will need to be paid before your policy kicks in. The higher deductible you pay, the lower your premiums will be.
Determine how much you can comfortably afford with this type of policy before choosing one.
How long will you need your policy? The term of the policy is also something you will want to consider when buying tenant insurance.
Do the benefits of tenant insurance justify its cost? Since this type of policy is not required, some renters might be willing to take the risk rather than paying into an insurance policy. This is something you’ll have to weigh for yourself.
While you can always buy tenant insurance directly from an insurance company, you may want to consider buying through a broker. That said, there are some perks and drawbacks to working with a broker that you’ll want to consider first.
The following are the steps you will need to take to file a claim under your tenant insurance policy:
The first thing you might want to do is inform your landlord about what happened to your home or your belongings. This is especially important if the damage was to the home itself. In this case, your landlord might be liable for making certain repairs and may want to inform their own insurance provider if the damage is significant.
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If you’ve been burglarized, you’ll want to notify the police right away. Not only will the police help you find any items that were stolen, but a police report will also serve as additional proof that your insurance provider might need to compensate you.
If you’ve been broken into or the home has been significantly damaged, you could be in danger if you don’t take certain precautions. Change the locks on your door, patch up any broken windows, or arrange for alternative living quarters while your home is being repaired.
Contact your insurer right away after you’ve suffered loss or damage. Most insurance companies will have a deadline to file a claim, which is usually anywhere from 48 to 72 hours after the loss or damage occurred. You will want to have a number of things handy to make the claims process run smoothly, such as your policy number, details about the loss or damage, photos of the loss or damage, and any other pertinent documents.
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Once you’ve documented any loss or damage and have been in touch with your insurance company, you will have to fill out a claims form. The more detail you can provide, the better. In some cases, someone from the insurance company may need to visit in person to inspect in more detail. You might also want to supply any receipts, a police report, or any other pieces of information that can help ensure that you receive the appropriate compensation.
After the insurance company has received your claim, the investigation process will begin. While some claims only take a day or two to complete, others can take a few days or longer, depending on the complexity of the situation.
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While tenant insurance is not mandatory in Canada, it is highly recommended. If your belongings are ever stolen or your home is damaged for whatever reason, your tenant insurance policy can help cover the cost of replacing or repairing anything affected. If you are a renter and are considering taking out a tenant insurance policy, be sure to do your homework to choose an insurer and policy that is best suited for you.
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Priyanka Correia is a Marketing Coordinator and personal finance expert at Loans Canada. Priyanka completed her Bachelor's degree in Marketing at Concordia University and has published work that has been mentioned in various news media. She is passionate about money management and educating Canadian consumers about how to take control of their financial lives.
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