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What is tenant insurance? (costs, coverage, and gaps)

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When people buy a home, they need to get home insurance to protect their largest investment. For those who rent, you may not be insuring the home – but what about your valuables and liability? A SquareOne Insurance survey from BC revealed almost 60% of those who rent a home don’t have a tenant or renter’s insurance policy.

The reasons for not having this type of insurance vary, including:

  • “My landlord already has an insurance policy.” Yes, he or she might already have it, but it doesn’t cover any of your items (contents) nor your liability. Think about flooding your neighbour’s unit, or causing a fire that leads to damages in other units.
  • “It’s too expensive.” This is a misinformed excuse for those who have never compared prices for tenant insurance. This type of insurance policy starts at $10 per month, meaning that you can often have a comprehensive protection policy for the price of two Starbucks Frappuccinos.
  • “I have nothing to protect.” Well, there’s your clothes, your laptop, TV, personal items and many other items that you need to buy if everything you have gets damaged. Maybe it’s not much, but you definitely have to cover some costs in the case of an accident.

How much is tenant insurance?

The costs of tenant insurance are inexpensive. On average, Canadians pay $23 per month in tenant insurance. BC tenant insurance come in on the higher end at $26 per month, while renters insurance in Ontario is on the lower end at $21 per month.

In general, tenant insurance is affordable but can go up if you have additional protection needs that require extended coverage.  A basic home insurance policy has limits on items like jewellery, fine art, and even bicycles. If you have valuables that may extend beyond the limits in your policy, consider adding an endorsement to cover those items in their entirety.

What does tenant insurance cover?

Unlike homeowners’ insurance that covers numerous items, the protection offered by tenant insurance is very clear – it consists of three main elements:

  • Contents: This includes any of the items that might be damaged from a disaster or stolen from your rental space. In other words, without this coverage, you’ll pay out of pocket to replace your damaged or stolen items. On the low-end, consider at least $20,000 coverage for TV’s, computers, and furniture. But if you have large collections or expensive valuables, you can add more coverage for a higher monthly premium. Note: Your insurance provider may require receipts or photos as proof that you do own the items.
  • Third-party liability: Liability covers you in case you are sued for damage to other units from flooding or causing a fire that spreads to other apartments. It also protects you in case someone injures themselves, or their property in your unit and wants to recoup their expenses. The minimal recommended coverage is $100,000, but we suggest you get at least $1 million. If you can afford it, go for $2 million.
  • Additional living expenses: After a disaster, renting a comparable space while yours is being repaired can be expensive if you don’t have this coverage. Make sure you understand what your insurance policy will cover. For example,  if your living expenses are capped at $24,000, you would only be able to get a condo or a rental apartment for $2,000/month for 12 months. Is that enough?

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What tenant insurance does not cover

Despite being a simple insurance product, you should be aware of some tenant insurance pitfalls.

Subletting your place: Short and simple – most policies will not cover you if you sublet (or Airbnb) your rented unit to somebody else. If that person does not get his/her own tenant insurance, you are carrying the risk on your own. This is especially important when it comes to a third-party liability claim.

Actual cash value vs. replacement costs: There are two insurance calculations used to determine the value of your items:

  • Replacement costs  An insurer will pay you enough to substitute your damaged item with a similar one in today’s costs.
  • Actual cash value  An insurer considers what you would pay for that item today and subtract any depreciation. In other words, actual cash value = replacement value – depreciation.

We hope these tenant insurance insights will make you a more responsible renter and helping you avoid any unpleasant surprises with your rented unit.


Flickr: Park Van Ness

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