Should my tenants have renters insurance?

What is renters insurance?

Renters insurance—also called tenant insurance—is a policy that covers loss, damage or liability on the part of your tenant. There are many things to consider when you become a homeowner, and even more when adding tenants to the mix. Renters insurance is one of them. When you rent out your home, your tenant becomes liable for any damage to your property and for any harm to others while on your property. 

“In the event the tenant is found responsible for damage, for example, as a result of a kitchen fire, a typical tenants insurance policy would cover up to $1 million,” says Jesse Bajwa, customer care manager at Sonnet Insurance Company.  

And if they didn’t have insurance? “Everything related would be money out-of-pocket. If we use the example of that kitchen fire, in a multi-unit building other units could be impacted, and those people could also sue the person who caused the fire.” 

In other words, if an accident happens and your tenant is found negligent, their tenant insurance would cover any costs. If, however, they’re found negligent and uninsured, it would be up to you as the property owner to pursue legal action against the tenant—with all costs out-of-pocket.

Should my tenants have renters insurance?

In a word: Yes. Without renters insurance, a claim will affect your own property owners insurance if your tenants aren’t covered. Plus, your insurance will not cover their stuff, like computers, TV, jewellery and furniture. There could be an opportunity for them to pursue damages from you in court. 

To avoid that, you can help your tenants better understand why they need insurance and why you should ask for proof of insurance. Renters insurance carries many benefits to your tenants, protecting their belongings and protecting them in cases of personal liability. But it also benefits you as a property owner. In the case of damage to the home, knowing that your renters are insured can offer the peace of mind that your repairs will be covered. Perhaps even more importantly, renters insurance adds a layer of liability protection. If your tenant causes harm to others, or if a guest of your tenant is injured on your property, the tenants policy would be the first avenue of relief. 

Know this, though: Tenant insurance is not mandatory. There is no law in Canada requiring renters to buy this insurance. That said, you do have some influence, as it can be included as a condition of occupancy on a lease, and you can request proof of purchase from your tenants. Further, if your renters agree to carry insurance and then fail to do so, you can move for eviction. (Is your landlord asking you for proof of renters insurance? Here’s why.)

How much is renters insurance?

Fees vary province by province, but renters insurance widely available at affordable rates—usually between $15 and $25 per month, or $180 to $300 annually. This is good info for you to know, as the first thing many prospective renters ask when faced with an insurance clause in a lease is: How much does it cost?

That said, “The cost of tenants insurance depends on a variety of factors and is based on how much insurance they may need to cover their personal belongings, the appropriate deductible and the size of the space,” explains Bajwa. He adds that the usual limit for personal belongings is between $30,000 and $50,000. “A straightforward policy would be between $20 to $30 per month, keeping in mind that the individual has a low content limit and is not in the penthouse.”

What does tenant insurance cover?

A standard tenant insurance policy covers liability insurance and loss or damage to the property or personal belongings, as well as additional living expenses. This means coverage in case your renter damages or causes loss to your property or the property of other tenants, or if they cause harm to someone on your property. And it also covers room and board at a hotel or Airbnb, for example, in the case of them needing a place to stay, say, during a flood or fire.

As a homeowner, you likely have an insurance policy that covers the property. Tenant insurance covers your renters’ possessions and adds a layer of liability protection between yourself and a lawsuit. 

In addition to the protection offered by a standard renters policy, there are also add-ons both you and your tenant can opt-in for on your own policy. Sewer backup coverage will protect against a sewage flood while overland water coverage protects you in case of damage caused by a freshwater flood.

For homeowners, renters insurance is a huge benefit. Not only does it protect your tenants and their belongings, but also your property and personal liability. For security and peace of mind, consider adding a renters insurance clause to your lease agreement.

More on home insurance:

• What getting a backyard fire pit will do to your home insurance
• “Do I need to tell my insurance company about a house fire or flood that I fix myself?”
• “I discovered water damage in my home. Will insurance cover me?”

About Keph Senett

Keph Senett writes about personal finance through a community-building lens. She seeks to make clear and actionable knowledge available to everyone.