What is landlord insurance?

Landlord insurance vs. home insurance

Home insurance protects a homeowner, and landlord insurance protects the landlord. While that may seem intuitive enough, it can get more complicated if you rent part of your home or another home.

Does your home insurance cover you if you rent out part of your home?

Your home insurance policy may be suitable for renting out part of the property where you live (say, a basement apartment). Typical home insurance protects the dwelling, detached structures on your property, personal property (your stuff—not that of tenants) and liability for personal injury or damage to other people’s property caused by you, your family and/or your pets. 

The coverage and cost of home insurance depend on which type of policy you choose:

• Comprehensive covers sudden and accidental occurrences including a wide range of perils (events that cause damage): fire, lightning, theft, falling objects, wind, hail, explosions, etc.
• Broad is similar to comprehensive coverage but with some exclusions and restrictions. For example, home contents are only covered for perils specified in the policy.
• Basic covers a limited number of perils—usually fire, wind and theft.

There are certain risks that even a comprehensive policy doesn’t cover: Sewer backup, water damage, overland floods, storm surges, earthquakes, landslides and avalanches. You have the option to buy additional coverage for these perils, which is a good idea if you live in an area at risk. Also, home insurance has coverage limits for valuables such as artwork, jewellery and sports gear, so you may want more coverage (also known as a “rider” or an “endorsement”).

When someone who’s not in your immediate family lives in your home, that’s an added risk (more on that below). However, let your insurance broker know about the tenant so they can help you determine if your coverage works for your needs. (Find out what can affect the cost of your home insurance and the average premium rates across Canada.)

Do you need landlord insurance? What does it cover?

If you own a second home or property and you charge rent to tenants, you need landlord insurance. More than 1 in 10 Canadians own multiple homes, with the majority of respondents reporting that they use the properties for rental income, according to a recent Royal LePage survey. So, let’s get into what landlord insurance is.

Landlord insurance policies reflect the added risk of having a tenant or tenants for an entire house or apartment when you don’t live on the property. “That’s typically called a fire and extended coverage policy,” says Sonja Denobrega, vice-president, personal insurance underwriting policy at Aviva Canada. “It’s more restrictive than a regular homeowner’s policy because the risk exposure is greater. If the whole house is rented, there’s typically a lower limit for personal property than you would have on a typical homeowner’s policy. Coverage for a rental property would be around $10,000 to $20,000, meant to cover things, like appliances, window coverings and other items that normally stay with the home tenant to tenant.” You are not on the hook for tenant’s belongings. That’s when tenant insurance comes into play. (Read: Should you make tenants insurance a condition of a lease?)

Whether you have a homeowner’s policy or landlord insurance, you’d be wise to add two endorsements: Sewer backup and water damage (which are often packaged together), and loss of rental income due to an insured peril—for example, if fire damage makes your property uninhabitable.

The premium for rental income insurance is based on how much you charge for rent. “While the cost of the loss of rental income endorsement differs between insurance companies, most landlords could expect to pay anywhere from $50 to $150 a year for this endorsement, depending on the total income of their property,” says Denobrega.

Does landlord insurance cover a tenant’s property?

No. The only personal property covered in a landlord insurance policy is that of the landlord, such as kitchen and laundry appliances. Tenants need their own insurance for their stuff and for personal liability—say, if a visitor is injured and decides to sue them. Tenant insurance isn’t mandatory like, say, auto insurance, but many landlords require proof of coverage in their lease agreements. Without tenant insurance, the burden of an injured visitor’s lawsuit might fall mainly on you, the landlord—another good reason to make sure you have liability coverage.

Can I cancel landlord insurance if I have no tenants?

If your rental property becomes vacant, even for a short time, it’s critical to let your insurance broker or agent know.

“As an example, let’s say you have a one-year lease and the tenant decides not to renew, and you need to find a new tenant. Meanwhile, the home is vacant for 30 or 60 days,” says Denobrega. “It’s very important that you contact your broker to find out how that impacts your policy, or what, if anything, you need to do to bridge that gap. An empty home is at higher risk, especially in the heating season—if the heat gets shut off, certainly that could lead to burst pipes, and the home is also a bigger target for thieves or vandals.”

To help landlords bridge that gap in occupancy, most insurance companies offer what’s called a “vacancy permit.”

“They understand the home will be vacant, and it’s an additional charge to cover the extra exposure,” says Denobrega. “It’s offered in short-term periods, say, up to 90 days, and we’re hoping by then the home is occupied. But do keep in touch with your broker—there are things they can do to make sure you’re covered.”

And if you decide to offer short-term rentals à la Airbnb between long-term tenants, that’s another thing to discuss with your insurance broker—you may need a short-term rental policy to ensure your property is protected.

About Jaclyn Law

Jaclyn Law is MoneySense’s managing editor. She has worked in Canadian media for over 20 years, including editor roles at Chatelaine and Abilities. Jaclyn completed the Canadian Securities Course in 2022.

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