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Tenant insurance in Canada

Insurance is often looked at as the cost of owning something valuable. Homes, cars or other expensive items need protection from damage or theft. Replacement values can be high, and insurance provides peace of mind for items that would put a financial burden on someone if they had to pay out of pocket to replace them.

Tenants, while not being owners, are encouraged to consider similar insurance protection for their belongings, even if they are not the primary owners of the dwelling.

Tenant insurance protects you for covered perils and offers personal liability protection in incidents where you cause damage to an adjacent property, or someone is injured on your property and intends to sue.

While tenant insurance in Canada is not mandatory, many, if not most, landlords require it as a condition of a lease agreement. Also, replacement costs can be quite high, and legal bills can reach the tens of thousands of dollars in some cases.

Tenant insurance can also provide protection on any upgrades made by you while living in the home. New cabinets, fixtures and other additions are usually covered by your tenant insurance.

If your dwelling becomes uninhabitable, tenant insurance can help cover the costs of temporary accommodations, while your unit undergoes repairs.

Tenant insurance coverage types and endorsements in Canada

Below is an overview of the protection most tenant insurance policies offer.

They’re very similar to comprehensive home insurance policies:

• Contents: Tenant insurance will cover the cost of the tenant’s belongings as well as vehicle contents, including, furniture, clothing, entertainment equipment and other possessions. If the tenant has especially valuable belongings such as fine art or jewelry, they can get additional protection by adding an endorsement or rider to their policy.

• Tenant liability insurance: In Ontario, this coverage protects the tenant financially if they cause accidental damage or bodily injury to a third party such as someone visiting the rental unit.

• Additional living expenses: This covers living expenses such as the cost of moving or staying at a hotel if the tenant is unable to stay at their rental unit while repairs are underway following an insured loss.

• Replacement cost: This covers the cost of replacing an item, following a covered peril. The compensation will reflect the current value of the item (of similar make and model) without factoring in depreciation.

While each insurance provider offers different options, they’re usually the same as those that can be added to a home insurance policy.

Some of the most common endorsements include:

• Additional contents: Standard tenant insurance policies don’t cover high-value items like jewelry, fine art, rare books, family heirlooms, etc. Tenants must request special coverage to have these items covered by their policy. Endorsements can be a good way to ensure adequate coverage for meaningful belongings.

• Identity theft: This endorsement offers protection if someone begins using the tenant’s identity unlawfully. Costs associated with the theft of personal information can quickly add up – in addition to the cost and hassle of replacing things like a Social Insurance number, Driver's License, credit cards and a passport.

• Overland water: For the contents of a rental unit to be protected against damage when water overflows from a nearby water way, overland water must be added to the tenant insurance policy. Most policies come with no protection against flooding. In addition, any home insurance protection the landlord has will not cover the tenant’s belongings if they’re damaged by a flood.

• Sewer back-up: Protection of contents against damage to a rental unit when water backs up through a drain or toilet must be added to a tenant insurance policy. Tenant insurance policies don’t come with protection against damage from flooding. Any home insurance policy the landlord has for the property itself does not extend to the tenant’s belongings.

Tenant insurance types

Most insurance providers package tenant insurance plans as either All perils or Named perils.

• All perils: Protects the tenant’s belongings against the widest range of hazards. Any coverage exclusions must be explicitly listed in the policy document.

• Named perils: Protects the tenant’s belongings from the most common types of hazards, which will also be stated in the policy document.

All perils policies cost more, but they offer a much broader range of coverage and give the tenant the confidence that they’ll be protected if something unexpected happens.

Coverage amount

The amount of tenant insurance coverage a tenant purchases should be informed by the total value of the belongings they keep in their rental unit.

Savvy renters will take a room-by-room inventory of their belongings and estimate the cost of replacing each item at least once a year. Doing so makes it easier to ensure that the tenant’s policy is up to date when it comes up for renewal each year.

Actual cash value vs. replacement cost

A tenant will also have to decide between getting an actual cash value plan or a replacement cost plan.

An actual cash value (ACV) plan reimburses the tenant for the value of the items claimed at the time they were damaged. But ACV plans account for depreciation, so the money the tenant gets from a claim might not be enough to replace the items.

If your tenant’s TV is stolen, the depreciated value of the TV will be covered, which is probably less than what the tenant paid for it and less than it'll cost to replace.

Replacement cost plans pay the tenant the full replacement value of the lost or damaged belongings. If someone steals an old TV from the insured unit, the insurance provider will pay to replace it with a new one of similar make and quality.

That's what's great about a replacement cost plan: The tenant will be able to replace all their belongings if they’re stolen or damaged.

How much does average tenant insurance cost in Canada?

Tenants should expect to pay at least $20/month.

Tenant insurance is a customized product, making it a challenge to suggest a more specific average cost.

Premiums vary depending on several factors, including the value of the tenant’s belongings, where the rental unit is located and how much coverage is included in the policy. The policyholder’s claims history is also an important factor.

When more coverage is added to the policy, it will be more expensive. If the tenant’s goal is to find a cheap tenant insurance policy in Canada, we encourage them to focus instead on finding the right tenant insurance policy.

The cost of adequate protection is likely to be less than the cost of paying out of pocket in the event of a claim. If an accident happens and the tenant is without protection, there’s no financial recourse.

In fact, the tenant could be on the hook for legal and medical costs if someone is injured within the rental unit and they successfully bring a lawsuit against the tenant.

Factors that determine your tenant insurance rate

Many factors go into determining the cost of a tenant insurance policy in Canada. Some of the most significant ones include:

• Claims history: Insurance providers are always trying to gauge how likely a policyholder is to make a claim. In instances when a claim seems likely, the policyholder will pay more. This means that if you have a history of making insurance claims, expect to pay more.

• Credit score: In Ontario, a tenant can consent to a credit check in order to get savings on their tenant insurance policy. While some are wary about taking this step, a good credit score can help the tenant secure savings. A bad credit score will not result in a more expensive policy. In other words, a tenant can’t be penalized for a bad credit score.

• Home inventory: The volume and value of a tenant’s belongings impacts the cost of the policy. For more coverage, they’ll pay more. If a tenant has added coverage for protection of especially valuable items such as jewelry or fine art, their coverage will be more expensive.

• Location: For tenants insuring a rental unit in an area that’s prone to damage from flooding or has a high crime rate, they should expect to pay more.

How to get the cheapest tenant insurance

How to get the cheapest tenant insurance

• Bundling: When a tenant agrees to have more than one insurance policy held by the same provider, they can reduce overall coverage costs. When an insurance provider holds more of a policyholder’s business, they’re more likely to offer a discount.

• Compare: Shopping around every year when a policy is up for renewal is a good way to ensure getting the best coverage at the lowest rate. Switch providers before the end of a policy term, can result in a penalty. At LowestRates.ca, we offer free quotes for coverage from dozens of the best providers in the country. It takes less than three minutes and is free.

• Customize coverage: In general, it costs more to have more coverage. Tenants who don’t need a lot of coverage will have minimal costs.

• Improve safety: Tenants who take steps to improve the overall safety of their unit such as installing a security alarm may be eligible for savings.

• Increase deductible: Tenants who can afford to pay a larger deductible in the event of a claim, may be eligible for savings. However, we encourage them to closely consider if they’ll have cash on hand to pay a larger deductible if they need to.