What is Tenant Insurance is not a question you need to ask if you own your home, but if you’re a renter, it’s something that you should probably get. In fact, it’s so important that many landlords will require it to ensure that you and your personal belongings are protected from theft and damage.
While some people worry that a Tenant Insurance policy will be costly, it only costs about $15 – $30 a month. This is a small price to pay to ensure you have personal property coverage. Getting renters insurance coverage is easy, but you’ll want to ensure you understand how the home insurance policy works in case you ever need to make an insurance claim.
What is tenant insurance?
Tenant insurance, also known as renters insurance, is a type of insurance renters need to protect themselves and their possessions, whether they are renting an apartment, condo, basement or a whole house.
Unfortunately, it is often an overlooked type of insurance. Many renters decide not to buy it, or they don’t realize they need it. Some people assume that if the landlord has insurance, the renter is also covered.
Home insurance can cover the property from things such as a flood, windstorm, fire, smoke, and even an earthquake. However, a renters insurance policy would provide protection if your personal goods, such as jewelry, laptops, and electronics are damaged or stolen from any incident including a burst pipe.
It’s worth noting that your tenant insurance covers more than just your personal possessions. You also get liability coverage in case someone injures themselves in your home and tries to sue you for damages.
What does tenant insurance cover?
Many people who rent think that their landlord’s insurance will cover them, but this is simply not true. Your landlord’s insurance doesn’t cover your belongings. If anything happened and everything you own was destroyed, would you be able to afford to replace your belongings out of pocket? Their insurance also doesn’t cover you for any injuries your guests have while you’re living there.
If you purchase tenant insurance, your renters policy would cover the following:
Contents coverage
This part of the policy covers you for what you own. When you buy renters insurance, it’s important to consider how much content you want to insure for. Most renters will typically only need about $30,000 in coverage.
While that may sound like a lot, it’s a good idea to keep an Excel sheet with the actual cash value of your home inventory, such as TVs, computers, appliances, furniture, clothing, etc. Be as detailed as possible, including model numbers, colour, where you bought it from, etc. This is vital information during the claims process.
Keep in mind that content coverage doesn’t cover most jewellery, musical instruments, sporting equipment, and collectibles. You will need to add what’s called a floater to your policy to protect things like wedding rings or prized collections.
As you can see, how much coverage you need will depend on the contents of your home. $30,000 sounds like a lot to start with, but once you start making a list, you may realize your possessions are worth much more than that.
Third party liability
Personal liability coverage is included with tenants insurance and covers you for bodily injury or property damage. If a visitor is injured or their property is damaged while at your place, they could end up suing you. While it may sound ridiculous that one of your guests will sue you, it applies to anyone entering your residence. For example, say you have a home office where your clients come to meet you. If one were to trip on your carpet and break their leg, they may try to sue you for loss of income.
Another example would be if you left your water running, and it flooded your unit and the unit below you. Any water damage would be paid out by your insurance company as long as you have a policy
Tenants legal liability
If you were to cause accidental damage to your rental unit, your tenant insurance would cover you. Some people assume homeowners insurance would cover any damage, but that’s not the case.
Having tenant insurance would cover you in these situations, so you don’t get sued by your landlord.
Additional living expense
If you need to vacate your home in order for repairs to be made, you could rack up additional living expenses, such as hotel accommodations and travel costs. The loss of use part of the insurance policy covers just that, so you don’t have to pay out of pocket.
Note that this only covers additional costs. Let’s say your regular rent is $2,000 a month. However, you need to move into a hotel, and it will cost you $3,000 a month. Your tenant insurance would cover the $1,000 difference.
What does tenant insurance not cover?
While tenant insurance covers many things, it doesn’t cover everything. If you have a pet, and it damaged your possessions, you wouldn’t be able to make a claim. Damage from pests such as bed bugs or raccoons also wouldn’t qualify.
As you can imagine, only things owned by you qualify for insurance. You can’t claim other people’s possessions, even if they’re your roommate. You also can’t claim anything you keep outside of your home.
Damage to your car also wouldn’t fall under tenant insurance since that’s what your auto insurance is for.
If there’s ant structural damage to your building, your tenant insurance wouldn’t cover it. Instead, your landlord’s homeowners insurance policy should cover it.
It’s also worth mentioning that business equipment is not covered as that’s what small business insurance is for. If you use your laptop for personal and business use, there’s a chance that your tenant insurance won’t cover it.
Is tenant insurance mandatory?
No, but also maybe. No, because it’s not required by law. Legally, you don’t have to have it for renting, unlike having car insurance for driving. But most landlords nowadays require you to show proof of tenant insurance as a condition of your lease before renting to you. So you might need to buy it before you’re approved for the rental.
Even if your landlord doesn’t require it, getting this type of insurance is still a smart decision. Depending on your building and how much you own, you’re typically looking at a cost of $200-$300/year to protect yourself.
How much does tenant insurance cost?
In most cases, tenant insurance will only cost you $15 to $30 a month. That said, your premiums could go up if you’re looking for additional coverage. On the flip side of things, if you don’t need much coverage, your premiums will be on the lower end.
How much you’ll actually pay depends on a few things, such as how much coverage you need, where you live, how old your unit is, the size of your rental, your deductible, and more.
Even though prices for renters insurance are relatively low, you should still shop around for a quote.
How much tenant insurance do I need?
To figure out how much tenant insurance you need, you need to determine the value of replacing your possessions as well as any other additional add-ons that you may want. The most common tenant insurance add-ons include:
- Overland water protection – Think of this as flood insurance from a water source that’s above ground and outside your home. This would be things such as a river or lake. If there’s heavy rainfall and the lake or river increase in volume, you would be protected if there’s damage to your goods.
- Sewer backup – Occasionally, heavy rainfall will cause sewers to backup into the basement of homes. This can cause huge damage. If you live in a basement or rent a home with a basement, you may want this coverage. If you’re in a condo or apartment, it’s unlikely you’d need this add-on.
- Additional content insurance – As mentioned above, special possessions such as collectibles, family heirlooms, or art will require additional content insurance.
Actual cash value vs replacement value
When getting a tenant insurance policy, you can be covered for the actual cash value or replacement value of your personal possessions. With a replacement value policy, you will get paid enough to re-purchase your damaged items at their current market value. This type of policy is more valuable, so it typically comes with higher premiums.
With an actual cash value policy, you’ll be paid the value of your items minus any depreciation costs. Even though your monthly policy will be cheaper, you won’t get enough cash back to repurchase everything you’ve lost.
Final thoughts
Just because you’re renting and don’t own the property, it doesn’t mean you don’t have anything to protect. Tenant insurance, like other types of insurance, is about more than just peace of mind. You hope to never have to file a claim, but in case something bad does happen, it gives you the needed protection.
While renter insurance is not an overly complicated product, a broker can help you fully understand your policy, so you are getting just the coverage that you need.
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