Rental House Insurance

Your guide to rental house insurance

Navigating rental house insurance can seem daunting, but understanding its essentials is crucial for any tenant or landlord. Rental house insurance, often called landlord or tenant insurance, provides a safety net against various risks, including property damage, liability claims, and loss of rental income.

Whether you are a landlord safeguarding your investment or a tenant protecting your personal belongings, this guide aims to demystify rental house insurance, outlining the key coverages, benefits, and considerations to help you make informed decisions. By the end, you’ll have a clearer picture of securing your property against unforeseen events.

What is rental property insurance?

Rental property, or landlord, insurance is a type of coverage designed to protect property owners from financial losses associated with renting out their homes, apartments, or other residential units. Unlike standard homeowners insurance, which covers owner-occupied residences, rental property insurance specifically addresses the unique risks faced by landlords.

Rental property insurance is crucial for landlords because it mitigates the financial risks of property damage, tenant disputes, and potential legal liabilities. Without adequate coverage, landlords could face significant out-of-pocket expenses that could jeopardize their rental properties and financial stability.

Rental property vs. home insurance

Rental property insurance and home insurance serve distinct purposes tailored to the needs of landlords and homeowners. Home insurance is designed for owner-occupied properties and provides comprehensive coverage for the home’s structure, personal belongings, and liability protection in case someone is injured.

It typically covers various perils like fire, theft, and natural disasters. Additionally, home insurance often includes coverage for additional living expenses if the home becomes uninhabitable due to a covered event, ensuring that the homeowner has a place to stay during repairs.

In contrast, rental property insurance is for investment properties leased to tenants. It protects the landlord’s investment property rather than the tenant’s personal property. It includes coverage for property damage, liability protection in case a tenant or visitor gets injured on the premises, and loss of rental income if the property becomes uninhabitable due to a covered event.

Unlike home insurance, rental property insurance generally does not cover the tenant’s personal belongings. Tenants are advised to purchase renters insurance. By addressing the unique risks associated with renting out a property, rental property insurance provides essential financial protection for landlords.

Types of landlord insurance

Property damage coverage

Property damage coverage covers physical damage to the rental property caused by events such as fire, storm, vandalism, or other covered perils. It includes the building structure and may extend to other structures on the property, like garages, sheds, and fences.

Liability insurance

Liability insurance protects landlords if a tenant or visitor is injured on the property and holds the landlord liable. It covers legal fees, medical expenses, and potential settlements or judgments. Liability insurance is crucial for mitigating financial risk from lawsuits.

Loss of rental income coverage

Also known as rental income protection or fair rental value coverage, this reimburses the landlord for lost rental income if the property becomes uninhabitable due to a covered event, such as a fire or severe weather damage, until repairs are completed.

Legal expenses coverage

This optional add-on covers legal costs related to tenant disputes, such as eviction processes or property damage claims. It helps manage the financial burden of legal actions, which can be costly and time-consuming.

Contents coverage

While it generally doesn’t cover tenant belongings, contents coverage protects items that belong to the landlord and are used to service the rental property, such as appliances, maintenance equipment, and furnishings provided with the rental unit.

Rent guarantee insurance

Also known as tenant default insurance, this type covers the loss of rental income if a tenant defaults on rent payments. It helps ensure a steady income stream even if a tenant fails to pay their rent.

Emergency coverage

Emergency coverage provides funds for immediate repairs to prevent further damage after an incident, such as emergency plumbing or electrical work. It ensures that the property remains safe and habitable for tenants.

Add-on coverages

In addition to the standard coverages, landlord insurance policies often offer various add-on coverages that provide additional protection tailored to specific risks and needs. Here are some common add-on coverages for landlord insurance:

  • Flood insurance: Standard landlord insurance policies typically do not cover damage caused by floods. Adding flood insurance can protect the property from flood-related damage, especially in areas prone to flooding.

  • Earthquake insurance: Similar to flood insurance, earthquake coverage is usually excluded from standard policies. This add-on protects against damages caused by earthquakes.

  • Rent guarantee insurance: Also known as tenant default insurance, this coverage compensates the landlord for lost rental income if a tenant fails to pay rent. It ensures a steady income stream even during tenant defaults.

  • Legal expense coverage: This add-on covers the legal costs associated with disputes involving tenants, such as eviction proceedings, property damage claims, or legal actions related to lease agreements.

  • Building code coverage: If a property needs to be repaired or rebuilt after a covered loss, this coverage ensures that any additional costs required to comply with updated building codes are covered.

  • Extended dwelling coverage: If a property needs to be repaired or rebuilt after a covered loss, this coverage ensures that any additional costs required to comply with updated building codes are covered.

  • Emergency coverage: It covers the costs of emergency repairs necessary to prevent further damage or to make the property safe and habitable after an incident.

  • Malicious damage or theft by tenant coverage: This protects the landlord against intentional damage or theft caused by tenants, which is often excluded from standard policies.

  • Accidental damage coverage: This covers accidental damage to the property caused by tenants, such as spills, breakages, or other unintentional damages that are not typically covered under standard property damage insurance.

  • Alternative accommodation coverage: If the rental property becomes uninhabitable due to a covered event, this add-on covers the costs of providing alternative accommodation for the tenants, ensuring they have a place to stay while repairs are made.

Rental property insurance premiums

The cost of landlord insurance in Canada can vary widely based on several factors, including the property’s location, size, age, and condition, as well as the level of coverage and any additional options chosen. On average, landlords can expect to pay between $800 to $2,500 per year for landlord insurance, although this range can be higher or lower depending on specific circumstances.

Getting a rental property insurance quote helps determine whether the premium fits your budget and get the best deal. When comparing landlord insurance quotes, consider the coverage types and limits, deductibles, exclusions, conditions, and the provider’s reputation and service. You can speak with an insurance expert to get a customized policy tailored to your specific needs as a landlord.

Frequently asked questions

Should you get home insurance for a rental property?

You should get landlord insurance instead of a standard home insurance policy for a rental property. Landlord insurance is specifically designed to cover the unique risks of rental properties. Home insurance is meant for owner-occupied residences and does not provide adequate coverage for rental situations.

How much is landlord insurance in Canada?

Landlord insurance in Canada typically costs between $800 and $2,500 per year. The exact price depends on factors like the property’s location, size, age, condition, coverage limits, and optional add-ons.

Is landlord insurance mandatory in Ontario?

No, landlord insurance is not legally mandatory in Ontario. However, it is highly recommended for landlords to protect their rental property from potential risks such as property damage, liability claims, and loss of rental income.