Renter's Insurance: What do you know?
Only one in five renters could actually replace all or most of their personal belongings in one shot should there be fire or water damage.
And while the rental market in Canada is booming, there is a huge gap when it comes to renters seeing the value of purchasing renters insurance (also known as tenant insurance).
According to TD’s 2021 Tenant Insurance Survey, 41 per cent of Canadian renters do not have tenant insurance, and almost 50 per cent said cost was the main reason why.
Figures from the Insurance Bureau of Canada agree. About 50 per cent of renters in Ontario, for example, do not have tenant insurance.
Meanwhile, the cost of rent across Canada has increased year over year. Rentals.ca reported that the average rent in British Columbia was up 7.3 per cent annually in 2021, in Ontario there was a 5.4 per cent increase, and in Nova Scotia, there was a 7.7 per cent annual increase.
Average belongings $35,000
In the event of a loss, more than 51 per cent of Canadian renters surveyed said they would have trouble replacing their belongings without insurance. It may surprise you to learn the average renter has about $35,000 worth of personal property.
And, the Renters Insurance Consumer Insights Benchmark 2019 from Assurant revealed many renters did not understand what tenant insurance covered: For example, 97 per cent didn’t know that they’d be covered if their dog bites someone, 81 per cent were unaware that a rug ruined by an overflowing toilet is covered, 84 per cent were unaware that a guest tripping and breaking a bone is covered, and 57 per cent didn’t know renters insurance will cover temporary housing if a home is made uninhabitable by a fire in their neighbour’s apartment.
The reality is tenant insurance is affordable. For less than a dollar a day you can cover the things you own, whether you rent an apartment, condominium, or a house. On average, premiums in Ontario, for example, are about $250-$300 per year or about $20 to $25 per month. How much you will pay will depend on the size of the property you are renting and the value of your personal items.
Landlord covers structure
Remember, a landlord’s policy covers the structure of a property itself as well as the contents within the unit such as a fridge, stove, washer, or dryer. Then it is up to the tenant to have coverage for their own personal possessions.
As a tenant, you are legally responsible for any damage you cause to any part of your building and for unintentional harm caused to others who live in or visit the property. While renters insurance is not mandatory, many landlords will require tenants to have insurance as a condition in the lease.
While tenant insurance can vary between insurance providers, policies typically include the following types of coverage:
Personal Contents: This covers the cost to repair or replace, clothes and most household items. For example, during the pandemic, there’s been a surge in purchasing expensive electronic items. It’s important for renters to consider the financial burden of replacing hundreds of dollars in electronics compared to the price of tenant’s insurance.
Even if you think your belongings have little value, the cost of replacing everything at once adds up. There are typically two ways you can be paid under your policy: actual cash value (equal to how much the item would be worth today) or replacement cost (equal to the cost you’d need to replace that item with a new, similar product of like kind and quality). An insurer has the right to determine whether an article is repaired or replaced.
Liability Coverage: As a tenant, you are legally responsible for any damage you cause to any part of your building and for unintentional harm caused to others who live in or visit the property. This provides coverage if a guest injures themselves in your unit, for example, and takes legal action against you.
Generally, a standard or basic insurance tenants' policy covers up to $1 million for the amount you'd have to pay someone who successfully sues you. Liability coverage also pays for the cost of defending you in a lawsuit. You can often increase your liability limit to $2 million.
Additional living expenses: If something happens and you cannot live in your rental while it is being repaired, where will you stay? What will you eat? This coverage pays, in certain circumstances, for any necessary expenses incurred while your apartment is being repaired. These include hotel bills, restaurant meals, and moving costs. It is subject to specified limits.
Renters insurance doesn’t cover all perils. Certain risks, water damage from floods and sewer backup, are not covered. It also doesn’t cover earthquakes, landslides, or other hazards. Be sure to know your policy.
The cost of tenant’s insurance depends on the amount of insurance you choose, where your apartment/house is located, how it was constructed, and the insurance provider you choose. The more you own, the more coverage you will need to replace those contents. Your history, including if you’ve made a claim in the past 10 years, also impacts your rate.
However, one thing is clear: If you rent, the cost of not having a tenant insurance policy could be very high should something happen.
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