The big news over the past week has been the destruction caused by something named “Fiona.” The hurricane devastated parts of our east coast as it moved north along the USA coastline. I was speaking with a person who hails from Newfoundland, and she shared that her parents purchased a property in Port Aux Basques to use as a rental until they moved back home. They closed on the property 2 months ago and a tenant moved into the seaside home. Fiona ripped the home apart. Thankfully, the homeowner had home insurance, and unfortunately, the tenant had no insurance. I felt it might be a good time to start a discussion about tenant insurance.
For starters, I am a Real Estate Broker, not an Insurance Broker, however, I can share what I have learned over the past 36 years working with tenants and investors. Tenant insurance is optional, and in the Ontario standard lease form, there is a section where the landlord can require proof of insurance. This requirement is only for tenant liability insurance, the landlord cannot demand content insurance. Simply put, tenant insurance deals with loss, liability and/or damage.
What exactly does tenant insurance cover? There are different levels of coverage and the average cost in Canada is $23/month. The basic coverage is content insurance, covering contents in the case of fire, water damage, theft or smoke damage. A good question to ask your broker would be that in the event you had to move out of your rental due to smoke or water damage etc. would your temporary accommodation be covered under your policy? Another level would be liability, meaning if someone is injured in your rental space you are covered against liability. Property damage is another form of insurance, covering the tenant if they cause damage to the home.
Most of the tenants I have worked with opt for content insurance, and many of the landlords I know request that a tenant has a policy. If there is damage to the property and the tenants’ belongings, the landlord is simply trying to encourage insurance to make certain that the tenant is covered. It makes sense.
Let’s revisit the tenant who moved into the oceanfront home in Newfoundland. My understanding is that they had no insurance, meaning they have had their possessions damaged or destroyed, and left to find accommodation themselves. If they had proper insurance coverage, their temporary accommodation would be covered by the policy, along with the replacement of their possessions. The landlord’s homeowner insurance would (hopefully) cover all of the physical damage to the property and to the items that were damaged on the property.
When a person is searching for a rental, the amount they pay monthly in rent is typically what they focus on, looking for the best features and location in a monthly payment they can afford. No one gets excited about spending more on something that they may never use, however the only times we seem to hear about tenant insurance usually is when a tragedy occurs and the tenant is not covered. Cash cannot replace our loved personal possessions, but it can soften the blow when calamity strikes.
If you have questions about tenant insurance, or if you are an investor looking to purchase or sell a property, I can be reached at lindsay@buyselllove.ca