Do you know if your tenants have insurance?
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We’ve all seen those news reports – shell-shocked tenants standing outside a burning building. Inevitably, most say that they did not have insurance and now must start from scratch.
According to Statistics Canada, more than half of renters in Canada do not have tenant insurance. Do your tenants fall into that category? Should they be concerned? Yes! Should you be concerned? Yes, again!
Many tenants (and landlords) are simply unaware of the serious gaps in coverage that exist if a tenant does not have their own insurance.
6 Things Landlords (and Renters!) Should Know About Tenant Insurance
1. A tenant’s possessions are not covered under the landlord’s home insurance policy.
A basic tenet of insurance is that you cannot insure what you do not own. Therefore, a landlord’s policy protects theirproperty (the building, appliances etc.) not the tenant’s property. Whether a tenant’s possessions fall victim to water damage, fire, theft or other perils, they simply will not be covered under the landlord’s policy. Some tenants believe that they don’t own much of real value, but a quick home inventory will often prove otherwise. Replacing all of one’s clothes, jewellery, furniture, electronics and other household items will likely cost thousands of dollars.
2. A tenant policy will provide coverage for alternate accommodations.
If a tenant is not able to occupy the property due to damage, a tenant policy will provide funds for alternate living accommodations during the restoration of the property. This scenario is becoming more frequent, as more people reside in condo buildings where one overflowing tub can leave multiple units uninhabitable! Without this coverage, your tenants may find themselves crashing on a friend’s couch for an extended period of time.
3. A tenant could be held legally responsible for damage to the landlord’s property or that of a neighbouring unit.
Remember that overflowing tub in point #2. What if it was your tenant that left the tap running? A tenant can be held liable for any property damage they cause. A tenant policy provides coverage for personal liability, paying for any damage caused by a tenant’s negligence, up to the limits of the policy.
Alternately, if your tenant does not have insurance or sufficient funds to cover the loss, you may find yourself at the receiving end of a big bill or a lengthy legal battle.
4. A tenant could be held legally responsible if someone is injured on the property because of their negligence.
Again, the personal liability coverage provided in a tenant policy does much to protect both tenant and landlord. For example, if a tenant is responsible for snow removal in the lease and a visitor slips on the icy sidewalk, collection of medical and legal expenses will likely be possible via the tenant’s insurance policy. If an injured party is not able to easily collect damages from the tenant, they will likely turn their attention elsewhere – to you!
5. Tenant insurance can be relatively inexpensive.
Some tenants believe that insurance is going to be too expensive. But, depending on the level of coverage required, it is often surprisingly inexpensive. Most policies cost as little as $10 – $40 per month.
6. A landlord may be able to require a tenant to carry insurance.
Tenancy regulations vary from province to province. But, if you are permitted by law to require your tenants to carry insurance, this is the best policy. For example, the Office of the Information & Privacy Commissioner for BC states the following regarding whether a landlord can ask to see a copy of a tenant’s insurance policy:
“Contents insurance may be a necessary requirement for renting a property. A landlord must have a purpose for requesting this information and explain it to the tenant. If, for example, the landlord must satisfy his or her own insurance company that tenants have insurance, then it may be reasonable to require some proof of insurance. A landlord should not ask if an applicant has contents and third-party liability insurance during the application stage, but can notify the tenant that it would be a requirement; the tenant can apply to obtain this insurance after they sign a tenancy agreement.”
Become familiar with the regulations in your province and, if permissible, make tenant insurance a requirement. Regardless, educate your tenants on the value of carrying insurance. Many tenants may erroneously believe that they are fully covered under your home insurance policy and others may not realize how inexpensive a basic policy can be.
The reality is that tenant insurance is a win-win situation for both tenant and landlord – providing essential coverage and peace of mind.
Chris Westrop is the Commercial Insurance Manager at Park Insurance. He has over 25 years of experience in the commercial insurance business and is a Chartered Insurance Professional with the Insurance Institute of Canada and a member of the Professional Liability Underwriting Society. He is also a REIN member and a regular attendee of many of our programs. He may be reached at (604) 659-3133 or email@example.com.