Insurance is a promise for the insurance provider, through a contract or policy, to reimburse the insured for losses or damages that come up in certain circumstances. Most people think you must own something like a car or house to get insurance. But what if you don’t own a house? If you’re a renter or tenant, is insurance necessary for you as well?
The unequivocal answer is yes – full stop. However, there are nuances and issues to consider. Firstly, tenant insurance is designed to protect you and your personal belongings from various risks and liabilities. Interestingly, it’s not mandatory by Canadian law to get tenant insurance.
However, most landlords will require you to have tenant insurance as a condition to rent their property to you, so it ends up being a mandatory requirement.
What does tenant insurance cover?
Tenant insurance offers a wide range of coverage to help protect tenants.
First, it covers the cost to repair or replace your belongings if they get damaged in a fire or flood, or by vandalism or theft. If you need to temporarily relocate because of damage to your apartment or you’ve been ordered to evacuate, it can provide coverage for that, as well.
Tenant insurance also includes liability coverage, which protects you and anyone in your home. In the event a visitor is injured while on your property, liability coverage can help cover medical expenses and legal costs if you are found responsible for the injury.
Generally, tenants are on the hook for accidental damage that you may cause to the rented property, such as a fire or water damage resulting from unintentional negligence. Tenant insurance will cover that, often up to about $1 million.
Lastly, whether you own or rent your home, identity theft is a real threat. Computers can be hacked, documents can be stolen, or you could fall victim to a phishing scam.
The good news is that most insurance policies (for both homeowners and renters) cover these types of incidents. Your renter’s insurance will reimburse you for legal fees as well as other costs, including lost wages and payment for services. But it’s best to talk to your insurance provider to hammer out those details, and to read your policy thoroughly to make sure you know the extent of your coverage.
Additional tenant insurance can include things like sewer back up and damage caused by rain, spring run-off, and melting snow that comes through windows and doors.
What goes up stays up?
So, there’s tenant insurance, which you need, but what about the cost of your rent and how do you factor in all these costs together?
Earlier this year, the Canada Mortgage and Housing Corporation released it's annual report on the state of Canada’s rental market. Average rent in Canada is now up 5.6% from the previous year, standing at $1,258 per month.
In Vancouver, rent was up 5.7% to $2,002 and in Toronto, it was higher by 6.5% at $1,765. The highest increase percentage-wise in the country was in Halifax with a 9.3% increase and an average rent of $1,449.
It’s tough to know how much your tenant insurance will be as it exactly, as it depends on the value of possessions you own, your square footage, location, claims history, and other factors. However, the average cost of tenant insurance in Canada ranges from $21 to $26 per month.
Now factor that cost in with your rent and other monthly bills such as hydro or Wi-Fi and you may find your budget stretched very thin. Since tenant insurance is de facto mandatory, it’s best to budget with as much knowledge and information you can obtain to get a complete picture of payments before you move into your dwelling.
The good news is that there has been some relief announced by the federal government’s Affordability Plan. The Canadian government is giving $500 as a one-time payment to nearly one million people who are struggling to afford housing. That’s a start, but this amount may only partially cover one month’s rent.
In the meantime, it’s smart to comparison shop tenant insurance rates on sites like LowestRates.ca as well as discuss your options with a broker or insurance provider. The more you know about costs, the better choices you can make and have peace of mind that your protection will not break the bank.
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