Tenant insurance safeguards your stuff — and your peace of mind

By: Jessica Wei on September 28, 2023

For many people, the biggest benefit of renting is not having to be deal with any misfortune that befalls your home. If a pipe bursts in your bathroom, or your laundry machine goes on the fritz, or the ceiling starts leaking after a heavy downpour, sure, it’s an inconvenience, because you still have to live with it — but it’s not really your problem. You don’t have to deal with it. You don’t have to arrange for a technician to come in to fix it, you don’t have to pay for it. All you have to do is call your landlord.

But what if, after a heavy downpour, your ceiling not just leaks, but full-on collapses all over your bedroom?

Your landlord might be able to get the ceiling fixed, but the rest of it — your unwearable clothes, the sopping mess of a bed, and the nights you’ll spend in a hotel while your room remains a pile of moldy insulation and shards of drywall — will all be your responsibility to deal with and pay for.

That’s where tenant insurance comes in handy. In Ontario, the average annual cost of tenant insurance in 2023 costs $206 annually. And as you’ll read, those $17 a month — roughly the price of a single movie ticket — could end up saving you both money, time, and more than a few sleepless nights in case the worst happens.

What is tenant insurance?

Tenant insurance is as it sounds: It’s insurance for tenants. It allows for a range of different coverages to make sure that tenants aren’t facing financial ruin in the event of a disaster. With tenant insurance, renters can recoup their losses, protect themselves in court, and pay for a place to stay if their home suddenly becomes uninhabitable.

While tenant insurance doesn’t necessarily cover the property as a structure, it does cover tenants in much the same way that property insurance would cover a homeowner.

“The only difference between the homeowner and the tenant is that the tenant doesn’t have to worry about the house, but they have to worry about absolutely everything else,” says Stefan Tirschler director of product and underwriting at SquareOne Insurance.

While tenant insurance is not a legal requirement to rent an apartment, more and more landlords are requiring their tenants to take out their own policy. However, a 2021 survey from TD Insurance found that 41% of respondents did not have tenant insurance, including 49% of respondents between 18 and 34 years old. In other words, nearly half of young renters would potentially have to replace any electronics, bikes, furniture, or other personal items in their apartment on their own dime if something happens to their apartment.

What does tenant insurance cover?

There are multiple types of coverages offered by tenant insurance.

Replacement cost of items

The most immediate benefit of tenant insurance is the replacement cost of items if your personal property is stolen or damaged. Depending on your policy, insurance companies calculate replacement value of belongings using one of two ways:

ACV (Actual Cash Value): This method calculates the value of an item after depreciation. For example, if your 15-year-old bed is destroyed through no fault of your own, your insurance provider may take into account the age and condition of your bed to figure out how much they should pay you to replace it.
Replacement value: This covers the price of the bed if you were to go out and purchase it new, ignoring the age and condition of your old bed.

Insuring high-value items

Tenant insurance might not be able enough to cover valuable items such as extra-fine jewelry, cherished antique furniture, and highly sought-after artwork. In that case, you may consider taking out additional insurance.

According to Tirschler, every insurance company keeps sub-limits on specific categories of items within their policies. For example, most insurance companies assume every household would have jewelry, but only a small amount.

“It would be impractical for us to include, let's say, $100,000 worth of jewelry coverage in every policy, because only a minority of homeowners would actually potentially need that much,” he says.

He advises collectors to find out what that cap is, or to list individual items on their policy so they aren’t impacted in the event of a claim. Individuals who suddenly come into an expensive piece of jewelry — say an engagement ring or an heirloom — are also advised to reassess their tenant insurance policy. While a new policy might be more expensive, it also offers more coverage for your precious goods.

Liability coverage

If someone visits your apartment and is injured or harmed, and decides to sue, your tenant insurance would cover any legal fees that may be incurred. Liability coverage can also cover repairs or damages from your apartment that affects a neighbour’s apartment, like a fire or water damage. Tenants are advised to have up to $1 million in liability coverage to safeguard them from any unexpected events.

The liability portion of a tenant insurance policy is also a major reason why landlords require their tenants to be insured.

“Landlords require tenant insurance as a way of managing the risk that is inherent to occupying the home,” says Tirschler.

In the event of a lawsuit, if a tenant isn’t insured and doesn’t have the means to cover their legal fees, landlords might unwittingly be drawn into litigation.

Loss-of-use insurance

While no one wants to think about falling victim to a disaster that renders your apartment unlivable, it can happen in the event of a major housefire or sewer backup. In those cases, your tenant insurance policy can step in to cover any additional living expenses, like nights you’d need to spend at a hotel while your apartment is being decontaminated.

Contents of a two-bedroom apartment

The replacement cost portion of most tenant insurance policies begin at $50,000 with some policies starting at $30,000.

This amount should reflect the entire value of your possessions, from your most valuable items (like your laptop, your couch, and any heirloom jewelry), to the things you hardly think about (your underwear, for example, or a spatula set, or bed linens).

For many people, $50,000 or even $30,000 might seem like more than enough. However, it’s easy to underestimate the value of one’s belongings, especially if they’re treating tenant insurance as an afterthought to landing a lease.

For the purposes of identifying a ballpark value of the contents of a two-bedroom apartment, we compiled a long list of common items that a (enviably minimalist) couple might own, assuming that one room is used as a bedroom and other is used as a studio or office.

The list is by no means comprehensive — it doesn’t include expensive hobbies, bikes, artwork or niche cooking tools; items which wouldn’t apply to everyone and would be hard to pinpoint a price for. It doesn’t account for more than a single pair of sneakers and a single pair of dress shoes or heels for each member of the household, even though a recent survey showed that the average person owns six pairs of shoes.

However, it provides, like an IKEA catalog, a basic snapshot of life spent between a handful of rooms, with throw cushions and furniture and enough bras and underwear to get you through the week.

The total replacement value of the contents of an average two-bedroom apartment is $50,939.74 excluding tax.

The prices for this calculation were taken from popular department stores, furniture shops and clothing retailers in Canada and denote the replacement cost of these items if they were to be lost to a fire or theft. They’re also the price of mid-range versions of each items — neither fast fashion nor luxury designer.

This price includes two desks, two office chairs, two pairs of headphones, two pairs of sneakers, eight sweaters and 14 t-shirts, a small selection of jackets for every occasion, two parkas and two wool coats, a half-decent coffee maker, a 16-piece dish set and 20-piece flatware set, linens and towels, and several types of drinking vessels, a dining table and four dining chairs, and more.

We envision this couple to have a few nice things — one nice purse (the $715 Black Betty Bag from French ready-to-wear brand A.P.C), a 0.33 cwt diamond engagement ring, and a $3,000 sofa from EQ3 (the “Everyday Sofa”). However, the rest of their items are solidly middle of the road, including an entry-level Casper mattress priced at $1,499 and an over-the-head shower caddy that won’t immediately fall on your bathroom tile upon installation.

Naturally, there’s no way to cover every individual – if you have a musical instrument, a gaming console, or a particularly nice laptop, you’ll need to add that to the total. But if you’re an average couple whose tastes are neither luxurious nor spartan, you can guarantee that the sum of your items is well into the $60,000s, and likely higher due to taxes and hobbies.

Younger couples starting out likely to own at least $11,957.25 worth of possessions

A newly graduated young couple still building their nest, on the other hand, will likely require less in tenant insurance. In our calculations, we tallied up the exact same number of items as for the average couple above. We assumed an assortment of basic IKEA furniture and clothes from brands like Uniqlo and the GAP, electronics purchased refurbished or on sale, and no fine jewelry.

Thus, a couple on a budget can expect to own at least $11,957.25 worth of possessions. This is well below the minimum available coverage of $30,000, but could increase if you throw in bikes (the cheapest way to travel), an Instant Pot for easy budget-friendly dinners, and a toolbox to fix your own furniture.

Work from home?

As most companies have yet to enforce a full return-to-office policy and office workers tend to work from home at least half the week, we included a work-provided laptop valued at $1,400 for both scenarios.

While generally, company-supplied equipment is covered by the company’s business insurance policy, many workplaces have restrictions for items that are stolen or damaged outside of the office. Therefore, in the case that a work laptop were stolen from your home, it would likely fall under the responsibility of the individual to whom the laptop was assigned, rather than the company’s.

Why all renters need tenant insurance — whether they own a lot or a little

Tenant insurance is one of the least expensive types of insurance available. In Ontario, the average annual cost of tenant insurance in 2023 was $206 — That’s $17.16 a month for the basic tenant insurance plan covering $30,000 worth of possessions. Raising your deductible (i.e., the amount that you would have to pay out of pocket before the insurance kicks in) could lower your rate even further, but you should be certain you can comfortably pay the deductible if you ever need to.

Whether your total insured goods barely brush the lower tier of tenant insurance coverage, or if the combined value of your apartment is too high to count, you can pretty much guarantee that you can’t afford to not get insurance.

While TD Insurance’s survey found that 41% of respondents aged 18 to 34 did not have tenant insurance, it also found that more than 51% of respondents would have trouble replacing their belongings without insurance. Only 20% said they would be able to cover their lost possessions without any help from insurance.

However, beyond the cost of replacement, tenant insurance serves as a very crucial stopgap solution if you find yourself forced out of your home.

“We see events that happen in large multi-unit buildings where something significant, like a power vault fire happens, and the entire building is no longer inhabitable for months at a time,” says Tirschler. In the event of a fire, where fault isn’t so easily assigned, the landlord is not responsible for making sure their tenant has alternate living arrangements.

“Tenant insurance could be the difference between making a few calls to your insurance provider, heading to a hotel and checking yourself in and being safe that very first night,” he adds. “Versus reaching out to community organizations, attempting to find support or going to shelter centres because you don’t have access to that kind of protection in your own pocket.”