Here’s why you need Landlord Insurance

Considering investing in real estate and renting it out to tenants? Then, congratulations, you’re thinking about becoming a landlord.
While being a landlord can be a profitable way to make the most of properties you own, it can also be challenging, time-consuming, and risky. Why risky? Because real estate is a sizeable investment, so you want to ensure you’re properly protected financially, with the right kind of insurance.

Is my home insurance policy different from landlord insurance?

If that’s what you’re wondering, it’s a great question and the answer is yes. Home insurance is designed with the expectation you’ll be living in your dwelling. In most cases, it only covers your property, contents and personal liability for you, your spouse and dependents – like your kids. It may also cover you if you’re renting a room or basement, to a boarder, in the house where you live. But it won’t protect you in an investment property you don’t live in.

Your best bet is to check with your insurance provider to find out if your current policy covers rentals – if not, it’s probably time to take a serious look at landlord insurance.

So, what exactly is landlord insurance?

While policy specifics can differ depending on what your exact needs are, landlord insurance is essentially protection that covers property owners from financial losses at their rental properties. It usually includes coverage for the building, contents that you own on the property, liability arising from ownership of the property, and loss of rental income.

Let’s talk a little more about coverage

A proper landlord insurance policy does the following:

  • Covers damage to your property, such as walls, floors, fixtures, heating and cooling systems and furniture (if furnished), subject to the terms of the policy. These terms indicate the risks that you're covered against, such as fire, explosions, wind damage etc and specify the dollar limits you're covered up to.
  • Ensures lost rental income is replaced if your tenants need to vacate the premises in the event of a covered loss.
  • Covers you if you’re legally liable for injuries or property damage to a third party arising from your ownership of the property.

What doesn’t it cover? Landlord insurance essentially applies to items you own, like the building itself, and any contents you own on the premises. It won’t cover damage to your tenants’ belongings, such as their furniture, electronics and other property. For that stuff, they’ll need to buy their own tenant insurance.

Do your tenants need their own insurance?

Tenants are not required by law to have renter’s insurance, but many landlords are now asking their tenants to carry insurance as a condition of their lease. Their insurance will cover their own belongings and provide them with liability coverage that could protect them financially if they unintentionally damaged your property.

How much will landlord insurance cost?

Landlord insurance policy prices vary depending on what’s covered, the value of your property and its location. Your best option is to speak to an insurance provider about your exact property to get an accurate idea of what it will cost to insure it. Also, try to insure your rental property with the same company that insures your home insurance. In most cases, there are savings when you bundle home and landlord insurance together.

The bottom line? If you're thinking about becoming a landlord (or you already are one and are not sure you have the right coverage) - reach out to your insurance provider to see what landlord insurance packages suit your needs.



Sources Used:

  1.   1. http://assets.ibc.ca/Documents/Brochures/Are-You-a-Landlord.pdf
  2.   http://www.ibc.ca/on/home/rental-properties
  3.   https://www.economical.com/en/blog/economical-blog/january-2019/landlord-insurance
  4.   https://loanscanada.ca/posts/landlord-insurance-for-canadian-home-owners/
  5.   https://www.investopedia.com/articles/personal-finance/061515/quick-guide-landlord-insurance.asp
  6.   https://www.houselogic.com/finances-taxes/home-insurance/renting-out-your-home-get-landlord-insurance/