Is Tenant Insurance Really Worth it?

Monday, July 14, 2014

Tenant insuranceIf you are renting a place to live, or if your child needs to rent a house or condo close to the university, you need to think about tenant insurance. Like all other insurance, you must calculate the merits of tenant insurance with reference to your own unique circumstances. Think through the following advantages and disadvantages:

  • The most important consideration is the type and amount of insurance that your landlord has already purchased on the house. If the landlord has a standard home insurance policy, the building is covered against fire, hail, wind and some types of water damage. This means that you will not be financially responsible for repairs if any of these disasters strike while you rent it.

  • If you accidentally damage the building, by driving into the garage door for example, your landlord's insurer might approach you to recover the cost it incurred for repairs (Insurance Bureau of Canada, 2014b). Alternatively, your landlord may not want to claim for damages, and may try to hold you accountable for the damage. This is the most typical case where tenant insurance is beneficial. It includes some cover for damage to a rented property. You can usually choose the amount of coverage. 

  • If your landlord has no home insurance, your best option is not to rent the property at all. But if you have already rented and your landlord's policy expires, you will have to take responsibility for insuring the whole house on your tenant insurance policy. If you do not do this, you run the risk of expensive legal action in event of a disaster. Your landlord will try to hold you financially responsible for the damage, and you will have to defend yourself in a costly and time-consuming legal case. 

  • Your landlord's home insurance does not cover your belongings, so if you do not have sufficient savings to replace everything you possess, tenant insurance is essential (Insurance Bureau of Canada, 2014a). 

  • Since your landlord's home insurer knows nothing about the habits and level of responsibility of the tenants, it will not cover third-party liability suits against tenants. Without tenant insurance, you are financially responsible for compensating neighbours and friends who injure themselves on the property (Folger, 2012).

Tenant insurance usually costs under $20 per month, and the potential damage against which it protects you can be massive.