Reviewed by Daniel Mirkovic
Updated September 9, 2022
If you are a landlord or a property manager, do your tenants have their own insurance policy in place? If your answer is “Yes,” that’s great peace of mind for you. If your answer is “No,” please keep reading.
You, as a property owner, are most likely obligated to carry insurance on your rental property. Your tenants, on the other hand, are not required to purchase contents coverage. While tenant insurance is not mandatory nor required by law, there are a couple of very compelling reasons why you should require your tenants hold tenant insurance.
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If your tenant causes unintentional damage to your home or the apartment complex the rental unit, then this coverage is very useful. Some simple examples of where this coverage could apply are: your tenant is cooking and accidentally starts a kitchen fire that damages not only their unit but also the entire complex, or they forget to turn off a tap and overflow a sink or tub causing significant water damage. While your rental property insurance may cover the building damages, compensation can also be sought through your tenant’s liability insurance. As the claim would be filed against their policy, and not yours, there would be less, if any, impact on your premiums. It is recommended to require at least $1 million in liability coverage from your tenants.
When unforeseen things happen, it’s important your tenants have their own insurance. Your rental property insurance will not cover loss or damage to your tenant’s personal property. If your tenants have coverage for their contents, then not only is their personal property covered in the home, it is generally also covered anywhere in the world, which is a great benefit. There would be coverage included for the cost of any additional living expenses your tenants incur while repairs are being made to the rental unit.
While no one likes to think of the worst-case scenario, it can give you peace of mind knowing that in the event of a significant insured loss, your tenants will have coverage on their insurance for the cost of emergency accommodations while they find a new permanent home, or wait for repairs to be completed. You will have the freedom to focus on repairing and rebuilding your home, without worrying about whether your tenants will have somewhere to go or have funds to replace their belongings.
Requiring your tenants to purchase tenant insurance may eliminate unsuitable tenants. For example, if a tenant does not qualify for tenant insurance, do you want them renting your property? It might also eliminate those who cannot afford tenant insurance. Tenant policies offered by Square One start as low as $12 a month depending on the coverages selected. If a tenant can’t afford or isn’t willing to pay to protect themselves and their property, it could be an indicator of financial stress or a lack of care or responsibility, which may make you think twice about allowing them access to your home.
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Creating a relationship with an insurance agent will make it easy for your tenants to get home insurance quickly and provide you with proof of insurance.
As the rental market tightens, more and more landlords require, not just recommend tenant insurance. In fact, they make it a condition on lease agreements. Check with your attorney to see if you can change the tenant lease to require tenant insurance. You can also check with your insurance provider to see if requiring your tenants to carry their own insurance gives you any savings on your premium. In some cases, it will, and there are even some scenarios where your insurer may require your tenants to have insurance based on the occupancy of your home.
Tenant policies offered by Square One are designed to offer the most critical coverages at the most affordable rates for your tenants. A Square One agent can set up a policy over the phone and have the documents sent to the client within minutes. In fact, clients can even buy their policy online. It’s easy and convenient, and typically takes no more than 10 minutes. Agents can efficiently explain the benefits of tenants insurance to your renters, to help them understand exactly what types of scenarios they are protected against.
Request a confirmation of insurance from your tenants to confirm they have indeed purchased a policy. It is very common these days for landlords to request this document before handing over keys to tenants. The confirmation would list the limits of coverage, the date the policy was initialized, the policy number, and the name of the insurance provider. For privacy reasons, insurers will not be able to divulge details about your tenant’s insurance; however, they should be able to confirm at any time whether the policy is active.
Tenants don’t need their insurance policy to cover the building they’re renting in, because they don’t have an insurable interest in it. That’s what the landlord’s insurance policy is for; the tenant’s policy only protects their own possessions, not the landlord’s.
If your renter has to leave the property so that you can do larger repairs, the last thing you want is them looking at you to foot the bill for their expenses. Here’s another area where insurance can lend a hand.
Say unexpected water damage occurs and some flooring needs to be replaced. The damage is extensive enough where it’s unreasonable for your tenant to live there until the repairs are complete. In this case, it’s likely that tenant insurance will cover the costs of your renter finding a new place to stay until the process is finished—leaving both of you less stressed as a result.
Understanding the benefits of tenants insurance for you as a landlord, and for your renters, can help you clearly articulate to them why you are making it a requirement.
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About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
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