Should my tenants have renters insurance?

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What is renters insurance?

Renters insurance—also called tenant insurance—is a policy that covers loss, damage or liability on the part of your tenant. There are many things to consider when you become a homeowner, and even more when adding tenants to the mix. Renters insurance is one of them. When you rent out your home, your tenant becomes liable for any damage to your property and for any harm to others while on your property. 

“In the event the tenant is found responsible for damage, for example, as a result of a kitchen fire, a typical tenants insurance policy would cover up to $1 million,” says Jesse Bajwa, customer care manager at Sonnet Insurance Company.  

And if they didn’t have insurance? “Everything related would be money out-of-pocket. If we use the example of that kitchen fire, in a multi-unit building other units could be impacted, and those people could also sue the person who caused the fire.” 

In other words, if an accident happens and your tenant is found negligent, their tenant insurance would cover any costs. If, however, they’re found negligent and uninsured, it would be up to you as the property owner to pursue legal action against the tenant—with all costs out-of-pocket.

Should my tenants have renters insurance?

In a word: Yes. Without renters insurance, a claim will affect your own property owners insurance if your tenants aren’t covered. Plus, your insurance will not cover their stuff, like computers, TV, jewellery and furniture. There could be an opportunity for them to pursue damages from you in court. 

To avoid that, you can help your tenants better understand why they need insurance and why you should ask for proof of insurance. Renters insurance carries many benefits to your tenants, protecting their belongings and protecting them in cases of personal liability. But it also benefits you as a property owner. In the case of damage to the home, knowing that your renters are insured can offer the peace of mind that your repairs will be covered. Perhaps even more importantly, renters insurance adds a layer of liability protection. If your tenant causes harm to others, or if a guest of your tenant is injured on your property, the tenants policy would be the first avenue of relief. 

Know this, though: Tenant insurance is not mandatory. There is no law in Canada requiring renters to buy this insurance. That said, you do have some influence, as it can be included as a condition of occupancy on a lease, and you can request proof of purchase from your tenants. Further, if your renters agree to carry insurance and then fail to do so, you can move for eviction. (Is your landlord asking you for proof of renters insurance? Here’s why.)

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