What you need to know about landlord insurance
Row of brightly coloured brick houses

If you’re looking to make some extra money, you might be inspired to invest in your own income property. But before you sign the deed for your new rental and put an ad out for tenants, you’ll want to make sure you have the right landlord insurance. It’s important to understand how your coverage will protect you. We’re here to answer a few commonly asked questions about landlord insurance to help you prepare.

Why do I need landlord insurance?

You’re probably wondering (as many do), “Why can’t I just go with a regular home insurance policy?” Well, in some cases, you can. For instance, if you’re actually living in the home and renting out a room or a basement unit within your dwelling, you’re likely fine to go with regular home insurance – but double check with your provider as there could be restrictions. But if you’re renting out a separate property that you don’t live in, you’ll need to buy landlord insurance. Not only that – if you have a mortgage for your rental property, you’ll likely be required to have coverage as well.

You won’t always be able to control how often or how well your tenants shovel their walkways to prevent trips, slips and falls. Maybe there’s a broken step you didn’t know about, and someone tumbles down the stairs and hurts themselves. Or, what if your rental has a house fire and damages the place next door? As the property owner, if any of these events were to happen you could face an expensive lawsuit.

What does landlord insurance cover?

Having the right insurance will help protect you and your rental property from expensive repairs and replacement costs from losses due to insurable events. Remember, every landlord has unique needs. Be sure to review what coverages are right for you. Make sure you’re protected.

Below is a general overview of the main coverages included in most landlord insurance policies.

Standard landlord insurance coverages

Property damage

If your rental home, condo, or apartment is damaged by covered losses, you’ll be protected from having to pay out-of-pocket. What if you have a shed or a fence? Don’t worry, these are also covered by your landlord insurance along with other structures on your property.

Liability insurance

If someone falls because of an icy walkway or a broken handrail, you could be sued. Thankfully, having liability coverage can help you avoid breaking the bank. Otherwise, you could be on the hook for paying for medical or legal costs.

Landlord’s belongings

Part of a landlord's responsibility is keeping the property tidy and well maintained. So, you might keep your personal lawnmower at your rental, for when the grass needs cutting. If your lawnmower gets damaged, you’ll have coverage.

Note: Landlord insurance generally does not cover your tenant's personal possessions (electronics, clothes, etc.). So, renters will need their own tenant insurance.

Loss of rental income

Let’s say there’s a bad electrical fire and your tenants need to move out while the home gets fixed. It could take months before the restoration is completed. You’ll be compensated for lost rental income as a result of an insured event until the rented house can be re-occupied, or for the maximum allowed by your policy – whichever is less.

Additional landlord insurance coverages

Sewer backup

Let’s be real, no one wants to deal with water damage. If water backs up or gets into your property through the sewer, you’ll be covered for the repair costs. You’ll have to check to see if your insurance provider offers this coverage.

Overland water

Is your rental located in an area that gets a lot of rain? You might want overland water coverage. It’s for damage caused by freshwater coming in through windows or doors. You’ll have to check to see if your insurance provider offers this coverage.

Did you know? Overland water is freshwater that flows above ground. It is usually caused by a sudden accumulation of water from heavy rains, spring run-off, or overflow from lakes or rivers.

Do landlords need liability insurance?

Yes! Thankfully, liability coverage is a standard offering in most landlord insurance policies. And it may help prevent you from paying out of pocket if you are found liable in certain situations.

Landlords can be held responsible for things like If the house catches on fire due to faulty electrical. This is called negligence. And since your home insurance policy won’t cover your rental property, you’ll need a separate landlord policy.

Landlord liability protects you in the event of property damage or injury arising from your ownership of the property. To protect yourself in case you’re sued, be sure to have enough liability coverage. You might even want to have more liability coverage for your rental property than you would for your own home since you won’t always be at the property to oversee what’s going on.

What’s included in liability coverage?

There are two main types of liability coverage:

1. Property damage

If your neighbour’s property gets damaged by something from your property, this coverage will help cover the cost. An example that could be covered, if a tree on your rental property falls onto the neighbour’s roof and causes major damage. Liability coverage could help you in this situation.

2. Bodily injury

This coverage is in case someone gets injured on your rental property. For example, if you’re cutting down a tree in your backyard and it accidentally topples onto your neighbour and breaks their arm. Even if you are not found to be negligent, your liability insurance could cover your legal expenses.

Keep in mind, that for liability coverage to apply, it must be proved that event was not deliberate but rather it was the result of landlord negligence. Simply put, liability insurance will not protect you against intentional acts, such as vandalism, wear and tear, or maintenance issues.

Is the stuff I keep at my rental property covered as well?

For landlords, contents coverage is usually limited to “landlord belongings” – in other words, those items that belong to you and the property. These include things like major appliances (like a fridge and a stove you’ve provided for your tenants) and fixtures (like cupboards). It also covers tools and maintenance equipment (your lawnmower or snow shovel) that you use for the upkeep of your home and property.

Am I covered for loss of rental income if something happens to my rental property and my tenants can’t live there?

Yes. Landlord insurance covers you for the loss of rental income until your property can be rented out again if the rented house cannot be lived in because of an insured event. This coverage will usually be for a limited amount of time, so be sure to review your policy.

Do my tenants need their own renters insurance?

Your landlord insurance doesn’t cover your tenants’ stuff. So, although tenant insurance isn’t mandatory in most provinces, it’s highly recommended. Your renters will need to purchase their own tenant insurance to cover their clothing, furniture and everything else in case something happens. And, if they’re responsible for damage to your property their own liability coverage will help pay for it.

How much does landlord coverage cost?

The cost of a landlord policy depends on many different factors. These include the property’s location, how it’s heated, any previous claims you might have, and your personal information (your age, etc.), to name just a few. You might find that it’s slightly pricier than home insurance, since it’s riskier to own and run a rental property. You won’t be there to monitor it, and some renters may have less motivation to protect a rental unit from damage.

What other coverages might I need for my rental property?

Like homeowners insurance, additional coverages for earthquake, sewer backup, overland water and (if you live in Alberta) hail would need to be purchased separately. But, having these coverages can save a landlord from a lot of grief and financial stress. In recent years, for example, water damage has been on the rise. So consider reading up on how it happens, how to prevent it and how insurance against water damage can save you from a timely and expensive clean-up. And do the same with all other extra coverages available to you – you might just find you need them!

Will my landlord insurance cover short-term rentals?

It depends. Some insurers will allow short-term rentals as long as you’ve notified them first. Others will only permit it if you’re renting out a room or unit in the house you live in, or they might impose certain coverage restrictions. And some won’t allow it at all. Before you decide to use your income property for short-term rentals, be sure to speak with your insurer first.

At the end of the day, the main thing to remember is that as a landlord, you’re exposed to a lot more risk than you would be as a homeowner. Landlord insurance is a smart way to protect your investment.

Protect your investment by insuring your rental property.