What you need to know about landlord insurance

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 property 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, so 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 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 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, they’ll likely require you to have coverage as well.

Like a home policy, a landlord policy will help you repair or rebuild if your rented dwelling is damaged by wind, fire or another covered loss. Also covered? Any other structures on your property, like a shed or a fence. It also includes other important coverages that every landlord needs – don’t worry, we’ll get to those below!

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 lawn mower or snow shovel) that you use for the upkeep of your home and property.

Am I covered for loss of rent 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. This coverage will usually be for a limited amount of time, so be sure to review your policy.

Why do I need liability coverage for my rental property?

You won’t always be able to control how often or how well your tenants shovel their walks 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 a hefty lawsuit. Landlord liability, much like homeowners liability, protects you in the event of property damage or injury arising from your ownership of the property. To safeguard 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.

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.