Tenant Insurance 101: Your guide to what’s covered, what’s not and how to get it

While there are many pros to renting, finding the right place can be hard, not to mention adding renters insurance to the checklist. It’s no wonder, only 17% of people insured have renters insurance.1 Most renters don’t know what it is, if they need it, or how to get it. We’ve got you covered with this comprehensive guide to Canadian renters insurance – starting from square one.

What is renters insurance?

Essentially, it’s a type of personal property insurance that offers coverage for anyone who doesn’t own the building they’re living in. Also called tenant insurance, this is just one of three different types of personal property policies. Let’s look at a quick breakdown of the differences.

Most of us are familiar with home insurance. This covers homeowners for liability, their personal belongings, and the structures on their property. In Canada, home insurance isn’t mandatory by law, but if you have a mortgage, your lender often requires it. In the case of rentals, your landlord would have landlord insurance. It includes the structures, the landlord’s personal belongings, plus unique coverages like loss of rental income. Legally, landlords don’t need to have insurance unless required by their mortgage lender. Either way, their insurance doesn’t cover tenants. That is where renters insurance comes in. It covers your liability, personal belongings, temporary living expenses, and more.

Who needs renters insurance and is it mandatory?

Renters insurance isn’t mandatory in Canada. However, landlords may require it as a part of your lease – which is completely legal. But even if your landlord doesn’t require you to have insurance or you don’t have a lease, it’s a good idea to make sure you’re covered. Whether you’re part of the 70% of renters living in an apartment or condo, a university student or recent graduate, or even a family renting entire house, you have plenty to protect.2 Imagine you accidentally break your neighbour’s window with a baseball. Or your laptop, sunglasses and phone are stolen from the gym locker. What if the worst happens and your rental has a major fire or flood? With renters insurance, you could be covered for this and more.

What does renters insurance cover?

A renters insurance policy is intended to keep you financially intact in case the unexpected happens. To do this, your policy is made up of a bunch of different coverages. But, knowing what’s covered can be confusing. Here’s a breakdown of the standard coverages you most often find in a renters insurance policy, plus those that are optional. Just remember to check with your insurer to know exactly how you’re covered.

Events that are covered by renters insurance

Your policy covers you for damage caused by specific events – these are called perils. Most policies offer coverage for these common perils:

  • Aircraft or Vehicle impact
  • Electrical current
  • Explosion
  • Falling objects
  • Fire or Lightning
  • Riot, Vandalism, Theft, or Malicious acts
  • Smoke (excludes fireplaces)
  • Wind and hail
  • Water damage (must be sudden and accidental)

Did you know? Fire was the most expensive claim in 2021, averaging over $56,000.3 It’s good to know you’re covered with fire insurance.

Standard renters insurance coverages

In the event of loss or damage caused by one of the perils above, these are the ways that a standard renters policy can cover you:

  • Liability Insurance
    Protect yourself and the people in your rental (family or roommates) in case you’re sued, with renters liability insurance. You could be covered if someone gets hurt while visiting or for damage you may unintentionally cause.

Did you know? Approximately 40% of renters own a cat or dog.4 Your renters insurance could offer some coverage related to pet liability as well as damage to other people’s property. Plus, if you buy pet insurance it could help cover up to 80% of your pet’s vet bill in case of accident or illness.

  • Personal Belongings
    This protects property you own that you could pack in a bag or put in a moving truck. It’s often called contents insurance for renters. Things like your clothing, electronics, furniture, etc. are covered while they’re on your property or temporarily removed (like when you’re travelling to work – or out of the country).

Wondering how much coverage you need? To make sure you have the best contents insurance, take an inventory of your belongings to estimate the total value. This will help you decide on the contents limit for your policy. Include everything from your TV to your sock drawer. If you have higher value items, like expensive jewellery or collectibles, schedule these items separately to your policy. This is also a good time to document proof of ownership which will make any future claims a lot easier.

Did you know? In 2021, theft was the second most common renters insurance claim.5 Rest easy knowing your contents insurance has you covered.

  • Extra Expenses
    In case something happens and you can’t live in your rental – you’re covered while your unit is being repaired. Often you can choose to stay in a hotel or even with friends and family – your costs are reimbursed either way.
  • Unit Improvements
    You’re covered for the cost of any damage to improvements you’ve made to your rental unit to make it your own. This could be built-in closet organizers or unique light fixtures.
  • Identity Theft
    This covers your and anyone else on your policy in case your identity is stolen. We’ll reimburse you for the legal fees as well as certain other costs that could happen, up to a limit. These could include lost wages if you take time off work to sort it out, and payment for services that help you get back to where you need to be.

Additional renters insurance coverages

For renters, there are optional coverages you should consider adding to your policy to make sure you’re fully covered:

  • Sewer Backup
    This coverage can help in some smelly situations. If water backs up or escapes into your rental unit through a sewer, sump, septic tank, or floor drain, this will cover you for the damage caused.

Tip: Most people think you only need sewer backup coverage if you rent a basement apartment. But, even if you live in a high-rise apartment, pipes can still clog and overflow.

  • Overland Water
    Most people refer to this as flood insurance. It covers you for damage to your stuff caused by fresh water, such as excessive rain, spring run-off and melting snow coming in a ground level through windows and doors. Even if you live on a higher floor, if you need to relocate because the lower part of your building is badly damaged, overland water coverage will help with those additional living expenses.

Did you know? Water-related claims are one of the most common among renters – accounting for almost 40% of rental insurance claims in 2021.6

What doesn’t renters insurance cover?

Now that you know what renters insurance covers, it’s important to also know what it doesn’t. This may be common sense, but wear and tear on your belongings isn’t covered by your renters insurance. Have a bug problem in your rental? Unfortunately, damage caused to your belongings by skunks, racoons, birds, vermin, rodents, bats, or insects is also not covered by your insurance. Similarly, damage caused by mould is also excluded. Instead, these types of issues can be avoided through proper care and maintenance by both you and your landlord.

There are also some types of rentals that aren’t covered. For example, if you’re considering listing your rental apartment on home-sharing services like Airbnb, this is typically not covered by your policy. At the cottage and looking to rent a boat or jet ski for the weekend? This also wouldn’t be covered by standard renters insurance. Instead, insurance for this would likely be provided through the rental place. Auto renters insurance for cars, U-Hauls or moving trucks is also different. Lastly, if you’re a business owner renting a commercial space, you’ll need business insurance.

If in doubt, it’s always best to check with your insurer to make sure you’re covered.

How much does renters insurance cost?

Calculating the cost of renters insurance is based on a risk assessment of the information about you and your rental. An insurer will consider factors like the location and type of property you’re renting combined with personal details like your claims history and how much coverage you’ll need to determine how risky you are. The general rule is the riskier you are, the higher your premium will be.

Because renter’s insurance isn’t mandatory, the premiums aren’t regulated by the government. This means, each insurer can set different rules for how they weight each risk factor. Which is why you’ll see different prices when shopping around. But for most Canadians, the average cost of renters insurance is just $30 per month or about $360 per year.7

Wondering if renters insurance is worth it? The average cost of a renters insurance claim in 2021 was $5851.8 It would take roughly 16 years of monthly insurance payments to cover that!

How to save on renters insurance

For most of us, renters insurance is an affordable way to protect everything we own and more. In fact, the average person will spend the same amount on shoes in a year! But no matter how much you spend on shoes, we have five of the best ways to make sure you’re getting the lowest rates on your renters insurance:

  • Bundle with your auto insurance.
    Having more than one policy with an insurer will most often get you a discount on both renters and auto insurance. Plus, you’ll only need to deal with one insurer.
  • Stay claims free for 5 years.
    Consider covering minor claims out-of-pocket, if you can, to keep your claims history clean. This will help save you money on premiums in the long run.

Tip: Look for first claim forgiveness when comparing insurers. With this benefit, you won’t be rated on your first claim, so it won’t impact your premium.

  • Look for group and association or professional discounts.
    Whether it’s through your employer, union, association, or university, you could be eligible for exclusive savings on renters and auto insurance.

Did you know? 41% of insured renters have a university or postgraduate degree.9 If you’re a graduate or student of a Canadian University you could be missing out on savings.

  • Review and update your coverage.
    Life changes and your insurance should too. Reviewing your policy often ensures you’re best protected and that you’re only paying for the coverage you need.

How to get renters insurance

Getting renters insurance is easy. Whether it’s your first time, you’re planning ahead, or you need same day insurance, it doesn’t have to be complicated or confusing. In just three steps, here’s how to quote and buy the best renters insurance for you.

  1. Research insurance companies
    This step will take the longest, but it’s worth it to know who will be protecting you and your stuff. Look for information on their claims process, evaluate their customer service and read customer reviews on Trustpilot.

  2. Gather the information you’ll need to quote
    This includes the address of your rental and basic information about it. You’ll need the personal details of you and any other tenants you’ll be including on the policy. It will also make things easier if you have an idea of the value of your personal belongings.

  3. Get and compare quotes
    Whether you call, use an aggregator, or quote online, our best tip is to be consistent with the information you provide and be sure you know how to properly compare each quote.

We know that the final decision often comes down to the best price for renters insurance. But it’s important that you’ve weighed all the other factors in your decision to make sure you’re getting the coverage you need from an insurer you can trust.

1 Source: Sklar Wilton, Sonnet Consumer Segmentation and Brand Growth Study, 2021
2 Source: Sklar Wilton, Sonnet Consumer Segmentation and Brand Growth Study, 2021
3 Source: Average fire claim based on Sonnet tenant insurance claims paid out in 2021.
4 Source: Sklar Wilton, Sonnet Consumer Segmentation and Brand Growth Study, 2021
5 Source: Based on Sonnet tenant insurance claims paid out in 2021.
6 Source: Based on Sonnet tenant insurance claims paid out in 2021.
7 Source: Based on average monthly policy premium for Sonnet tenant insurance polices in 2021.
8 Source: Based on Sonnet tenant insurance claims paid out in 2021.
9 Source: Sklar Wilton, Sonnet Consumer Segmentation and Brand Growth Study, 2021