Owning an investment property is a great way to generate a secondary, rental income throughout the years. That being said, being a landlord and owning rental properties comes with several risks, especially if you own multiple properties, which is why purchasing the right coverage is essential to safeguarding your investment from financial losses and the property itself.
If you own a rental property, stick around as BrokerLink gives you the ins and outs of landlord insurance below.
What will landlord insurance cover?
In general landlord insurance will cover property damage, protect landlords against legal liability, will cover damages to personal belongings, and incorporate guaranteed income insurance. Here's a breakdown of some of the different policies that are typically included in a standard landlord insurance policy:
Rental property damage coverage
This type of insurance protects against physical damage to your rental property. It will cover the cost of any required repairs or replacement expenses for structures on your property like the building itself, separate garages, and other structures.
Generally speaking, this insurance policy will cover the cost of property damage that is caused by things like fires, lightning, strong winds, hail storms, and any other covered peril that is listed in your specific policy. In some cases it will cover the cost of repairs and replacements caused by vandalism or due to theft. However, it depends on your specific insurance policy and your insurance provider.
Third-party liability coverage
Third-party liability protection safeguards landlords against legal costs and medical bills if someone is injured on the premises of the rental property. This includes legal fees and costs associated with a settlement if a liability claim is filed against them.
Furthermore, in some cases liability coverage can also cover damage caused by your property to your neighbours. For example, if a storm causes one of the trees in your yard to fall into your neighbours and cause damage, your insurance provider will typically cover the cost of repairs.
Contents coverage
Contents coverage is also another aspect of landlord insurance. This insurance policy protects your personal property as a landlord that may be used to maintain your rental properties. For example, it will cover things like your appliances, furniture, and other items you may choose to provide your tenants for them to use during their residency.
Additionally, in some cases, your landlord insurance policy may also include items you choose to store on your rental property but not within the rental unit. This could include equipment that you store in your shed or garage.
It's important to note that only the personal property belonging to the landlord on the premises of their rental properties is covered under a landlord insurance policy. Those who are renting the property from you will need to purchase insurance for themselves, commonly known as renters insurance.
Loss of rental income coverage
Loss of rental income coverage provides landlords with financial assistance for lost rental income should their rental property become unlivable due to covered perils listed in their landlord insurance.
Generally speaking, rental income policies will cover any lost rent payments during the course of any repairs that are caused by unexpected events like fires or severe storms. For specific perils listed in your landlord insurance, make sure you read your documents carefully to fully understand what is and isn't covered, as these tend to vary between each insurance company.
What is the difference between landlord insurance and tenant insurance?
At BrokerLink, we completely understand that landlord insurance and renters insurance are terms that are often used interchangeably, when in fact they refer to two different types of policies. Here's what makes them different:
Landlord insurance
This insurance policy protects the property owner from personal liability in the event liability claims are filed against them claiming third-party injuries or damages and the residential property itself and its contents should they suffer any damage.
Renters insurance
On the other hand, renter's insurance provides protection to the tenants belongings, liability protection, and more, depending on the type of insurance that is purchased.
Is landlord insurance mandatory in Ontario?
No, you do not legally need landlord insurance if you own an investment property that is rented out to other people. However, accidents happen and landlord insurance covers you against damage to your property, lost rental income, damage to your personal property, and offers personal liability protection against third-party claims.
Without this type or rental property insurance, you can put yourself and your investment in serious financial risk. It's also important to note that should you apply for a mortgage with mortgage lenders in Ontario for the purpose of owning and operating a rental property, you may be required to purchase rental insurance with an insurance company as a condition of being approved for said mortgage.
How much does landlord insurance cost in Ontario?
How much your insurance as a landlord will cost in Ontario really depends on your unique circumstances and property. Like any type of insurance, there are several factors that an insurance provider will take into account before calculating your premium, including the following:
Where your rental is located
Rental properties that are located in city areas or regions with higher crime rates may have higher premiums compared to those that are located in more rural areas where there is a lower rate.
The condition of your rental
Larger properties and those that are deemed to be in poor condition may cost more to insure than newer properties that don't have as many structural challenges to them.
How much coverage you want
If you choose to have higher coverage limits and additional coverage options, you can expect to pay more on your insurance premium for the additional protection purchased, sort of like how auto insurance works.
The type of rental you have
Short term rentals may have higher premiums compared to those rented for tenants who want to stay long-term.
Insurance provider
Different insurers may offer different rates and weigh each variable differently than others, which is why working with a broker can be helpful in helping you find the most comprehensive insurance policy for the most affordable price.
What is liability insurance in Ontario for rental property?
Liability insurance is a type of policy purchased by property owners who want to rent out their units in apartment buildings, parts of their home, or an entire property to renters.
This coverage protects landlords from financial losses, in the event that they are held legally responsible for third-party injuries or damages that occur on or in the rental property.
For example, if a tenant or someone who is visiting the property is injured by slipping on black ice on your front walkway, liability insurance will cover medical expenses, any legal costs, and any settlement funds, should a claim be filed against you.
On the other hand, if you are found responsible for causing damage to your tenant's property, this insurance will also cover the cost of repairs or replacements, regardless of whether you are found liable or not.
Ultimately, liability policies are meant to provide landlords with peace of mind knowing that their investment and personal finances are protected against unanticipated risks that come along with owning and renting out their home to others.
Is my home insurance policy different from my landlord insurance policy?
Again, homeowners insurance and landlord insurance are two terms that can often get mixed up by individuals. Here is how your homeowner's policy is different from a landlord insurance policy:
Homeowners insurance
A home insurance policy is designed to protect owner occupied homes. This type of policy protects the homeowner's personal items and offers liability protection if someone is injured on the property.
It also covers the cost of living elsewhere if your home becomes unlivable due to a covered risk that is listed in your policy, such as natural disasters that are out of your control. For example, a municipal plumbing backup in your basement that causes water damage.
landlord insurance
In contrast, rental property insurance differs from homeowners insurance as it provides landlords protection against the associated risks involved with owning and renting out their property to tenants. Again, this covers damage to property, personal belongings, rental income loss, and liability arising from a third-party claim.
Do your tenants need their own insurance?
Tenant insurance is not mandatory in Ontario. However, as a landlord, you have the right to put in your lease agreement that renters must purchase tenant insurance in order to occupy your residence. Ultimately, both types of insurance policies are meant to protect the interests of both parties involved, should something occur to them or their personal property.
Can landlords be forced to get rental insurance for their property in Ontario?
No, you as a landlord will not be legally forced to purchase insurance for your rental property. That being said, it's highly recommended that you purchase some sort of policy, given the unique risks associated with letting tenants live on your property.
Without landlord insurance, you can put yourself at risk of serious financial losses. But, by having an insurance policy tailored to your unique needs, you can have peace of mind knowing that your investment and personal interests are protected. Like any other type of insurance, it's better to be safe rather than sorry in the end.
What is not covered by landlord's insurance?
Remember, not all risks are automatically included in a basic insurance policy, which is why it's important that you know the individual exclusions of your own. While all policies are different, here are some common risks that you will need to specifically ask your provider to add to your insurance coverage:
- Wear and tear throughout your property or any problems that arise with the equipment you allow your renter's to use. For example, the dishwasher or washing machine.
- Problems with indoor plumbing or frozen pipes caused by inadequate insulation in your home.
- Unforeseen natural disasters like an earthquake, tornado, or other weather-related phenomenons.
- Damage that is caused by pests and vermin.
- Damage caused by hail, overland flooding, and sewage backup.
- Wrongful eviction suits.
- Uninhabitable living conditions due to your negligence as a landlord.
For specifics on your policy, make sure to ask your provider.
Does landlord insurance cover damage caused by renters?
Yes, landlord insurance can cover damage caused by renters, but whether this additional coverage is included in your policy, depends on the insurance company you choose to work with. Landlord insurance provides compensation to landlords in the event their property suffered accidental damage. For example, a hole in the wall or a broken door.
That being said, many basic policies tend to exclude intentional damage that is done by your tenants, which is why it's important that you understand what is and isn't covered in your particular policy, so you can go about purchasing extra protection if needed.
Furthermore, normal wear and tear throughout the property, such as peeling paint or deteriorating carpet is not typically covered by landlord insurance. These instances are considered as part of the landlord's responsibility to maintain as the owner of the property.
For customized landlord insurance policies, contact BrokerLink today!
Need landlord insurance for your rental property? No problem, the broker team from BrokerLink has got you covered.
Navigating the landlord insurance industry can be challenging. But, with the help of BrokerLink, you'll have access to some of Canada's top insurance providers by working with a team of experienced brokers who have your best interests in mind.
To speak with an insurance broker directly about what insurance coverage you need, feel free to give us a call directly. Alternatively, you can get a personalized and competitive insurance quote from the comfort of your home by filling out our online quote tool.
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