Is renter insurance worth it?

Moving out of your parent's home for the first time is an exciting milestone for young Canadians and a massive financial responsibility. If you're trying to navigate the world of renting, it's likely you're wondering, what renters insurance is and if it's worth purchasing in the first place.

Crafting your first budget in advance of your highly anticipated move-out-date can be daunting, but with the help of KOHO you'll get a better sense of whether you need to make room in yours, for a renters insurance policy.

What does renters insurance cover?

With a standard tenant insurance plan, you can expect the following coverage:

Personal property coverage

If a kitchen fire rips through your unit and destroys most of your personal items, you can be left with a hefty out of pocket replacement bill, especially if you have valuable items in your possession. Personal property coverage helps you protect your belongings in the event your personal items are damaged, vandalized, or stolen from your rental unit by covering any repairs or replacements of said items.

Personal liability coverage

Renters insurance protects you from personal liability as well. For example, if your friends or family accidentally injure themselves while on your rental property, you could be found legally responsible for their injuries, in the event they file a lawsuit against you. With personal liability coverage, you'll be covered up to your coverage limits for medical bills, legal fees, and other costs that incur.

Additional living expenses

If your rental unit becomes uninhabitable due to flooding, fire damage, or another cause, you'll likely need to find another place to live until your unit is safe to move back in. With the cost of temporary living expenses being high, without a renter's insurance policy, you could face a substantial hit to your own savings, as you'll need to pay out of pocket.

However, with the additional living expenses portion of your tenant insurance, you can have peace of mind knowing that costs for temporary housing, meals, and other expenses are fully covered up to your coverage amount.

What is not covered by renters insurance policies?

The different types of insurance policies within the umbrella of renters insurance offers invaluable protection to policyholders. That said, there are some limitations and exclusions you should be aware of, which may require you to buy a separate policy. Common exclusions found in standard renters insurance include water damage, earthquakes, and other damage from natural disasters. Intentional property damage to the physical structure of your rental unit will also not be covered.

Most insurance companies are different--we recommend asking your insurance agent about the specifics of your individual tenant insurance coverage, so you can have a better idea about whether your policy needs to be adjusted depending on your unique needs.

Don't forget to shop around and get multiple renters insurance quotes to find coverage for the best value!

The benefits of having a renters insurance policy

Now, the reason why you're here--is renters insurance worth it? Let's dive into some of the many benefits you can experience when purchasing renters insurance:

An affordable price compared to potential out of pocket expenses

If you were to tally up the cost of your personal belongings, you could be looking at thousands of dollars in items that could one day be damaged or lost due to a theft or other unexpected accident in your rental home.

Compared to having to pay out of pocket for repairs, replacements, and any other unpredictable expenses, renters insurance is an affordable investment that will pay itself off in the long run. With available discounts for customers, renters insurance is invaluable and a smart financial move.

It can cover expenses related to liability costs

Legal proceedings for unpredictable accidents and property damage is the worst case scenario. By having a renters insurance policy in place, you'll be protected against liability claims that could lead to expensive legal costs in the future.

Renters insurance provides peace of mind

Renters insurance provides peace of mind, and to us, that's the best value overall. Canadians who rent face unique risks, but with a renters insurance policy, you can rest assured knowing that you have coverage against unforeseen perils outside of your control.

Your landlord's insurance does not protect you

Contrary to popular belief, your landlord's insurance doesn't extend to you or your personal property as a renter. Typically landlord insurance is a type of property insurance that covers the actual structure of the property that is rented, any contents they own on the property (like appliances), liabilities that can arise from owning and operating the rental, and any lost rental income. To ensure that you're protected, you'll need to purchase your own renters insurance.

The drawbacks of renters insurance

Like all insurance, renters insurance is an added cost to your monthly bill for events that are likely never going to occur. That being said, anything can happen, and when it comes to your personal property, finances, and interests, it's always better to be safe than sorry.

How much does renters insurance cost?

So, how is homeowners insurance calculated? Given that all renters are different, if you're in the market for a renters insurance policy, we recommend reaching out to different insurance companies to get a customized quote.

Companies use factors like where your rental property is located, the total value of your belongings, the coverage amounts you want, and more to determine premiums. In other words, how much renters insurance you want will reflect how much you end up paying in the end.

Do you legally require renters insurance?

Now, you're also likely wondering, "is home insurance a legal requirement in Canada?" Like renters insurance, you aren't legally required to purchase this type of coverage. That being said, your landlord may require you to have renters insurance as a part of your rental terms.

Remember, landlord insurance does not extend to renters and is only meant to provide coverage for their investment in the property.

Regardless of whether or not it's legally required in Canada, renters insurance is something you need to consider before moving out on your own and factor into your plans for spending and saving.

How can I get renters insurance?

Similar to how you purchase other types of insurance coverage, if you're looking for renters insurance you have a couple of options. The first, is to reach out directly to different Canadian insurance companies and speak with an agent. They'll be able to take your individual circumstances into account and provide you a personalized quote for coverage.

Alternatively, you can work with an insurance broker. Unlike agents, insurance brokers do not work for a specific insurance provider. Rather, they work independently.

So, what does this mean for you?

Essentially, brokers work on your behalf and have access to several policies from different companies. This means that they're able to shop around for different quotes, discounts, and policies on your behalf, which can help you get a better deal on your insurance in the end.

And because insurance brokers aren't tied to a specific company, you have more peace of mind knowing you're getting unbiased recommendations when choosing between policies.

Does paying rent build your credit score?

Maintaining a healthy credit score is crucial, especially if you want to own a home in the future. And yes, paying your rent on time and being an overall responsible tenant can help you build your credit score. That said, the only way your rental payments can impact your credit score is if your landlord reports this information to the Landlord Credit Bureau.

If you're unsure whether your current landlord is doing so, we recommend speaking with them directly for more information. In the meantime, you can get a free credit score and build your credit with KOHO with our virtual credit card products!

Your new landlord will likely conduct a credit report when deciding whether to accept you as a tenant. Make sure you're prepared to demonstrate you're financially responsible with a credit score you can be proud of.

Purchase affordable renters insurance with KOHO

Renting a property comes with certain risks. Make sure you're prepared for the unthinkable by opening a high-interest savings account and setting up your financial future with KOHO. With this account, you can earn interest with competitive rates to cover your monthly insurance and rent.

You can also improve your credit score and purchase overdraft protection coverage as an additional layer of protection.