An essential section within the umbrella of tenant insurance coverage is personal liability coverage. While you may be familiar with liability insurance from your auto insurance, you may be wondering how this policy is incorporated into renters insurance protection.
Whether you already have your own insurance or thinking about if you should get insurance early before moving out on your own, understanding what liability entails and why renter's insurance can make a world of a difference when it comes to protecting your individual interests and finances.
To learn more about liability insurance for tenants in Canada, take a look through our detailed guide below as we go over the ins and outs of everything you need to know before purchasing your own renters insurance policy.
What is personal liability coverage for renters insurance?
The liability portion of your tenant insurance can be broken down into two separate sections: bodily injury or property.
Bodily injury
Imagine a scenario where you and your friends are having a gathering in your rental unit. As the night goes on, one of your guests goes to leave and, on the way down your exterior steps, trips and falls onto the pavement. Because they've hit their head, an ambulance has been called, and they've been taken to the hospital, where they learn they have a concussion and a broken arm.
While unintentional bodily injury has occurred, you can still be found legally responsible for those injuries. And if a lawsuit is filed against you, you'll need to pay for any medical bills, legal expenses, and other additional costs that arise from this claim. Without tenant insurance, these expenses will need to be paid out of pocket, which can significantly impact your finances.
Now, imagine the same scenario where you do in fact, have a tenant insurance policy in place. Instead of having to pay for any of these costs out of pocket, your personal liability will cover expenses that may arise from a claim, including lawyer fees, medical bills, and any settlements.
Like other forms of liability protection, you'll be able to choose your policy limits to determine how much coverage you'll have in the event any liability claims are filed against you.
Damage to someone else's property
Moving onto the property damage aspect of your personal liability insurance, if you were to cause unintentional damage to another person's personal property in your rental apartment that resulted in damages or losses, your insurance will cover the repair or replacement cost of the item(s).
For example, if you accidentally leave a candle on and start a fire that tears through your rental unit and your neighbours, causing thousands of dollars in repairs, your personal liability insurance will kick into effect and cover damages related to the property loss, providing you with financial protection.
Are there any limitations to tenant liability insurance?
It's important to mention that personal liability protection does have some limitations in terms of coverage. The first is the term "unintentional." In order to have coverage under this policy, any damage or injuries caused to a third party must be found unintentional by your insurance company.
For example, if you intentionally cause an injury to someone or damage their property in retaliation to an ongoing conflict, you cannot expect your insurance provider to reimburse you for any costs incurred.
Additionally, you will only receive renters insurance coverage up to your policy limits. For example, following a liability claim, the cost of all incurred expenses comes out to $1.2 million, but you only have coverage up to $1 million. In this case, the remaining $200,000 would be yours to pay out of pocket for these extra costs.
Therefore, when purchasing your tenant insurance policy, you'll want to make sure that you choose a limit high enough that sufficiently protects your interests in the event a claim is filed.
What else is included in tenant insurance coverage?
If you're currently wondering, "Do I need tenant insurance in Canada?" and aren't sure whether it fits into your plans for spending and saving as you're crafting your first budget, it's important to mention that a tenant insurance policy also offers other protections to policyholders:
Contents insurance
The contents or personal belongings portion of your tenants insurance provides coverage to all personal belongings stored within your rental home against specific perils. Whether it be smoke and fire damage, vandalism, theft, or other insured damage listed in your policy documents, you can rest assured knowing your personal property is protected in the event of a covered claim.
Additional living expenses
Now, let's say that damage happens to the physical structure of your rental home that renders the property uninhabitable. Until the home is restored or you find another rental. During this time, you'll likely need to find accommodations, eat out, and rack up other living expenses. Without tenant insurance, you'll be responsible for paying for any living expenses acquired throughout this already stressful period, yourself.
But, with tenant insurance, your additional living expenses would be reimbursed, saving you the added headache during this limbo period.
How much does tenant legal liability insurance cost?
When calculating expenses, it's only natural to wonder, "how is homeowner's insurance calculated?" Like any of the types of insurance, there are numerous factors that insurance providers take into consideration when calculating premiums. Common factors you need to be aware of include:
The value of your belongings
To ensure you're sufficiently reimbursed for any personal property damage that occurs to your items, insurance companies will have you estimate the value of all your belongings combined. High-ticket items are more costly to replace. So, you can expect your renters insurance premium to be more expensive if you own luxury clothing, artwork, numerous electronic devices, and other high-value personal belongings.
Your claims history
If you have a history of tenant insurance claims, insurance companies may view you as more of a risk to insure, which could lead to you having to pay a higher premium than other renters with no history of claims on their file.
Your credit score
Not all companies take into account your credit score. But a lot of them do. It goes without saying that the higher your credit score is, the more favourable you'll appear to insurance companies, as it can give them a good idea about whether or not you're going to pay your tenant insurance bill.
If improving your credit is something you're interested in, get a free credit score reading online before learning how to build your credit with KOHO by getting approved for a virtual credit card that you can use to pay your tenant insurance.
As an added security blanket, you may also find it helpful to secure credit card protection insurance in the event you aren't able to make your credit payment to prevent any penalties on your overall score.
Whether you purchase additional coverage
While tenant insurance covers an array of risks, not all perils are included in basic coverage options. For example, if you wanted to have an insurance policy for sewer backup, identity theft, and water damage, you would need to purchase separate policies on top of your standard renter's insurance for this additional protection, which, of course, is going to cost you more.
Where you live
Where the rental is located is also an important factor, given that certain locations pose greater hazards than others. For instance, if you live in a busy metropolis with a high crime rate, your premium may be more expensive than if you were living in an area with little to no crime. Similarly, living in an area where natural disasters like forest fires and flooding will also influence how much you pay for tenant insurance in the end.
Does renters insurance cover damage to landlord's property?
Does tenant insurance cover any damage to your landlord's property? The answer is no. Similar to how your landlord's coverage does not extend to you as a renter. In most cases, your landlord will have their own insurance coverage, given that renting your home to a third party comes with its own set of risks.
Therefore, if you experience sewer back up in your unit that damages the walls and flooring, your landlord's insurance will pay for the repairs whereas any damage to your personal belongings during the flooding of your rental, will be covered under your renters insurance.
Can my landlord force me to get renters insurance?
So, is home insurance a legal requirement in Canada? Is tenant insurance mandatory? The short answer is no. There is no law in Canada that says that property insurance is mandatory like how it is with auto insurance. That being said, your landlord could require you to purchase renters insurance as a condition in your lease agreement.
Remember, landlord's insurance does not extend to you as a renter. Rather, it only protects the physical rental structure, their liability interests, and their personal property within the rental unit, which is why having your own renter's insurance is a good idea.
At the end of the day, any type of property insurance is meant to protect the interests and finances of those who have an investment in a home, regardless of whether you're a landlord or tenant.
Will my previous property insurance affect my tenant insurance premium?
Yes, if you have a history of filing claims under your previous renters home insurance, you may face a higher premium from your insurance company at the time of your renewal. That being said, if you do decide to shop around with insurance brokers or on your own for a new renters insurance plan, you may be able to secure a lower rate with a different provider.
How can I save on my renters insurance policy?
We get it. Tenant insurance is another cost you need to add to your list of expenses each month. While tenant insurance in general, isn't as expensive as other types of coverage, there are still ways that you can save on your insurance that we think you'll find useful:
Obtain a tenant insurance quote online from different providers
Like we just mentioned briefly, if you're in the market for tenant insurance and want to get the best deal out there, we recommend getting a tenant insurance quote from as many different providers as possible, so you can compare coverage and costs.
You can do this by working with insurance brokers, or on your own by visiting the website of different insurance companies in Canada--the choice is up to you!
Bundle your insurance policies
Another great way to save on your coverage is by bundling your insurance with any other policies you may have. For example, if you have an auto insurance policy with a provider, you may be able to save on your new coverage by purchasing your policies from the same company.
A lot of the time, insurance companies give discounts to customers who have remained loyal to them over the years.
Ask about discounts
This brings us to our next point, which is discounts. Beyond a loyalty discount, there are other types of promotions and savings you may qualify for with an insurance company, you just have to ask! You'd be surprised to know that you're likely eligible for.
Increase your deductible
If you're able to, increasing your deductible can help you save on your coverage. The deductible is the amount you pay out of your own pocket before your insurance company will cover the rest of your claim. Just note that the higher your deductible, the more you'll be responsible for in the future. So, try to find a balance between what you can afford and what you can afford.
Think about your personal liability limit
When it comes to personal liability, it's your choice for how much insurance you want. Standard limits start at around $100,000 and can go up to $2 million. The higher your limit, the more you'll pay for your premium.
How do I file a tenant insurance claim?
In the event you need to file a tenant insurance claim, here is a general overview of what you need to do:
Don’t panic: Make sure that there is no immediate threat to your life or safety.
Call for help: Contact emergency services if required and wait for assistance.
Document evidence: In the event there is damage to your personal belongings, take as many photos and videos as possible to use as evidence in your claim.
Reach out to your provider: Call your insurance company and open a claim.
Speak with an adjuster: Once a claim is opened, you'll be connected with an adjuster who will walk you through the process. They will ask you a series of questions regarding the incident, so be prepared to speak on the phone for a while.
Waiting period: After your claim is started, the adjuster will review your evidence and the situation at hand.
Stay in contact: Remember to stay in contact with your adjuster for updates on your claim.
Get reimbursed: Once approved, you'll be reimbursed for any damages to your property.
Take note that if your claim is one related to liability, the process will look different depending on the unique situation.
Secure affordable tenant insurance policies with KOHO
Tenant insurance is available to help give renters across Canada peace of mind when it comes to damages and losses that may arise from an insurance claim. If you're interested in protecting your financial future, open a high-interest savings account with overdraft protection coverage for added security.
About the author
Grace is a communications expert with a passion for storytelling. This hobby eventually turned into a career in various roles for banks, marketing agencies, and start-ups. With expertise in the finance industry, Grace has written extensively for many financial services and fintech companies.
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