As a renter, you’re not necessarily required to have tenants insurance, although some landlords do require it. Even if it’s not obligatory, being insured is something that you should consider.
“Is it really worth having an extra expense every month? When you consider the financial hardship that could be in store for you if one of the possible scenarios actually plays out and you sustain damage in your home or you cause damage for a neighbour or to the building itself, an insurance premium is far more affordable, than paying out of pocket,” says Jeff Schwartz executive director at Consolidated Credit Counseling Services of Canada.
“Having insurance is part of a financial strategy to help keep your household afloat when you encounter expenses that you haven’t budgeted for. It goes hand in hand with keeping your debt load low and having cash savings on hand. At the very least, take some time to learn about tenants insurance and what’s at stake if you’re not covered,” says Schwartz.
Here are some reasons you need tenants insurance:
It’s not just about your “stuff”
There is a common misperception that tenants insurance is only about covering your belongings. It may not seem worthwhile to take out tenants insurance if you don’t have a lot of items or if they aren’t worth a lot of money. But in actual fact, tenant’s insurance covers you against far more than the value of your belongings, should they get damaged or stolen. The real issue is your own liability as a tenant. And liability can come with a huge price tag.
Did you know that as a tenant, you can actually be held financially responsible for damage to the rest of the building (common areas and other units) or other tenants if the issue originates in your unit?
Say if you left your sink running and flooded other apartments or left the iron plugged in and started a fire that spread to other units, you could be liable to pay for repairs and other damages. You are also vulnerable to getting sued, all of which could add up to huge amounts of money. How would you pay for that?
What is covered under tenants insurance?
Insurance policies vary depending on provider and in some cases based on where you live. But generally speaking, tenant insurance policies cover: contents insurance (i.e. the value of what it costs to repair or replace your belongings), as well as costs (with some limitation) that you would incur living off premises while your home is repaired after damage. It also covers repairs, should damage spread to the rest of the building as a result of your unintentional actions.
And what could be most costly- tenant insurance covers a good chunk of liability. According to the Insurance Bureau of Canada, the typical tenant insurance policy covers up to $1million in damages in the event that someone sues you. It also generally covers the cost of your defense in a lawsuit.
What impacts premiums?
Like with other types of insurance, your premiums can vary depending on a number of factors. Where you live and what type of material your rental unit is made from have influence (some materials are more vulnerable to damage than others). You can also choose how much coverage you want and what kind of deductible you’d like.
It is worth shopping around to find premiums and coverage options that fit in your budget. Ask for discounts too. You might be eligible for a discount through your employer, an association that you belong to or through your school.