Landlord Insurance in Canada
What You Should Know
- Standard home insurance generally doesn’t protect landlords if they don’t live on the property; therefore, they must obtain landlord insurance.
- Landlord insurance covers costs arising from damage to property, loss of rental income due to a covered event, and liabilities such as injury to a third party.
- Tenants can also receive renters insurance to protect themselves from liability and in the event of damage to their personal property.
- Although there is no law requiring property insurance, most mortgage lenders require it.
Landlord insurance or rental property insurance is one of the many types of insurance policies offered by major insurance companies in Canada. Owning a rental property comes with its own set of risks, and landlord insurance can help mitigate them. This type of insurance can protect you in the unfortunate event that your property suffers damage. It will also aid with income if your renters cannot occupy the rented property while repairs are completed. Learn about what landlord insurance covers and the various options available in Canada.
Landlord Insurance Providers in Canada
If you are a landlord looking to buy rental insurance for your property, you can contact one of the insurance providers or brokers listed below. Insurance providers may require you to apply through their agents.
| Insurance Provider/Broker | Provinces & Territories | Google/Trustpilot Rating |
|---|---|---|
Zensurance(Broker) | ON, BC, AB, SK, MB, NS, NB, NL, PE | 4.8/5 |
| ON, BC, QC, AB, SK, MB | 4.8/5 | |
| Across Canada | 3.8/5 | |
| ON, BC, QC, AB, NS, NB, PE | 4.3/5 | |
| ON, QC, AB, NB, NS | 4.6/5 |
What is Landlord Insurance
Landlord insurance can protect you against financial losses at your rental property and can typically be customized to suit your unique requirements. It usually covers
- the building,
- contents that you own on the premises,
- liability connected to the ownership of the property, and
- loss of rental income.
Landlord insurance differs from standard home insurance because home insurance is designed with the expectation that you’ll be living in the dwelling. In most cases, the landlord won't be protected to the same extent if they don't live in the property. This is why landlords must research coverage options available to them.
Is Landlord Insurance Mandatory?
Although there is no legal requirement for landlord insurance, mortgage lenders often demand it. Even without a mortgage, it's a good idea to protect a source of income.
How Much Is Landlord Insurance?
Landlord insurance typically costs about 15-20% more than regular home insurance. On average, you can expect to pay between $40-$80 per month for basic insurance. Condo landlord insurance can be significantly cheaper than landlord insurance for a house. There are many factors that affect insurance costs such as such as:
- Property size,
- Type of property
- Age of property
- Risk of natural disasters or crime (can increase insurance cost)
- Installed safety features (can reduce insurance cost)
If you add additional coverage, such as flood insurance or rent non-payment, you may end up spending more. Landlords can expect to spend $1,000 - $1,500 a year on insurance.
What Does Landlord Insurance Cover?
Landlord insurance includes a standard component and can include additional coverage.
Standard Landlord Insurance Coverages
The standard insurance covers the very basics of landlord insurance, and you can expect most policies to cover more or less the same items. Standard insurance typically costs between $40 - $80 per month.
1. Property Coverage
This component of your insurance covers damage to the rented property, as well as any attached structures, such as a garage or shed.
Depending on the policy selected, the coverage can apply to specific perils (named risks) or all perils (anything that damages or destroys the property). The perils could include events such as fire, wind, lightning, theft, vandalism, falling objects, etc.
2. Landlord's Belongings
This protects the landlord's valuables and equipment. For example, it can cover significant appliances from damage caused by insured hazards such as lightning. It's important to understand that landlord insurance typically does not cover the tenant's belongings.
3. Liability Coverage
Landlord liability insurance protects landlords from liability for harm or injury to another person or their property. Liability coverage, for example, would cover legal fees and hospital bills if someone slipped and fell in the home due to a broken stair.
4. Loss of Rental Income
This component of the policy activates when damages force the tenant to move out. If the rental unit is uninhabitable, landlords can't charge their tenants rent. This coverage will pay the landlord fair rental value for the reasonable time required to complete the insured repairs. This coverage is great for landlords who rely on rental payments each month.
It is worth noting that this policy will only reimburse the landlord for their property’s "fair market rent." This means the landlord may not receive the same amount of rent the tenant was paying. Additionally, it only covers the amount of time required to make the repairs. For example, imagine the damages caused the landlord to make six months of rehabilitation and spend another three months finding a new tenant. The insurance coverage would only protect the landlord for those first six months.
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Additional Landlord Insurance Coverage
1. Enhanced Water Damage
The standard insurance only covers water damage directly attributed to flooding. It does not cover water damage resulting from a sewer backup or heavy rainfall (unless it causes a flood). For additional coverage, landlords may consider including the following policies in addition to their plan:
Sewer backup: If water enters the rental property through a sewer, sump, sewage system, or floor drain and causes damage, this policy will cover you. On average, it could cost an extra $150 - $300 per year.
Overland water coverage: This policy covers structural damage caused by freshwater, such as heavy rain, spring runoff, and melting snow, which enters through windows and doors at ground level. On average, this policy costs an additional $100 - $400 per year, which can be reduced by bundling with sewer backup.
2. Earthquake Insurance
This isn't necessary for most landlords. However, if the property is in a high earthquake-risk area, it might be a good idea to get additional insurance. Premiums can vary significantly based on the earthquake risk, with a deductible typically between 2% and 20% of damages.
3. Extended Equipment Insurance
Standard insurance protects high-ticket items up to a certain amount. Landlords may consider this policy if they have expensive objects that cost more than what an insurer classifies as "normal." For example, landlords who keep expensive gardening or snow removal equipment on the rental property may want to protect them. The prices for this plan vary on a case-by-case basis depending on what you want to insure.
4. Short-Term Rental / AirBnB Coverage
Although Airbnb and similar platforms offer some protection to hosts, it is often not enough. Meanwhile, standard landlord insurance policies may not cover short-term rentals as they are deemed risky. Understanding the gaps in coverage is essential to determining if additional protection is required.
Insurance providers are increasingly developing policies to provide additional protection that could cover loss of rental income, increase liability protection, and even cover guests' property. In general, these policies cost an additional $20 - $50 per month. It is worth noting that some of these policies require a bundle with general property coverage, so a landlord would need to switch their core insurance provider.
5. Non-payment of Rent
This protects landlords against tenants who decide not to pay rent. When a tenant does not pay rent, the landlord has to go through a lengthy eviction process that includes many fees. In this circumstance, the insurance would reimburse the landlord for a certain period. However, insurance providers will analyze the tenant's job and debt ratios before deciding to insure them.
Rent guarantee insurance may be expensive, costing 5 - 7% of the yearly rent payments. Some landlords may decide to avoid this insurance if they believe analyzing a tenant's credit score with other factors will decrease the likelihood of default. However, events such as a recession or divorce could restrict the tenant from making payments.
Renters Insurance
Although not mandatory, many landlords now require tenants to obtain renters insurance (also known as tenant insurance) as part of the lease agreement. This is a smart move for both the landlord and tenant because it decreases the possibility of conflict between the two parties. In general, renters insurance costs between $12 - $20 on average per month. The insurance typically covers:
- Tenant's Belongings
- Third-party Liability
- Additional Living Expenses
Frequently Asked Questions
How are landlord insurance fees calculated?
The cost of landlord insurance is determined by several factors, including the type of property you're renting out and your personal information. Insurers will consider the amount of coverage you have, the structure type, the property's location, and your prior claims history.
Does homeowners insurance cover a rental property?
You'll need landlord insurance if you're renting out a separate property from your primary residence.
However, things may not be straightforward if you rent out the basement, bedroom, or separate unit within your primary residence. It is best to talk with your home insurance provider to see if you are protected in these circumstances.
Does landlord insurance cover tenants?
Landlord insurance does not cover tenants' belongings. Renters must purchase their own policy to protect their clothing, furnishings, and other possessions in the event of a loss.
Does tenant insurance cover damage to the landlord's property?
Tenant insurance typically does not cover the landlord’s property, and the landlord should ideally get landlord insurance for it.
Is landlord insurance expensive?
Landlord insurance is generally inexpensive, with many packages costing less than $100 per month. If you have multiple properties, you can purchase a bundle deal which further reduces the cost.
Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
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- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.