Car owners know they need car insurance, but a lot of renters don’t bother with tenant insurance. In fact, the Insurance Bureau of Canada reports that about half of all tenants don’t have insurance to cover contents and liability.
Tenant insurance typically isn’t high on most people’s list of priorities — and, after all, you’re not legally required to have it. But that decision is often based on misconceptions, from underestimating how much it costs to replace your belongings to not understanding your legal liability as a tenant.
Here are some of the most common misconceptions about tenant insurance — and how knowing the truth could save you thousands of dollars.
Myth 1: I’m covered by my landlord’s policy.
Reality: This is, perhaps, the most commonly held misconception about tenant insurance. “Most folks who are renting a space — whether an apartment, condo or house — have a false belief that the owner of the property is going to take care of them if something should happen to the building they occupy,” says Julie Skelton, VP Personal Lines with HUB International Insurance Brokers, who has worked with Wawanesa as a broker for more than 30 years.
But your landlord’s policy covers damage to the building — not tenants’ personal possessions. If you’re properly insured, you’re covered. However, if you’re uninsured, those costs come out of your own pocket.
Myth 2: I don’t need tenant insurance because I don’t have much stuff.
Reality: Most people don’t realize the value of the things they actually own. Clothing, electronics, furniture, dishes, sheets, towels, bikes, skis, sporting equipment…the cost of replacing this list will be much larger than you think. And once you start tallying the costs to buy it new, the numbers add up quickly.
“A lot of people don’t think about what it looks like to lose everything — your jeans, your kids’ toys. There’s a misconception of the cost to replace those items. Tenant policies typically cost only a few hundred dollars per year. When you compare that to the tens of thousands it takes to replace your contents, it really does provide great value,” says Skelton.
Myth 3: I already have basic coverage. I don’t need to pay a premium.
Reality: Some tenants do have insurance — the cheapest they can find online. But even if you have coverage, do you have enough?
You probably don’t have an itemized list of everything you own (and, let’s face it, you probably won’t start keeping an itemized list just because you’ve read this blog). But a broker can provide resources to help you calculate the value of your possessions and figure out how much money you’d need to replace or repair everything.
If $10,000 sounds like a lot of money, consider how much you pay for a pair of jeans and how many pairs of jeans you currently own. That $10,000 won’t last long if you were to lose everything in a fire.
Myth 4: I’m just a renter. Damage to the unit isn’t my responsibility.
Reality: Another common misconception is that, as a renter, you’re not responsible for any damage to the unit or unintentional harm to someone who visits your home. After all, you’re not the owner, right?
“If you were to accidentally cause major damage to your unit, you do have a responsibility to the landlord, and damage deposits are not designed for that,” says Skelton.
Consider this scenario: If you left the water running in your unit, which caused flooding in your unit and the ones below, you may be responsible for covering the damages — not the building owner. And the building owner and other tenants may be well within their right to pursue legal action.
Myth 5: If I’m forced to move out temporarily, my landlord will reimburse me.
Reality: Contents insurance will cover the cost of replacing or repairing possessions lost or destroyed by a fire, smoke, flood, windstorm, water damage, vandalism or theft. But if you have to move out temporarily while your unit is being repaired — say, due to a water leak or fire — your landlord isn’t responsible for covering the additional cost that comes with spending potentially months in a hotel or fully furnished apartment. Instead, you might be reliant on family, friends, a GoFundMe site or charitable donations.
Your tenant insurance should provide enough to cover additional living expenses, including the cost of a temporary location.
Myth 6: It’s not going to happen to me. And if it does, I’ll stay with family and friends.
Reality: No one thinks it’s going to happen to them — until it does. But if you lost everything in a fire, you’d be temporarily homeless.
Where would you go? What if your friends and family also had to evacuate? Could you afford to live in a hotel or a temporary furnished rental suite for several months? How would that affect your ability to work? Your kids? Your dog?
Thinking about it from a personal perspective can make you realize how vitally important it is that your insurance provides additional living expense (ALE) coverage if you’re displaced. That coverage needs to be enough to cover a long-term stay outside of your home, and there are other factors that can go into determining the right amount. Ensure you talk with your broker about how much you will need to live somewhere else.
After dispelling all these common myths, it’s fair to say that every renter should have tenant insurance, but not all tenant insurance is created equal. That’s why taking the time to meet with a broker to customize the right policy for your needs is time well spent — so if the worst-case scenario does happen, they’ve got your back.