Landlord Insurance For Your Ontario Properties
Ontario landlord insurance provides rental dwelling protection for property owners who rent their premises to others. As a landlord, you want to protect your rental property with the right landlord insurance.
What Is Landlord Insurance?
Landlord insurance financially protects your rental property in the event of an insured loss or damage. The building and property are covered by landlord insurance, including certain personal belongings that the property owner may have on the premises like major appliances, detached structures, rental income and liability coverage.
Who Needs Landlord Insurance?
If you own a property and are planning to rent it to tenants, you should purchase landlord insurance to protect your asset and your financial stability.
Landlord insurance is tailored to your unique needs as the owner of a rental property. Don't let expenses come out of your own pocket for losses such as liability, property damage, or damage to your belongings. Ensure that you are fully protected before welcoming renters.
Why Should I Get Landlord Insurance?
You should get landlord insurance to protect yourself from losses and claims that can arise while renting out your property.
If you, as a landlord, were to suffer a significant loss, you could face financial ruin if you had to repair or rebuild, and pay the expenses from your own pocket. Landlord insurance is essential to protect your investment and avoid substantial financial harm in case of an insured peril or loss.
It is possible to lose your property entirely to an insured peril, such as a fire. Even though you no longer have a physical structure, you would still be required to pay the mortgage. Also, you would be responsible for rebuilding that structure on your own. Furthermore, you may be faced with a loss of income from your tenant and could be exposed to liability lawsuits.
Is Landlord Insurance Required?
Landlord insurance in Ontario is not required by law, but it is a wise decision to purchase this insurance protection. If you are not insured and suffer a loss, there may be considerable damages that you would be required to pay yourself. These expenses can add up quickly and may potentially far exceed your initial investment.
If the property you own has a mortgage, it is very common for financial institutions to require insurance on the property when you purchase it. Since the institution has a financial interest in your property, it wants to make sure the property is properly insured. If the buyer cannot provide proof of insurance, there is a possibility the mortgage may be denied.
Does My Homeowners Insurance Cover My Rental Property?
Your standard home insurance policy does not cover your rental property. Typically all rental properties are specifically excluded from your homeowners insurance policy.
All damages and losses, including liability claims associated with a rental property, would be denied without the appropriate coverage in place. This is because renting a property, whether it be a separate residence or a portion of your primary residence, increases your liability exposure. Not only do you want to properly insure your investment, but you also want to protect yourself financially.
Landlord insurance can offer unique coverages such as loss of rental income protection. Loss of rental income coverage means that if there is damage to the rental unit that renders it unlivable and your tenants have to evacuate, you would not receive the usual rental income. With this specific coverage built into your landlord insurance, the loss of that income would be covered for a reasonable amount of time while the building or unit is repaired.
What Landlord Insurance Do I Need?
Since rental properties come in many forms like a detached dwelling, townhouse, duplex, or condominium, using an insurance broker is the best option in selecting the appropriate landlord insurance for your specific needs and circumstances. An insurance broker will help you figure out the best coverages to ensure you and your rental property are properly protected.
Rental Property Insurance For Detached Dwellings, Houses
If you own a detached building, the structure of that building and any other detached structures on the property must be taken into consideration when determining the amount of insurance required.
Rental Property Insurance For Condominiums
If you are renting a condominium that you own, it is essential to first determine what portion of the structure you own and are responsible for insuring. This can be determined by the "standard unit" definition, which is commonly provided to you by your condominium corporation board. It is essential to know that any improvements and betterments made to the unit are always the unit owner's responsibility to insure. A rented condo insurance policy will include specific coverages that are unique to a condominium, such as improvements and betterments, in addition to loss assessment coverage.
Rental Property Insurance For Vacant Properties
If you purchase a property that you plan to rent, but it is not occupied, or you are in-between tenants and want to make improvements before renting it, your property is considered vacant.
There is a lot more risk exposure when a building is vacant, as there is no one living at the residence to regularly monitor it. As such, some coverages are limited or removed during this period of time and can be re-added once the unit is tenanted again. In the meantime, a vacancy permit will be applied to the property, and further questions will need to be answered for the insurance provider to maintain coverage. The company will request that a “vacancy questionnaire” be completed, which simply confirms what precautionary measures are in place while the premises are vacant. Once you find suitable tenants and they move into the unit, the vacancy permit can be lifted, and all eligible coverages can be reinstated.
According to the Canadian Mortgage and Housing Corporation's 2020 Rental Market Report, vacancy rate increased from 2.0% (2019) to 3.2% (2020), and the average rent for a 2 bedroom apartment increased from $1,113 (2019) to $1,165 (2020) in Canada.
How Does Landlord Insurance Work?
Landlord insurance protects your rental investment and provides liability protection when you rent your property. Landlord insurance is not legally mandatory, however, it is essential protection in case of insured losses.
When Should I Get Landlord Insurance?
You should get landlord insurance when your purchase offer for a rental property is accepted by a seller. Contact and insurance broker to discuss rental insurance coverages.
Landlord insurance needs to be in place before the transfer of ownership. Typically, once an offer is accepted, you have weeks, if not months, before the title is transferred. Your insurance broker can properly assess your insurance needs and determine what the best coverage options will be for you. The broker will provide several rental property insurance quotes, and you can decide which insurance policy best meets your needs.
If you acquire an investment property by succession or other means, you should reach out to your insurance broker as soon as possible.
What Does Landlord Insurance Cover?
Landlord insurance can cover the physical damage to the dwelling and attached or detached structures, any personal property such as major appliances, lawnmowers, and snowblowers included in the unit, personal liability against liability claims or lawsuits such as legal costs, and any lost rental income if the unit becomes uninhabitable due to an insured peril.
What does Landlord Insurance Not Cover?
Some of the common landlord insurance policy exclusions include: any personal belongings of the tenant, the wear and tear or maintenance of the building, any damage caused in part of business or farm use (unless specified), any property illegally acquired (kept or stored), any loss occurring after the dwelling has been vacant for more than 30 consecutive days (unless advised prior), intentional vandalism or damage by tenants, and any damage caused by an animal owned by the tenant.
Each insurance company offers slightly different coverages and additional landlord insurance coverages are available. This means insurance companies can provide landlord policies uniquely tailored to you. Note that along with these policies, there are unique exclusions. A broker can review all the coverage exclusions and limitations with you to determine if you want additional coverage added to your rental home insurance policy.
An insurance broker will get you a landlord insurance quote that is tailored to your specific rental unit insurance needs, and will discuss optional coverage options with you to ensure you and your residential properties are properly protected.
How Much Does Landlord Insurance Cost?
The cost of landlord insurance depends on many factors. To determine the annual premium or your landlord insurance policy, the insurance company takes into consideration multiple factors, such as: Geographic location, including fire protection, proximity to water and the surrounding buildings, the value of the home/condo/premises, the size, condition, and age of the dwelling, the number of rental units you have, the heat source within each unit, if the tenants are smokers, and the type of coverage that are requested by the owner.
How Much Renters Insurance Should A Landlord Require?
As a landlord, you want to protect your rental property investment. You can stipulate in your renter's agreement that tenant insurance is required to rent the property.
A tenants insurance policy will not only protect the renter's personal property and belongings, but it will provide personal liability coverage for the tenant. This could potentially alleviate additional liability exposure for you as the landlord if personal injury were to occur. The average tenant policy requires a minimum limit of $1 million in liability. The contents limit, which insures the individual's belongings, can be more flexible in relation to the amount of coverage required by the tenant.
Who Needs Renters Insurance?
Any person who occupies a residence they do not own should obtain renter’s insurance. Renter’s insurance provides personal liability coverage as well as coverage for the renter’s personal belongings. The cost of this coverage can be minimal, depending on the coverage limits requested.
As a landlord, it is a good idea to require that your tenants have renter’s insurance. Renter’s insurance is also called tenant's insurance.
How To Get Landlord Insurance
Landlord insurance is available through insurance brokers. Insurance brokers are unique because they have access to many different insurance companies, each of which offers different insurance coverage.
The moment you contact an insurance broker, your options, and the variety of insurance coverages available to you are multiplied. You have choices. You can choose among several landlord insurance options.
Having access to insurance choices also allows a broker to find the best coverages and competitive prices in the insurance market for you. This is our focus as insurance brokers.
Working with a broker gives you extra peace of mind. You have an insurance expert helping you.
Our Morison Insurance brokers know landlord insurance. Every Morison Insurance customer has a dedicated insurance broker - one specific insurance broker looking after your insurance. Your broker will answer your questions, make changes to your insurance if needed, and provide assistance and insurance service at any time.
This content is written by our Morison Insurance team. It is provided for general information only. Insurance needs differ from person to person, and this article is therefore not a substitute for professional advice about your individual insurance needs which can be obtained by speaking to one of our brokers.
