As an organization, owner, executive director, manager, volunteer or as a co-worker, you may know someone who does not have or really doesn’t understand “tenant’s insurance”.
According to the Insurance Board of Canada, about 50% of renters in Canada do not have this kind of insurance. There is a variety of reasons why and this post is intended to correct some common myths and misconceptions and to provide some resources so people can make an informed decision.
“What is Tenant’s Insurance?” According the the Insurance Bureau of Canada:
- Tenant Insurance covers the cost to repair or replace , clothes and most household items;
- Tenant Insurance provides liability insurance. If your “faulty toaster” causes a fire and damages other units in your building; or if someone slips and falls and is hurt in your unit;
- Tenant Insurance pays your additional living expenses, in certain circumstances, while your apartment is repaired.
Common Myth – “I don’t need to insure my belongings because they aren’t worth anything.” Many people think that; however, if someone actually makes a list of what it would to replace everything; most people would find that the costs quickly add up. People should consider only having the clothes they are wearing and and having to essentially replace everything.
Common Myth – “I don’t need insurance because the building owner should have insurance.” Property owners do usually have insurance; however, it only covers their assets: the building and their property, their insurance will not cover the tenant’s belongings. In addition, the property owner’s policy does not cover tenant’s additional living expenses. Tenant’s insurance can provide assistance to cover those additional expenses that might result while their apartment or home is not available or under repair. For example, if your apartment is being repaired and you normally pay $900 for rent and a temporary place costs $1100 per month, the insurance company will pay the additional $200, an unexpected cost that can quickly accumulate.
Common Myth – “I have one or more roommates and they have insurance.” Each tenant in a home or apartment needs to have their own insurance. A roommate’s insurance company will only pay for their belongings.
Common Myth – “I can’t afford to have insurance.” Insurance is like clothing, “There are policies to fit all budgets and one size does not fit all.” Shop around and compare. Many companies can provide free quotes on-line. Policies for clients in “geared to income housing” may be less than $20/month for basic plans. In addition, many insurance companies will usually offer discounts when the tenant bundles their car insurance and other insurance with tenants insurance.
Common Myth – “Insurance is complicated and I don’t understand anything about it.” Insurance is complicated and the industry has a language all of their own. There are resources available: 211 is a great place to start; the Insurance Board of Canada has a website that explains many of the terms and will answer questions free. This the link: Insurance Board of Canada. In addition, many insurance companies will offer free quotes for coverage.
Common Myth – “I don’t have insurance because the deductibles are too high for me to pay.” Many people do not realize that deductibles are adjustable to match what they can afford. The tenant need to be careful to ensure they have the resources to pay whatever deductible is selected.
Common Myth – “The insurance companies don’t want to pay; they will find some way to get out of paying me.” Insurance policies do have clauses that limit coverage; they do not cover every type of accident. It is important to ask, “What is covered and what is not covered?” If a tenant has issues or difficulties making a claim, there are advocates advocates in most communities that can help; ask a local victim services organization, if they could recommend someone.
Common Myth – “I can purchase tenant insurance after something has happened and then make a claim right away.” Insurance companies do not work like that; insurance policies only cover losses for insurance that is in place when the accident happens.
Common Myth -> “I live in a big building, the odds are if there is a fire, I won’t be affected.” Unfortunately, many times, if a building, even a large one, is damaged by a minor fire, the entire building could be closed and often the power is turned off for everyone. Water from putting out a fire and smoke can damage many units even those some distance away from the original problem unit.
Common Myth – “I just rent my apartment; I am not responsible for damage to the building.” If your faulty toaster burns down the building or your bathtub overflows because you forgot to turn the water off, you may be held liable for repair costs. Repair costs can be expensive.
Common Myth – “It will never happen to me.” Everyone says that. Watch the news; unfortunately, it happens all the time.
THINGS TO KNOW: All Risks vs Named Perils – An “all risks” policy will cover all of then tenant’s belongings (unless specifically excluded) for all perils. Perils are things like fire, theft, earthquake, tornado, etc. A “named peril” policy will only cover belongings only if they are destroyed by those specific perils. “All risks” policies will usually cost more but they provide more of a “piece of mind” for the tenant. Before signing anything, tenants need to understand what their policy covers and what it does not.
THINGS TO KNOW: Replacement Value vs Actual Cash Value – A common misconception with insurance claims is that people think that when something happens to their insured belongings, they simply call the insurance company and almost magically, they get new “stuff.” That can happen, if the tenant has “replacement value” insurance, although it doesn’t happen magically. For example, if the tenant has insured the contents of their home and their television is destroyed. If they have replacement value, they will get enough money for a brand new TV; if they don’t have replacement value, and the TV is 6 years old, the tenant will only get enough money to buy a 6-year-old TV that is Actual Cash Value.
THINGS TO KNOW: Sewage backup or septic tank backup coverage – These are specific perils and you should strongly consider having for all of the obvious reasons.
THINGS TO KNOW: Not all belongings are automatically covered – Ensure any high value items such as electronics and other valuables are covered, some items may require “extra” insurance.
THINGS TO KNOW: Keep a photographic record of your belongings – Tenants should keep the record in a safe place, preferably not in their apartment. Using a free photo cloud storage is a good way to have the record accessible and it should be updated annually.
THINGS TO KNOW: People should review their policies – Everyone should review their insurance policy(s) as circumstances change, whenever they move, when they acquire more belongings, and/or if they decide to live with another person.
THINGS TO KNOW: Insurance Company vs. Insurance broker – An insurance company will sell a client any of the policies that their company carries. An Insurance broker will charge a fee and search for the “best price” or “best package” based on what coverage their client has requested. Brokers may work with several insurance companies to find the best price for their client.
This blog was originally written as a group effort for the UNITED WAY OF BRUCE GREY FINANCIAL FRIDAY – TENANTS INSURANCE. If you know of any person who may benefit from this introduction to insurance, please refer them to this series.
Good Resources/source material:
The Insurance Board of Canada website: IBC – Website
“What every renter needs to know about tenant’s insurance” – CBC News – Natalie Nawoski Sept 5, 2018