Do I Need Landlord Insurance?

The short answer is yes! Of course you need landlord insurance. But the long answer is a little more complicated. Landlords operate at different levels; some rent out an entire space, some are simply subletting a room, some rent out year around, and some rent out for only a certain number of weeks in the year. If you fall into the latter category and only rent out a room for a few weeks in the year, than you should be fine to disregard landlord insurance; you’ll very likely be covered through your homeowners insurance. However, if you rent out on more than just an occasional basis, then you’d be making a big mistake by neglecting to invest in landlord insurance.

Why isn’t my Homeowners Insurance enough?

The homeowners’ insurance company does not take rented space into account when they issue your policy. So under the circumstance that you need to make a claim due to your tenant’s neglect of the property, it may not be covered. If you are simply subletting a room, however, you do have an option to endorse your homeowner’s policy with “unit rented to others” coverage. This would be in replacement of buying a separate landlord policy. But if you are renting out an entire space, this won’t suffice.

When do I need a separate Landlord Insurance Policy?

In short: if you don’t live in the same space as your tenant, you’ll want a separate policy. Renting out an entire condo? Get a policy. Renting out an entire house? Get a policy. Renting out an apartment space? You guessed it: get a policy! You should know that you are not legally obligated to own a policy, the way you are car insurance for example, but failing to purchase one is a risky move. You run the risk of financial loss due to fire damage, flood damage, severe weather damages and more. For example, let’s say a fire breaks loose on your rental property due to a strike of lightening. The situation may be an extremely rare occurrence, but on the off chance that it happens, you may be faced with damage exceeding $100 000 that you will now have to cover out of your own pocket. This is just one, farfetched scenario, but there are countless instances in which a good landlord insurance policy can cover your rear end. A good policy will give you peace of mind knowing that your rental unit is covered on the off chance that it becomes uninhabitable due to circumstances beyond your control.

There are many different types of important coverage that you can request in your policy. The exact coverage would depend on the insurance company that you are dealing with, and the options that they present. Some important options to include are as follows:

Property Damage:If your property endures damage due to storm, fire, theft, vandalism or tenant damage (always remember to screen your tenants) this will cover you. The important aspect to cover here is to ensure that you are covered for the entire cost of your property in the rare event of a total loss.

Liability Insurance:  Equally as important as property damage coverage, liability insurance will protect you against liability claims and lawsuits. Renting out a space can be very risky without this coverage, as any tenant or visitor who injures themselves in your property can hold you accountable. Bodily injury claims on your property will ding you with a ton of legal costs i.e. funeral costs, medical payments, settlement costs etc.and this coverage will help with many of those costs.  Moreover, this coverage will protect you if you are found to be responsible for any damage to the tenants’ property.

Loss of Income: Finally, you’ll want to make sure that loss of income coverage is included. If your property becomes uninhabitable due to a covered loss i.e. fire, this coverage will reimburse you for all of the “lost rent” you’ve incurred while the unit is being repaired to livable standards.

In addition, you can buy “optional coverage” that extends beyond what we’ve covered here. What you wish to add, is entirely up to you. Some popular add ons are employer liability insurance, landlord contents insurance, and rent guarantee insurance.

If you need help with property management, tenant management services, or looking into a property investment – contact CMG Toronto today. The best property management company in Toronto.

What’s the Bottom Line?

Landlord insurance doesn’t have to be costly. There are policies that run for as little as $500 a year, or less. To protect your biggest investment, that’s money well spent. Working with a property management company will ensure that you have the best options, and are given the best policy. CMG is one of the most trusted names in Toronto. If you have questions or concerns, reach out today and let our team of professionals guide you through the process.