Why Should Landlords Require Tenant Insurance? | Mitch Insurance Brokers (2024)

A common question when it comes to landlord insurance is, “Does landlord insurance cover tenant damage?” The simple answer to that is no.

Landlord insurance policies are designed solely for the property of the landlord, whereas tenant insurance protects the tenant’s property. They complete each other, but they don’t intersect – which is why it’s so important for landlords to require tenants to carry their own insurance.

Can landlords require tenants to buy insurance?

In Canada, renting is growing twice as fast as home ownership. Unfortunately, with so many prospective renters out there, there’s bound to be some bad eggs. People who fail to pay rent on time, who cause damage to the rental property, who hold the landlord liable for damages to their personal belongings, etc. Having tenants acquire insurance is just one protection point in mitigating a landlord’s risk.

Similar to home insurance, tenant insurance isn’t legally required in Canada. That being said, landlords can make purchasing tenant insurance a condition of the lease agreement.

Does landlord insurance cover tenant damage?

While landlord insurance doesn’t cover damages to tenant property, there’s some nuances when it comes to damages caused by tenants:

Does landlord insurance cover damages to tenant property?

No. Tenant insurance, on the other hand, will cover damage to the tenant’s personal property if it’s damaged by an insured cause, like a fire. If the tenant did not have insurance and a fire broke out at the rental property, even if it was entirely unrelated to the tenant’s actions, their belongings would not be covered by the landlord’s policy.

Does landlord insurance cover damages caused by tenants?

Sometimes. Most acts of intentional tenant damage will not be covered by landlord insurance, nor will general wear and tear, theft or vandalism of landlord property. However, unintentional accidents, such as a fire, may be covered by landlord insurance. It’s generally recommended that landlords not only require tenant insurance from their renter but also a security deposit in the case of damages.

Why should landlords require tenant insurance?

There are numerous benefits to requiring tenant insurance as a landlord, ranging from reducing financial risk to increasing the potential to attract responsible renters. Requiring tenant insurance for prospective renters as a landlord can:

Increase tenant accountability

Having tenants acquire insurance encourages them to take responsibility and pushes them to take better care of their belongings, as it reinforces the understanding that they are held financially accountable should anything happen to their property.

Reduce liability and risk

Being a landlord involves a series of risks, and that goes beyond rising mortgage rates or inflation. Should a tenant ever be held liable for injuries suffered on the property by a third-party, their insurance coverage would kick in to protect both the financial interests of the landlord and the tenant.

Protect tenant property

A landlord’s policy only protects the rented dwelling. It doesn’t provide coverage for the tenant’s property. In the event of a covered claim, such as fire or theft, the tenant’s insurance would activate to cover their property against loss or damages.

Rental types: When should tenant insurance be required?

There are dozens of different types of rentals in Canada, from short-term rentals (AirBnb) to college students living in residence on campus. In some situations, having a renter’s policy may not be necessary for your tenant, but that doesn’t mean they’re without protection. Here are some examples of rental types/scenarios and how tenant insurance fits in:

• Tenants residing in short-term rentals. Rental insurance is generally not required for tenants residing in any short-term rentals you own, and your tenants’ property and liability should still be covered under their existing home (or tenant) policy.
• College students living on/off campus. Students who reside in dorms on campus may still have coverage under their parents’ policy so they won’t need to have tenants’ insurance, but students living off campus in separate housing should be required to carry renters’ insurance.
• Month-to-month lease rentals. You should require tenants to carry insurance even on month-to-month rentals. If your tenant chooses not to renew their lease but there’s still time left on their policy period, they may receive some of their premium back (minus what’s known as the “minimum earned premium”).
• Subleasing. Often, yes. Any subletters in your rental property won’t be covered by the primary tenant’s insurance, so it’s recommended you require them to have their own coverage.

As you can see, in instances where the tenant may already have their own insurance policy elsewhere (through their parents, at their primary residence, etc.) you may not require them to carry tenant insurance, as they’ll already have protection (and by extension, you’ll already have protection).

Making sure your investment property is properly protected

As a landlord, having your own insurance – and requiring your tenant to carry their own policy – is all about mitigating your financial risk. For advice or help on comparison shopping for quotes from some of Canada’s top insurers, contact Mitch Insurance today. We’d be happy to get you started.