How Much Does Landlord Insurance Cost?

Landlords have a lot to worry about – from the upkeep of their rental properties, picking the right tenants and minimizing vacancy periods to complying with local housing laws and budgeting for unexpected expenses – the successful management of a rental property is a full-time responsibility.

There’s also another critical facet of property management that’s top-of-mind: protecting property from unexpected and expensive damages and liability claims.

A comprehensive landlord insurance policy is necessary for safeguarding your investment and financial wellness from those risks. Let’s review what that entails, its average cost, and what steps you can take to keep your annual insurance premium as low as possible.

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What Is Landlord Insurance?

Landlord insurance is a policy containing different coverages designed to protect rental property owners from financial losses associated with renting residential or commercial properties.

It typically covers property damage caused by fire, water, severe weather, theft and vandalism, loss of rental income following an insurable loss, and third-party liability claims.

What Does a Landlord Insurance Policy Include?

A landlord insurance policy typically includes the following types of coverage:

• General liability insurance: General liability insurance covers third-party bodily injury and third-party property damage claims. For example, if a tenant or visitor to the property trips, falls, and is injured on your premises, this coverage is designed to pay for the injured person’s medical and rehabilitation expenses.

• Commercial property insurance: Commercial property insurance covers damage to your rental property caused by fire, water, a natural disaster, extreme weather, theft, and vandalism. It also covers your business contents inside the building, like kitchen appliances, furniture, and fixtures, up to its coverage limit.

• Business interruption insurance: Sometimes included with commercial property coverage, business interruption insurance can be added to your policy if it isn’t. It covers you for lost rental income if your tenants are forced to live elsewhere and pay for your property’s overhead (utility bills, mortgage or loan payment) following an insurable loss, such as a fire.

• Equipment breakdown insurance: Equipment breakdown insurance pays to repair or replace your building’s equipment if damaged or destroyed by an internal mechanical or electrical malfunction. It covers equipment such as the HVAC system, kitchen and laundry appliances, and security systems.

There may be additional coverages you should consider for your policy. A Zensurance broker can advise you on what your options are.

What Is the Average Cost of Landlord Insurance in Canada?

An insurance company determines how much landlord insurance may cost, and it depends on many factors. Premiums are based on the reconstruction value of buildings, fire protection grades in your region, flood zones, and the optional coverages available.

The primary factor, however, is the building’s value, age, and condition. It’s also wise to establish an in-depth inventory of your physical contents and their replacement values to know the level of coverage you need.

What you need to insure, the property’s value, neighbouring exposures, and how many tenants you have all influence the cost of landlord insurance. Other factors include:

• Your location. If the neighbourhood where your rental property is in an area with a high number of break-ins or vandalism, or if it sits on a floodplain, your annual premium is likely to be higher.

• The building’s occupancy. How many tenants do you have? How many are legally allowed to live there? The larger a property is and the higher the occupancy rates, the higher the risks.

• The value of your contents. Think about the contents of your rental property. What would repairing or replacing them cost if stolen, damaged, or destroyed? That includes furniture in common areas or apartments, fixtures, appliances, and lighting systems.

• Replacement cost. What is the cost of replacing your rental property and its contents if an insurable loss, such as a fire, destroys it? The replacement cost is determined by the square footage of the building, its composition, and the value of your contents.

• How old the building is. A century-old building or home can also cost more to insure. That’s because the older a building or physical structure is, the more likely damage or loss will occur. Newer properties tend to get lower premiums since they are built with fire-retardant materials and modern HVAC systems.

• The property’s plumbing system. Water damage is one of Canada’s top causes of insurance claims, and the number of such claims rises each year as the severity of storms increases. According to the Insurance Bureau of Canada (IBC), severe weather caused over $3.1 billion in insured damage in 2023. IBC notes, “With today’s extreme weather events, insured catastrophic losses in Canada now routinely exceed $2 billion annually, and most of it is due to water-related damage.” Think about the type of plumbing in your building or house. Older buildings have installed galvanized or lead piping and usually lack a sump pump and backwater valve, upping the likelihood of water damage or flooding. Many property damage claims due to water arise from burst or leaking water pipes.

• The property’s electric system. An older property may also have outdated electrical work that can lead to potential fires. For instance, a building with knob and tube wiring will raise a red flag with insurance providers because it’s obsolete, lacks grounding wire, and can’t handle the power demands of modern appliances and electronics.

• The coverages you choose. The different types of insurance coverage also influence a policy’s annual premium. Adding optional coverages to your commercial property insurance, such as business interruption insurance, equipment breakdown insurance, overland flood protection, and sewer backup coverage, will increase your premium. Also, the coverage limits and deductibles you choose per type of insurance affect your rate.

Know that your landlord insurance policy does not cover your tenants’ personal belongings or the liability risks they face as individuals. 

It’s wise to advise all your existing and prospective tenants to buy tenant or renter insurance to cover their possessions from damages caused by fire, water, theft, and vandalism. Tenant insurance may also include financial coverage if they accidentally hurt someone or damage their property or are sued for unintentionally injuring someone or damaging their property.

6 Ways to Keep the Cost of Landlord Insurance Low

While keeping your premium low is important, it shouldn’t come at the expense of being underinsured. Being underinsured exposes you to paying for damage and loss on your own instead of having the right amount of protection your rental property needs. 

That doesn’t mean you shouldn’t try to lower your insurance bill. Here are six ways to do that:

1. Conduct Routine Maintenance

Performing routine maintenance on the interior and exterior of your building is vital. An insurance contract is not a maintenance contract, so if you spot something small that requires fixing, do so before it becomes a significant problem that causes expensive damage. 

For example, ensure the downspouts and eavestrough on the building are clear of debris, so water flows away from it during a rainstorm, or if you see cracks forming in the building’s foundation, patch them up to prevent water from leaking inside, making them worse, and possibly flooding the basement.  

2. Install Security and Safety Measures

Get a professional to install a monitored security and fire detection alarm system if you don’t already have these. If you do, have them inspected annually. That system should also include water detection devices in the basement to alert you if water begins seeping into the space and ensure there are working carbon monoxide detectors throughout the building.

Also, bright lighting should be installed outside the building to deter thieves and vandals, and strong deadbolt locks should be installed on all doors.

3. Thoroughly Screen Prospective Tenants

Even if you’re renting a room in a house instead of an apartment or renting to postsecondary students, screen all prospective tenants to select reliable, responsible people with references and stable incomes to help reduce the likelihood of tenant-related claims.

4. Review Your Landlord Insurance Policy Annually

You’ll need to renew your landlord insurance policy every year, but before you do, take the time to review your existing coverage, consider what’s changed at your rental property, and see if you need to increase or decrease your coverage. 

For example, if you replace the HVAC system in the building or plan to renovate the property, the value of your building may increase. That requires examining whether your coverage limit suits these new investments or installations. 

5. Choose High Deductibles

You can choose how low or high the deductibles on your policy are. A deductible is the amount of money you must pay after filing a claim before your insurer pays out. Generally, the higher your deductible, the lower your annual premium is. However, be sure you’ve got the funds socked away to pay a higher deductible if you choose that route.

6. Be Mindful of Your Property’s Valuation

According to the Canada Mortgage and Housing Corporation, the value of your property and its replacement costs are not fixed numbers and can fluctuate. A property’s valuation changes “in relation to current market conditions and what other, similar properties are selling for. This value can change over time based on improvements to the property, as well as changes in your neighbourhood and the overall housing market.” 

Furthermore, all rental properties are considered businesses. Therefore, they require commercial insurance since a homeowners’ insurance policy is not designed to cover rental properties. When buying commercial property insurance for your rental property, you need to choose either actual cash value or replacement value coverage. There are significant differences between each option. A Zensurance broker can help you navigate the complexities of your insurance policy and advise you on what you need and don’t.

How to Get Low-Cost Landlord Insurance Fast

Zensurance is the no. 1 choice for comprehensive insurance coverage for Canadian landlords. More than 350,000 small business owners across Canada trust Zensurance to get them the comprehensive, low-cost coverage they need to safeguard their properties and finances.

Are you ready to protect your rental property with a customized landlord insurance policy? Take five minutes to fill out our online application for a free quote.

We’ll get you covered with a comprehensive policy through our partner network of over 50 insurance providers. Our experienced brokers will customize it to suit your needs and budget.