Being a landlord has its perks. Renting a property can provide a stable source of passive income, help create long-term wealth, and you can tap into many tax benefits.

But it also comes with responsibilities and risks. Being a landlord can be time-consuming. More importantly, it opens you up to third-party liabilities that can quickly drain your financial resources without landlord insurance.

Do Landlords Need Insurance?

If you’re renting or leasing a property, it’s highly recommended you protect yourself and your property from damage and loss caused by fire, water damage, extreme weather, theft, vandalism, and liabilities such as third-party bodily injury or property damage claims. For example, if a tenant slips or trips on the walkway leading to the building’s entrance and is injured, they could sue you for damages.

A landlord passing the key to a rental property to a tenant.

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Without landlord insurance, you’re exposed to financial risks such as expensive property damage, lawsuits, or lost rental income. Additionally, some mortgage lenders may require landlords to have insurance as a loan condition.

What’s the Difference Between Landlord Insurance and Home Insurance?

Landlord insurance and homeowner insurance are both types of property insurance, but they differ in the types of coverage they provide and the risks they address. In general, homeowner insurance only covers you if you reside at the property.

Here are other key differences:

  • Coverage: Homeowner insurance typically covers the home’s structure, personal property, liability, and additional living expenses of the owner and their family if the house is damaged or destroyed due to a covered peril such as fire, theft, or weather events.  In contrast, landlord insurance covers the physical structure of the rental property, as well as landlord-specific risks such as loss of rental income, tenant damage, and third-party liability.
  • Liability coverage: Homeowner insurance usually includes personal liability coverage, which protects the homeowner against liability claims for bodily injury or property damage caused by the homeowner or their family members. Landlord insurance includes personal and commercial liability coverage, which protects you from third-party liability claims arising from the rental property or your activities.
  • Additional living expenses: Homeowner insurance may include coverage for additional living expenses if the home becomes uninhabitable due to a covered loss, such as a fire. Landlord insurance may include loss of rental income coverage, which helps compensate a landlord for lost rental income if the rental property becomes uninhabitable due to a covered loss.
  • Cost: Landlord insurance is typically more expensive than homeowner insurance because it covers additional risks associated with renting a property. The cost of landlord insurance depends on factors such as the location, size, age, and condition of the rental property, the plumbing and electrical infrastructure, the landlord’s insurance claim history and the chosen coverage limits.

A private homeowner insurance policy is not designed to cover damage and loss or liability risks related to renting or leasing a home, condo, basement apartment, or other type of property. It also doesn’t cover short-term rentals if you use home-sharing platforms like Airbnb or VRBO

6 Ways Landlords Can Reduce Their Liability Risks

Here are six ways you can reduce the amount of liability risk you face as a landlord: 

1. Maintain a safe and habitable property

Preventative maintenance is critical. Landlords are legally responsible for providing tenants with a safe and livable rental property. That means keeping the property in good condition, addressing safety hazards, and complying with your jurisdiction’s municipal building codes and health and safety regulations.

2. Conduct thorough tenant screenings

Conduct criminal background checks (the Royal Canadian Mounted Police offer this service), credit record checks through Equifax Canada and TransUnion Canada, and employment and reference checks on all potential tenants to identify any red flags that could increase your liability risks.

3. Enforce lease agreements

Landlords should have clear lease agreements that outline the responsibilities of both the landlord and the tenant. It can help prevent disputes with your tenants and ensure they understand their legal obligations.

4. Respond promptly to tenant complaints

Landlords should respond quickly and appropriately to tenant complaints and repair requests to address any issues and prevent further damage or liability risks.

5. Purchase landlord insurance

Get adequate coverage to protect yourself against liability claims and your property from unexpected accidents or damages resulting from severe weather or fire.

6. Stay up-to-date on legal requirements

Stay up-to-date on municipal, provincial, and federal laws and regulations that apply to rental properties to ensure you comply with all legal requirements.

It’s also worthwhile to insist your tenants buy a tenant or renter insurance policy to cover their personal belongings and provide them with some liability protection. Your landlord insurance policy will not cover a tenant’s possessions if damaged, destroyed, or stolen.

What Should Landlords Look For in a Landlord Insurance Policy?

Consider your financial interests and the value of your property when shopping for a landlord insurance policy.

To ensure you have comprehensive protection, look for the following things that should be included in your policy:

  • Property coverage: In general, commercial property insurance includes coverage for the building, any attached structures, and your personal property used to maintain the property or furniture and items inside the home that you allow your tenants to use.
  • General liability coverage: Commercial general liability insurance provides third-party liability coverage, which protects you from claims from others, including your tenants arising from the condition of the rental property or your activities. It should include bodily injury, property damage, and legal defence costs.
  • Loss of rental income coverage: The policy should cover loss of rental income if the rental property becomes uninhabitable due to an insurable loss, like fire or water damage. It can help compensate you for lost rental income during the repair or replacement period.
  • Deductibles: Most policies have deductibles. A deductible is the amount that you pay out-of-pocket in the event of a claim before your insurance provider pays. You can select the amount of your deductibles. The higher the deductible, the lower the annual premium. But if you choose low deductibles, be sure you can afford to pay them in the event of a loss.
  • Coverage limits: Your policy needs adequate coverage limits to protect your financial interests. Coverage limits are the maximum amount your insurance provider will pay for a loss. They should consider the value of the rental property, the cost of rebuilding or repairing the property, and your potential liability exposure.

How to Get Low-Cost Landlord Insurance

Zensurance specializes in providing small businesses, self-employed professionals, and landlords with the insurance they need to protect their assets.

Fill out our online application for a free quote for landlord insurance. Through our partner network of more than 50 insurance providers, our brokers will find a low-cost policy with maximum coverage and customize it to suit your needs.

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About the Author: Brandon Bowie

Brandon Bowie is a Team Lead, Professional Lines at Zensurance.