Rental Property Insurance Explained

Rental Property Insurance

Do you own a rental property? You are in the right place. Rental property insurance is important for all investment property owners. As someone who operates a rental property, you probably know first-hand how risky it can be. From potential lawsuits to property damage, and more, there is a lot that can go wrong. Luckily, ALIGNED is here to help you find the coverage you deserve. Let us get in touch with Canada’s top insurance companies on your behalf to find you a fantastic policy at a competitive rate. Protect your real estate investment today by contacting ALIGNED.

What is rental property insurance and how does it work?

Rental property insurance, sometimes referred to as landlord insurance, is a type of commercial insurance that is specially designed to meet the needs of rental property owners. Should something go wrong with your rental property, such as a piece of furniture being damaged, a tenant filing a lawsuit against you, you losing out on rental income due to property damage, or something else entirely, an insurance policy can protect you. Depending on the coverage you choose and the limits and conditions of that coverage, you can be financially protected against a whole variety of unforeseen events, preventing you from having to pay for them entirely out-of-pocket. 

What types of buildings does rental property insurance apply to?

The good news is that ALIGNED can help property owners find rental insurance policies for a wide range of buildings. For example, we have helped customers find rental property insurance policies for their single family homes, rented properties, large housing complexes, condominium units, seasonal and short-term properties, vacant rental properties, rooming houses, duplexes, triplexes, and high-rises or multi-unit buildings. If you aren’t sure whether rental property insurance is applicable to your building, get in touch with an ALIGNED broker and we can assess your rental property and offer advice on the type of insurance it could benefit from.

Rental property insurance coverage tailor-made for you

Rental property insurance varies between policyholders and insurance providers. That said, many policies typically feature the following coverage: 

• Commercial general liability insurance: Commercial general liability insurance, or slip and fall insurance, is designed to protect you from personal liability claims. For example, if a third party (e.g. a guest of a tenant) injures themselves while visiting the building, they could sue you, and you could be held liable as the property owner. Thankfully, with a rental property insurance policy that features commercial general liability insurance, your insurer might step in to help cover the associated costs (e.g. legal fees, medical expenses, etc.). 
• Commercial property insurance: Commercial property insurance is designed to protect your rental property and its contents from property damage caused by insured perils. Insured perils that you may be protected against vary but could include fire, water damage, windstorms, theft, vandalism, falling objects, etc. It is important to note that commercial property insurance for rental properties can also include:
  • Rental income coverage/loss of income coverage: This is intended to replace lost rent payments if your rental property becomes temporarily uninhabitable due to a covered peril.
  • Dwelling/building coverage. This covers damage to the physical structure of your rental property (so long as it is caused by a covered loss). Please note that dwelling insurance does not typically cover the land your rental property sits on or the contents of your property; only the structure of it. Examples of covered losses that dwelling coverage may safeguard you against include fire, lightning, theft, smoke, falling objects, windstorms, etc.

• Contents coverage: Finally, contents coverage is a component of commercial property insurance that pertains to the items inside your rental property (more specifically, the items that are not permanently attached to a structure, such as a refrigerator). With this type of coverage, if any belongings in your rental property (that belong to you, the property owner) are damaged or stolen due to an insured peril, your insurer might cover the cost of replacing or repairing them. Other items commonly covered by contents insurance include furniture, electronics, etc. 
• Equipment breakdown insurance: Equipment breakdown insurance, sometimes referred to as boiler and machinery insurance, can help cover the costs of repairing or replacing equipment in your rental property (e.g. kitchen appliances, HVAC units, etc.) if they are broken or damaged due to a mechanical or electrical issue.

Overall, if your rental property insurance policy includes the coverages listed above, it can be protected against all kinds of risks. These include damage to your physical property (both the rented dwelling and any detached structures) and belongings (e.g. appliances, furniture, and more), loss of rental income if your tenant is no longer able to live in the property due to a covered loss, lawsuits stemming from incidents of third party bodily injury or property damage, and more. 

Additional insurance coverages available for rental properties

Beyond the coverages listed above, there are a couple of other types of coverage that may interest rental property owners. Sewer backup insurance and overland water insurance are two coverages that might be worthwhile depending on your property and risk level. We outline these two options in detail below.

• Sewer backup insurance: Sewer backup insurance, as the name suggests, is designed to cover you in the event that your rental property falls victim to a sewer backup. This is the name for when your sewer system malfunctions and wastewater from the sewer or septic tank ends up seeping into your property. If this happens, it could cause extensive damage to the walls, building, and floors of your rental property. In essence, a sewer backup is every property owner’s worst nightmare. But by adding sewer backup insurance to your rental property policy, your insurer can help cover the costs of repairing any damage caused by such an incident.  
• Overland water insurance: Overland water coverage may also be worthwhile as it safeguards your rental property from damage resulting from excessive water (e.g. a flood, rain, melting, overflowing bodies of water, etc.). Please note that not all insurance providers offer overland water protection, but if this coverage is important to you, speak with an ALIGNED broker. We will work tirelessly to ensure we find the rental property coverage you need. 

Factors impacting the cost of insurance for rental properties 

The cost of insurance for rental properties varies widely because it depends on many factors. We outline a few of these key factors below: 

• The location of your rental property and the type of building it is (e.g. a single family home vs. a condominium unit)
• The years of experience you have as a landlord or rental property owner
• The number of rental units you own and the type of occupancy per unit (e.g. professionals, students, or commercial businesses)
• The annual and projected revenue of your rental property
• The coverages, deductibles, and policy limits you wish to include with your policy

Does rental property insurance cover damages caused by a tenant?

Sometimes. Some rental property insurance policies will cover a rental property against property damage caused by insured perils, such as fire, theft, etc. However, this usually only applies if a tenant accidentally causes damage to an appliance (e.g. if a kitchen fire breaks out). If a tenant intentionally damages your property, like by punching a hole in a wall, your insurer is unlikely to compensate you. 

Does rental property insurance cover vacancies?

Rental property insurance does not typically cover standard vacancies (i.e. simply not being able to find a tenant). That said, as mentioned above, this type of insurance may cover you for lost rental income in the event that an existing tenant is forced to temporarily relocate due to damage to the unit caused by an insured peril. This is part of your commercial property insurance coverage and is designed to protect policyholders if damage occurs that renders their rental unit uninhabitable, forcing their tenant to temporarily find someplace else to live. In such a circumstance, the owner would simply be out this rental income until the property is repaired. But with rental property insurance, your insurer might compensate you for this lost income until the tenant is able to move back in (or up to the policy limit – whichever comes first). 

Get ALIGNed with the rental property insurance you deserve

Are you ready to ALIGN your rental property with quality insurance? Get in touch with ALIGNED today. We will work to find you a fantastic policy with the coverage you need. No matter what type of rental building or unit you own, we have the resources and expertise to help you navigate your insurance journey. Get started by contacting the ALIGNED team today or click here to get a free quote now.