Many may consider landlord insurance unnecessary, confident that only the best tenants will emerge from a stringent selection process to lease their property. And with good tenants, what could possibly go wrong with your investment – right?
Andrea Butt of Harcourts Property Management talks to the team at Square One Insurance Services about the lowdown landlord insurance.
Do landlords in strata properties require insurance?
There is a common misconception that the commercial insurance purchased by the strata property fully protects the unit owner. In reality, the strata property’s insurance only covers the building, common areas and associated liability exposures. As a unit owner, you must purchase insurance to protect your unit, contents owned by you, and associated exposures. Without insurance, you could be out-of-pocket tens of thousands of dollars in the event of a loss. Your tenant is responsible for purchasing a tenant insurance policy to cover their own belongings and any liability exposures.
What does a standard landlord insurance policy cover for a rental property? Are there any additional options?
The typical landlord insurance policy includes:
- Condo property protection: This protects against amounts you are assessed to offset a property insurance deductible paid by your condominium corporation. It also protects against repair costs to the building and common areas that: (1) fall beneath your condominium corporation’s property insurance deductible; (2) are not covered by your condominium corporation’s property insurance; or, (3) result from a shortfall in your condominium corporation’s property insurance.
- Premises liability: This protects against amounts you are legally responsible to pay for unintentional injury to someone or damage to their property arising from the ownership or use of your home.
With most policies, you can also purchase:
- Condo improvements, fixtures and glass: This protects any upgrades, additions, or alterations made to your condo unit after it was originally built. It also protects countertops, flooring, glass, or other fixtures in your unit that you are responsible for insuring under the bylaws of your strata property.
- Landlord property: This protects appliances, window coverings, furniture and any other property that you have provided in the unit for your tenants to use. It does not protect any property owned by your tenants. Your tenants need to purchase their own insurance policy.
- Lost rental income: If the unit is damaged and rendered uninhabitable, you cannot collect rent from your tenants. If the damage was due to an insured loss type, your landlord insurance will reimburse you for lost rental income while repairs are completed.
Tell us an example or two of where the owner was thankful they had landlord insurance.
In this first example, the tenant became distracted while drawing a bath. Water overflowed, damaging the hardwood floor in the unit, carpet in the common hallway, and the ceiling in the unit below. The tenant did not have insurance but, fortunately, the landlord did. The landlord’s policy paid $3,000 to repair the hardwood floor and $25,000 to cover the assessment associated with the strata property’s deductible.
In this second example, a pipe burst in the unit causing significant damage to the unit, common hallway, and the unit below. The unit was also rendered uninhabitable forcing the tenant to temporarily move out while repairs were completed. Although neither the landlord nor the tenant was at fault, the strata property assessed its $10,000 deductible against the landlord. In addition to covering this cost, the landlord’s policy also paid to repair the unit’s hardwood floors and crown mouldings, as well as lost rental income while the repairs were completed.
What does the owner have to watch out for when choosing a landlord insurance policy?
First, it’s critically important that you understand what the maximum deductible is under the strata property’s insurance policy as it may be assessed against you. This is more difficult than you might expect because there are often several deductibles.
Next, it’s important to review your strata property bylaws to determine if you are responsible for insuring countertops, floorings, and fixtures. Some strata property policies will not provide any protection for these items, even if they were original to the unit.
Finally, you must determine if there were any upgrades, additions, or alternations to your unit, whether made by you or a previous owner. It’s important to note that any customizations that were made to the unit during the strata’s original construction are also considered upgrades.
Are there any special considerations in choosing landlord insurance for strata properties?
Many companies only offer landlord insurance as an add-on to your primary residence policy. If there is a loss at your rental property, then it may also affect your primary residence premium. So, you may want to purchase a separate policy for your rental property.
Should landlords inspect their rental properties? If so, how often?
Harcourts conducts quarterly inspections once a quarter, and recommend this as the standard. Regular inspections can reduce the risk of claims. For example, a new tripping hazard may be identified and remedied during the inspection, preventing injury to a guest. Often times, tenants don’t notify their landlords of what they believe to be minor issues but which may actually pose major risks.
ARTICLE BROUGHT TO YOU BY ANDREA BUTT
HEAD OF PROPERTY MANAGEMENT, HARCOURTS
About Square One Insurance Services
Established in 2011 and based in Vancouver, British Columbia, Square One offers the only home insurance policy in Canada that can be personalized to your unique needs. That means you only pay for the protection you need. Square One is also one of the few providers to automatically include earthquake, sewer backup, and broad water protection in its policies. Square One currently serves British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario. For more information about Square One, or to get an online quote, visit www.squareoneinsurance.ca.