Landlord Insurance Coverage Guide

Landlord insurance is a specialized policy for rental properties. It helps cover building damage from insured perils, protects you against third-party liability claims, and can even replace lost rental income. You can use it for non-owner-occupied establishments.

Being a landlord comes with financial risks. Rental income can change without warning, and fires, storms, theft, or water can damage your property. Even with careful tenant screening and maintenance, not every risk can be avoided. 

Landlord insurance can help you cover all your bases. It provides a critical safety net, protecting your property, income, and investment when the unexpected happens. Here’s everything you need to know to maximize your landlord insurance coverage.

What Is Landlord Insurance in Ontario?

Landlord insurance is a specialized property insurance policy designed for rental properties. It protects both the physical building and the income it generates. Although policies will vary based on your insurance provider, you can generally file claims against property damage, liability claims, natural disasters, and loss of rental income.

Unlike homeowners' insurance, a standard landlord insurance policy is not designed for owner-occupied properties. It treats rental income as an insurable financial interest and reflects the higher liability coverage needs that come with leasing to third parties.

Although not mandatory, many landlords would benefit from having their properties insured, including:

• Owners of long-term rental properties, such as single-family homes, duplexes, or small apartment buildings that are leased to tenants on annual or monthly agreements.
• Condo unit owners. With shared spaces, personal contents coverage is reduced and liability exposure increases.
• Landlords with secondary or investment properties that generate rental income but are not owner-occupied.
• Portfolio landlords managing multiple properties. The loss of rental income and liability exposure can quickly compound across units.

Source: Unsplash

What Does Landlord Insurance Cover?

Although specifics vary per provider, most landlord insurance policies cover the following areas:

Property Damage Coverage 

Property damage coverage includes the structural components of your property. When a covered peril occurs, landlord insurance covers the cost of repairs to the building and the expense of restoring damaged structures.

You can generally file claims on the following structural components:

• Roof, exterior walls, and foundation
• Flooring, ceilings, and interior walls
• Built-in fixtures such as cabinets, countertops, and staircases
• Permanent systems like plumbing, electrical, and HVAC

Regarding covered perils, your insurance broker will need to confirm the specifics of your policy. However, most plans cover:

• Fire and smoke damage from electrical faults or tenant accidents
• Water damage from burst pipes, appliances, or frozen plumbing
• Storm-related damage, including wind, hail, and heavy snow load
• Vandalism or malicious damage by third parties
• Theft-related damage to doors, windows, or entry points during a break-in

Liability Coverage

When third-party injuries occur on your rental property, you’re legally responsible for the victim’s hospitalization and recovery. Landlord insurance protects you from this liability.

Note that medical and legal expenses can add up fast. The average settlement amount for minor injuries is anywhere from $10,000 to $40,000, but more extreme cases could put you under several hundred thousand dollars.

Liability coverage typically applies to situations involving:

• Bodily injury to tenants, guests, or visitors that occurs on the rental premises
• Legal defence costs, including lawyer fees, court costs, and investigation expenses
• Settlement payments or court-awarded damages if the landlord is found liable

You can file a claim in instances where you’re legally liable, like:

• Slip-and-fall accidents caused by icy walkways, wet floors, or uneven surfaces
• Physical injuries linked to unsafe stairs, loose handrails, balconies, or damaged flooring
• Claims on negligence because of poor maintenance or building code violations

Loss of Rental Income Coverage

Some policies also cover lost rental income. During insured events where the property becomes uninhabitable, you can file a claim to offset daily expenses.

Here are some instances where you might be covered:

• Fire damage that forces tenants to vacate
• Major water damage from burst pipes or flooding
• Severe storm damage that compromises the roof, windows, or structural safety
• Smoke damage that requires professional remediation before re-occupancy
• Government-ordered evacuation or restricted access due to an insured peril
• Vandalism or malicious damage that renders the unit unsafe for occupancy

Note that there are several important limitations to be aware of. For starters, some basic landlord insurance policies don’t include this protection by default, and you might require an additional endorsement.

Learn more: Top 5 Most Common Landlord Insurance Claims

Source: Pexels

Landlord Insurance vs. Home Insurance vs. Tenant Insurance

Many property owners often get confused about the differences between renters' insurance, landlord insurance, and homeowners' insurance, thinking that basic homeowners' insurance covers more than it does. This misunderstanding can lead to coverage gaps that might cost them thousands of dollars if something goes wrong.

Here’s how these policies differ:

That said, these insurance policies aren’t mutually exclusive. They can overlap depending on your coverage needs. For example, mixed-use properties often require more than one type of policy to avoid coverage gaps.

The property owner needs both homeowners’ and landlord insurance to protect different portions of the same structure. Meanwhile, tenants would have to get their own policies to protect their belongings.

How Much Does Landlord Insurance Cost in Ontario? 

A comprehensive landlord insurance policy covering the basics, such as property damage, liability, and loss of rent, typically costs between $800 and $1,500. However, final costs are calculated based on several factors tied to your property, including unique risks, tenants, and coverage choices.

Property Location 

Higher crime rates, a greater risk of vandalism, or a history of frequent insurance claims can lead to higher premiums in certain areas. Likewise, regions prone to severe weather also incur higher insurance costs.

Construction 

Older buildings or those with outdated electrical, plumbing, or structural systems are considered higher risk and may result in increased premiums.

Source: Unsplash

Property Type and Occupancy Rate

Detached houses, multi-unit buildings, and commercial rentals may be priced differently based on rebuild costs and occupancy patterns.

Coverage Limits and Deductibles

Higher coverage limits naturally increase the premium because the insurer’s potential payout is greater. On the other hand, opting for a higher deductible lowers the premium but costs a bigger out-of-pocket expense when filing a claim.

Claims History 

A history of frequent claims can signal a higher risk to insurers, resulting in higher premiums or more restrictive terms. Alternatively, a clean claims record typically supports more competitive pricing.

Tenant Profile and Use 

The type of tenants (e.g., long-term renters versus short-term occupants) can influence cost, as short-term or high-turnover rentals may be associated with higher risk. Owner occupancy and full rentals are also rated differently.

Safety and Security Features 

Installing security systems, including smoke alarms, fire sprinklers, monitored burglar alarms, and CCTV, may reduce premiums because they lower the likelihood of large claims. 

Rental Income Amount 

Higher expected rent increases the insurable value of potential loss of rental income, which can result in proportionate premium increases based on the income at risk.

Number of Properties Owned

Unfortunately, landlords with multiple rental units or a portfolio may face higher aggregate premiums due to the increased overall exposure.

FAQs About Landlord Insurance Coverage

In Summary 

• Landlord insurance coverage typically includes property damage, third-party liability, and lost rental income after insured events.
• A standard home insurance policy does not provide adequate protection for income-producing rental properties.
• Liability coverage is critical for landlords due to increased exposure from tenants, guests, and contractors.
• Loss of rental income coverage helps maintain cash flow when a unit becomes temporarily uninhabitable, ensuring a steady income stream.
• Insurance costs in Ontario vary based on several factors, e.g., location, building condition, tenant profile, claims history, and coverage limits.
• Optional endorsements may be required for risks such as flooding, sewer backup, or malicious tenant damage.
• Comparing landlord, homeowner, and tenant insurance helps prevent costly coverage gaps.
• A tailored landlord insurance policy helps safeguard your investment against unexpected financial and legal risks.

Protect Your Investment Property With Comprehensive Landlord Insurance 

Fires, storms, water damage, or liability claims can put your rental property at risk and derail your income without warning. At KASE Insurance, our specialists take the time to understand your property’s unique risks and identify any coverage gaps, delivering landlord insurance coverage tailored to your specific needs.

Book a consultation today to receive a clear, customized quote. No guesswork, just coverage that works for you.