If you’re purchasing tenant’s insurance, also known as renter’s insurance, you’re bound to bump into many confusing terms. It may be hard to distinguish between other apartment or home insurance products, as well.
This article provides a concise breakdown of tenant’s insurance, condo, and home insurance, and building insurance and explains the difference between each product.
Need Renter’s Insurance?
Tenant’s insurance is purchased by those renting a home. It usually covers three areas of risks that renters face:
- Content destruction or theft: Tenant’s insurance provides compensation to repair or replace items that are stolen or destroyed in your home as a result of incidents like break-ins, fires, or floods.
- Personal liability: If someone faces harm or property damage at your apartment or house, they may have the right to sue you. Personal liability coverage from a tenant’s insurance policy can pay for resulting legal costs and damage awards.
- Additional living expenses: Suppose your home becomes unliveable due to a fire or flood. In this case, tenant’s insurance can pay for other living expenses incurred due to such an incident.
A landlord may mandate their tenants purchase a policy to mitigate the landlord’s risks. But even if this isn’t the case, renter’s insurance is a wise purchase. A policy may cost $200-$400 per year, but it provides millions of dollars in coverage. Just consider the following example:
Suppose you leave a hair straightener on and head out. It could start a fire in your condo apartment. If this fire spreads to adjacent units, your neighbours may sue you for property damage. You could then be liable for millions in legal fees and damage awards — a sure path to financial ruin if the proper insurance plan isn’t ready.
Condo and Home Insurance
Condo and home insurance protects property owners against risks similar to tenant’s insurance. Again, condo and home insurance can pay for content destruction or theft, personal liability, and additional living expenses. Further, this insurance covers damages to improvements or upgrades to your property and, most importantly, the destruction of the physical unit or building.
If you purchase a condo or freehold property with a mortgage, your mortgagor generally mandates you have insurance ready. This reduces the mortgagor’s risk that the security on the loan (aka the apartment or house) might burn up in flames without compensation. Condominium corporations may also require condo owners to have a policy prepared.
For homeowners living in their property, condo and home insurance are critical because a condo or house is commonly a person’s biggest lifetime purchase. Insurance protects this investment and ensures that perils won’t result in unexpected expenses.
For landlords, they may believe tenant’s insurance is enough. However, renter’s policies won’t cover the destruction of the physical building if a fire or storm ensues. Further, if someone is harmed at the property, the individual might sue the tenant and the landlord to maximize their chance at recovery. In such an instance, a landlord either needs to tap their policy for legal fees and damage awards or pay out-of-pocket.
Building insurance is generally not a policy in itself. Instead, it’s part of policies such as condo or home insurance or commercial property insurance. Building coverage protects your property in case an event causes damage to the physical structure. For example, a hailstorm breaks your windows or a tree topples and damages your roof. In these scenarios, the building coverage from a home or condo insurance policy can pay for repairs or even rebuild the house.
Building coverage is also an essential difference between tenant’s insurance and condo or home insurance. Tenant’s insurance usually doesn’t cover damage to the physical building, as that’s commonly covered by the landlord’s condo or home insurance policy.
Tenant’s, condo, and home insurance are all vital policies to purchase depending on what stage of property ownership you’re at. It’s often mandatory. But even when it’s not, it’s a wise purchase because it can protect you financially from worst-case scenarios.
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