Inflated house pricing and supply chain issues are creating challenges within the insurance industry as the ability to assess whether Canadians are still looking to get into homeownership or investment properties is up in the air.
There are also “supply issues on the rental front,” according to Steven Harris, licenced insurance broker and Lowestrates.ca expert, who went on to describe rental vacancies as being “at an all time low.”
The supply chain is impacting both homeownership and rental vacancies, but Harris said that both trends are balancing each other out.
“When we take a step back and look at overarching trends, we will likely see business as usual in the homeowners and tenant marketplace. We haven’t noticed an uptick in business,” he explained. “Looking at younger demographics, they will still have challenges entering homeownership, and renting will likely be an outcome.”
On the landlord side, there has been an increase in investment property purchases compared to homeownership. Whether this is investment owners expanding their portfolio with more properties, or homeowners venturing into rental property investments for the first time, Harris stressed that all clients need to be properly advised about their insurance coverage options.
“We see a lot of insurers having different eligibility rules and appetites for rental properties,” he continued. “As a landlord, if I’m investing in a student housing property versus renting a home to a family, it’s going to make a big difference in securing coverage.”
The housing market is changing how clients look at homeownership, and, according to Harris, brokers should be asking if leveraging equity and expanding investments to the rental space is a possibility for the future, so clients know their risk profile and coverage options.
Read this article to know if taking out tenant insurance in Canada really worth it?
“It’s also common for most insurers to require renters to carry tenant insurance,” said Harris. “For a new landlord, that should be top of mind as it’s important from a liability perspective. There is a lot of landlords that do not fully understand the function of tenant insurance.”
Tenant insurance is not just for personal property, it can take care of additional living expenses, and brokers should suggest landlords build a tenant insurance requirement into lease agreements to protect themselves.
“If a tenant were to incur a loss due to fire or water damage, a lack of insurance could impact their ability to make rental payments,” he added. “Tenants insurance mitigates that risk and provides financial stability to both parties.”
Harris mentioned that attracting more clients towards tenant insurance continues to be a challenge, as consumers tend to undervalue their personal property.
“In tenant policies, carriers have minimum limits because they know that in the event of a claim, costs add up,” he said. “Consumers need to be properly advised by their brokers about coverage, costs and the benefits.”
For many in the 20-to-35-year age bracket, affording a house is still out of reach, but having tenant insurance helps build some security which can be beneficial with a growing rental population.
For landlords, replacement costs are naturally having an impact on premiums. Rates are increasing as the costs of materials rise.
“There’s overall increases in the property space,” Harris continued. “When it comes to risk management, leveraging questionnaires and understanding the dwelling you’re insuring is critical. If a landlord purchased an investment property with a lot of aluminum wiring, or the roof is severely outdated, it will impact eligibility.
“It’s important for brokers to work with clients to understand the requirements to get insurance. For example, ask how many units they plan on renting out, because insurers will have maximums when it comes to unit counts, or the amount of rental property you can have before it’s deemed a commercial endeavour.”
