The rental market in Canada has been booming but there is a huge gap when it comes to renters seeing the value of purchasing tenant insurance.
According to TD’s 2021 Tenant Insurance Survey, 41% of Canadian renters do not have tenant insurance, and almost 50% said cost was the main reason why.
The cost of rent across Canada has increased year over year. Rentals.ca reported that the average rent in British Columbia was up 7.3% annually in 2021, in Ontario there was a 5.4% increase, and in Nova Scotia there was a 7.7% annual increase.
Read more: Tenants still need insurance
Craig Richardson, vice president of claims at TD Insurance, spoke to Insurance Business about the importance of educating Canadian renters of the value that tenant insurance provides.
“In the event of a loss, over 51% of Canadian renters surveyed said they would have trouble replacing their belongings without insurance,” he said.
The industry has a great opportunity to expand their portfolios and fill the gap when it comes to tenant insurance.
“It’s important for renters to understand they are liable for damages to the rental unit and could potentially face steep expenses for repair costs,” Richardson explained. “The main misconception is that renters think their personal belongings are covered under the landlord’s policy, and that is simply not the case.”
A landlord’s policy covers the structure of a property itself as well as the contents within the unit such as a fridge, stove, washer, or dryer. Then it is up to the tenant to have coverage for their own personal possessions.
“If a renter is negligent and caused damage to the landlord’s property, they are also legally responsible for reimbursing either the landlord or their insurance company for the repair costs,” he said. “For example, if a stove was unattended and a fire ensues, the landlord’s insurance would cover the repair cost initially, but their insurance company would likely look to recoup those funds from the tenant.”
Insurers and brokers need to make renters aware that having tenant insurance covers not only personal property that would be damaged from a fire but provides liability coverage as well.
“We accumulate valuable items over time and in the event of a fire or break-in, renters will have a difficult time replacing everything at once,” Richardson noted. “Only one in five people could actually replace all or most of their items in one shot.”
Richardson also noted that, throughout the pandemic, Canadians have spent more money on personal items such as electronics to stay more connected to family, friends, and work.
With a surge in purchasing expensive electronic items, it is important for renters to consider the financial burden of replacing hundreds of dollars in electronics compared to the price of tenant’s insurance.
“The pandemic has certainly caused people to increase their discretionary spending, and this particular trend has really increased the need for Canadian renters to protect their belongings,” he said.
The big question now becomes, how can insurers and brokers attract renters towards buying coverage?
There are no regulatory requirements when it comes to renters purchasing insurance, but TD’s Tenant Insurance Survey shows that educating renters about liability and losses will help the segment gain some traction.
“Our hope is that Canadian renters take the time to understand the benefits of having a tenant policy. The incremental cost of a premium far outweighs the cost of replacing your possessions in the event of a major loss,” said Richardson. “It’s a relatively nominal investment to ensure the safety of your finances and personal effects.”
