Do you need both landlord insurance and home insurance?

Approximately one third of Canadians live in rented accommodation, so it may not come as a surprise to know that the number of Canadians who rent their homes grew by 21.5% from 2011 to 2021.

Renting is a great way for many homeowners to offset high mortgage payments, but not enough people are aware that their home insurance won’t automatically cover rental activities, and becoming a landlord changes the dynamics of how your house is being used.

You know you need home insurance for your main property. But what if you rent out a room in your home or own a secondary property? Do you need both landlord insurance and home insurance?  

It’s estimated that around 42% of homeowners who rent out either a portion or all of their home don’t inform their insurance companies of their rental activities. In addition to that, 24% of homeowners aren’t aware they need to. Unfortunately, the failure to provide full disclosure of one’s occupancy could void a home insurance policy entirely.  

Most landlords, whether they own multiple properties or are solely renting out one room in their home, don’t fully understand their coverage needs. It boils down to the occupancy of your home and any secondary properties you own. The risks associated with renting out a part of your home or another property entirely aren’t covered under a traditional home insurance policy. 

Renting creates a need for supplemental insurance, whether through a separate landlord insurance policy or a home insurance endorsement. Plus, failing to disclose your rental habits to an insurer can cost you more than if you had been upfront in the first place, and it could make it more difficult for you to find insurance in the future. 

Homeowners who only rent a portion of their home still need to disclose their renting habits to their insurer and acquire special insurance, usually in the form of a home insurance endorsement. This only applies if they are also living in the home. 

Home insurance policies are designed to only cover the contents, property, and personal liability of the homeowner and their family – not the renter’s belongings or personal liability. Without sufficient coverage from an endorsement, the homeowner may be responsible for the compensation of lost/damaged belongings of a renters. Always be upfront with your insurance broker. If your insurance provider doesn’t want to insure homeowners who rent rooms or floors in their home, you’ll need to find a different insurance company. A broker can help you find a solution.  

If you’re renting out a secondary property that you own to a third-party, landlord insurance is a must. You won’t need to have home insurance and landlord insurance, as you (the building owner) aren’t occupying the property full-time. Landlord’s insurance covers similar items as homeowner’s insurance, however it will also include coverage for fair rental value. Fair rental value, or FRV for short, is rental income.  

FRV can also be included in your homeowners additional living expense (ALE) insurance if you rent out a part of your home as well. FRV coverage kicks in if the tenant is forced to leave the unit or building due to an insured loss and covers the landlord’s rental income until the unit is livable again. FRV will not cover: 

No, you will need one or the other. You only insure a property once. If you’re renting a room in a home that you live in, you’ll only need a homeowners policy with a rental insurance endorsement added to your policy. But if you’re renting out a secondary property that you don’t live in, you’ll need landlord insurance. 

Whether you’re renting out a secondary property or a portion of your primary residence, landlords should always: 

For further information regarding landlord insurance, or how to ensure you’re adequately protected if you’re renting out a portion of your home, give us a call at Mitch.