Tenant Insurance: A Guide for Parents & Teens

By Terri Coles · Last Updated August 8, 2022

Your teen’s eventual move into an apartment of their own might come sooner than you expect. (We know—it’s a lot to take in.) Do yourself and your teen a favour by teaching them how to protect themselves as a tenant well before you’re packing boxes into the trunk of their first car.

For this exciting new phase in their life, they’ll need tenant insurance (or renters insurance). Read on to learn more about what tenant insurance covers, why it’s necessary, and how to choose the right policy for your teen’s needs.

Key takeaways

Renters insurance isn’t required by law, but many landlords make this a condition of their lease.
Tenant insurance gives renters important protection for their belongings, which aren’t covered under a landlord’s property insurance.
These insurance policies also protect against legal and financial liability from property damage or accidents or injuries in a renter’s apartment.
The monthly cost of tenant insurance is low, but it’s an important investment in your teen’s financial and legal future.

What is tenant insurance?

Tenant insurance, also called renters insurance or contents insurance, protects your teen against liability due to property damage or injuries that may occur in their rental unit.

You might wonder why your kid needs tenant insurance in the first place. Shouldn’t their landlord have insurance to protect their property in case something goes wrong?

Absolutely—but the landlord’s property insurance has everything to do with their building and nothing to do with your teen and their things. That’s where tenant insurance comes in: It protects tenants if their possessions—like your kid’s furniture or electronics—are lost, damaged, or stolen in the property they rent. And, more importantly, it protects tenants against legal liability if, say, a visitor to their home is injured.

Tenant insurance versus home insurance

In a nutshell, home insurance protects the property owner, while tenant insurance protects the renter. Your home insurance protects you, the homeowner, and your possessions inside the home you live in. For landlords, home or property insurance protects them if a tree falls onto the building or if someone slips on an icy walkway in front of the building and injures themself.

However, a landlord’s home insurance doesn’t cover your teen’s belongings inside their rental home or your teen’s liability if something goes wrong—e.g., an overflowing bathtub causing damage to the unit below them. Not only would there be structural damage to pay for in this scenario but the renter below your teen could also sue them for any damage caused to their property. This is where tenant insurance fills the gap.

When should you get tenant insurance?

Once your teen moves out of your home and rents a property, they should get tenant insurance coverage. They may be able to hook into a good rate with your home insurance policy (see below), or they may need to purchase separate renters insurance.

Some universities, like the University of Regina, also require tenant insurance coverage for students living in their residences. Check the fine print on residence rules. Even if tenant insurance is not mandated in their dorm, it’s not a bad idea for your undergraduate to get coverage anyway for laptops, musical instruments, or any other expensive items they may keep in a shared living space.

Why do you need tenant insurance?

Renters insurance isn’t required by law in Canada, but it is legal for landlords to require tenant insurance as part of a lease agreement. Your teen could even be evicted if they sign a lease agreeing to get tenant insurance and then fail to do so.

But this will get your teen’s attention: Tenant insurance protects their stuff. Most young adults start their gap year or post-secondary education with a few expensive items in tow; laptops, smartphones, headphones, tablets, cameras, and other such items are hard to replace if lost, stolen, or damaged. These are worth protecting with insurance coverage because the Bank of Mom and Dad is not an endless resource.

Secondly, both you and your teen want to be covered if there’s ever a lawsuit. Landlord’s home or property insurance covers the property itself and the landlord’s possessions—for example, any appliances included with the rental unit. But it doesn’t cover your teen’s liability for damage or injury.

Without tenant insurance, your teen is financially and legally vulnerable if, for example, they make nachos at 2 a.m. and fall asleep with the broiler on. Anything damaged by smoke, including their neighbours’ homes and possessions, could result in lawsuits from the landlord or their neighbours for property damage. And if anyone was injured by the smoke, even if it was an accident, your kid could face a lawsuit. Renters insurance would financially protect them.

What’s covered by tenant insurance?

Basic tenant or renters insurance includes three main areas of coverage: contents, liability, and additional living expenses.

The contents portion of tenant insurance covers personal items, such as clothing, housewares, furniture, textbooks, and a laptop or desktop computer. Some policies also cover belongings stored in a vehicle or while your teen is temporarily away from their digs—like when they’re visiting you and doing laundry for free at home, for example.

When your teen is choosing a policy, make sure they have a solid understanding of what is included. Some high-value items may be limited, excluded, or require an additional policy. If your teen has valuable possessions like jewellery, rare collections, musical instruments, or really high-end electronics, they might need additional insurance specifically to cover these things.

Liability

The liability portion of your teen’s tenant insurance policy protects them if the rental unit is damaged or if they or a friend are injured on the property. This part of their insurance plan provides important legal protection, because your teen (and by extension, you as the parent with more assets) could be held liable for property damage or an injury—even if it’s the result of an accident.

Basic tenant insurance covers the renter for $1 million to $2 million in liability. However, this amount varies by plan, and some plans may not even include liability. It’s important that your teen confirms that liability is part of any insurance coverage they choose.

Additional living expenses

Many renters insurance policies will also pay for expenses like hotel bills or moving costs if the unit is unlivable for a period of time due to damage.

When looking at coverage for additional living expenses, remember this means costs beyond normal expenses. For example, if your kid has to spend $2,500 to stay in temporary housing for a month and their monthly rent is $1,500, insurance for additional living expenses would cover the extra $1,000 over their normal rental cost. In other words, they don’t get a month living rent-free!

Water damage

Just like with home insurance, coverage for water damage due to a sewage backup or flooding usually isn’t standard in tenant insurance policies. Your teen’s landlord might have coverage for the property—to cover the cost of repairs or water damage if a pipe bursts, for example—but that likely won’t extend to their tenants’ belongings.

If the plan your teen chooses doesn’t cover flooding or water damage, they should consider adding it. The amount they need will vary depending on the likelihood of flooding in their area and the replacement value of their belongings.

Theft

Unfortunately, the loss of property due to theft is a real risk for your kid, especially in shared living situations like on-campus residences or even a shared house. In general, residence agreements state that the university or college isn’t responsible for theft of personal property from a dorm room.

There are also plenty of other situations where your teen could have belongings like a smartphone or a laptop stolen, such as while studying in the library or at a coffee shop. Some tenant insurance may even provide coverage for property theft that occurs outside the home—check the fine print of the policy.

How much does tenant insurance cost?

The cost of tenant insurance ranges from between $15 and $30 per month in Canada. The amount can vary based on several factors. The province, territory, or even area of town your teen rents in will affect the premium. The monthly premiums also vary based on what is covered under the insurance—for example, they’ll be higher if your teen wants extra insurance for valuables—as well as the deductible amount.

A standard deductible for tenant insurance is $500, which is the amount your teen will have to pay out of pocket in the event of a claim. However, this varies by provider and the coverage your teen chooses. Encourage them to think about how much of a deductible they can afford to cover if they have to make a claim and balance that with the monthly cost of tenant insurance to pick the best plan for their needs and budget. Given the valuable protection it provides, your teen should consider renters insurance premiums part of their standard monthly living expenses, just like rent or internet access.

How much tenant insurance coverage do you need?

That depends. You can help your teen streamline the process of getting a quote with some initial research and basic information gathering.

The insurer will want some information about the rental unit, including:

Whether there is security on the premises, such as a concierge or an alarm system
How large the rental unit is
How many rooms are in the rental unit
The approximate age and construction materials of the building

Your teen’s personal possessions, which are covered under the “contents” portion of the insurance policy, also affect the amount of coverage and the monthly cost. Belongings can be covered for their actual cash value (ACV) or replacement value. ACV is what the item would be worth on the current market, while replacement value is what it would cost to buy a new version of the item. You might want to get any priceless items, like their great-grandpa’s violin, appraised.

To determine how much content coverage is needed, spend a bit of time with your teen going through their belongings. Create a spreadsheet together if they’re keen or even a simplified list that includes a detailed description of each item as well as its approximate ACV or replacement value. Take photographs of the items—especially those with the highest value—and include them in the list. If any of your teen’s belongings have been appraised, have those certificates handy and make digital copies.

It seems tedious, but putting this list together serves three important purposes:

Including your teen helps them understand and appreciate the true value of their belongings and ensures they’re familiar with the difference between replacement value and market value.
To state the obvious again, putting together a detailed, researched list of their belongings makes it easy to know how much coverage they should purchase. If they guess, they could undershoot and get less coverage than they should or overshoot and pay more than is necessary.
In the unfortunate event that your teen needs to make a claim, they will be relieved to have this document. Memory can be unreliable, and having this information helps claims get paid out more quickly.

Finally, some insurers have a minimum amount of coverage required. If your teen doesn’t have a lot of stuff and the replacement value of their belongings is considerably less than this minimum, they could save money by looking elsewhere for a lower amount of coverage.

Can your existing home insurance cover your child living away?

Maybe! Your home insurance policy might cover your kid’s belongings while they live on campus, either in a dorm room or at another university-owned residence. That’s because these living situations are considered temporary and your child’s primary residence is still your family home.

Check your home insurance policy to make sure your kid is covered while they’re away at school and to see whether there are any restrictions or limitations on this coverage, like a maximum age. (Your grad-school-bound kid might be exempt, for example.)

If your budding musician or artist has expensive possessions related to their craft, the amount of coverage you have under your home insurance may also need to increase to account for the value of their belongings.

But even if your university- or college-bound teen can be covered under your home insurance, it could still make the most financial and practical sense to set them up with a separate contents insurance policy because if they have to make a claim against your coverage—if, say, their laptop is stolen out of their dorm room—your rates will go up.

Can you share the cost of tenant insurance with roommates?

Some insurers allow people living together, such as a group of students renting a shared home, to share one renters insurance policy. However, there are a few potential downsides to this arrangement.

First, if the tenants have belongings worth very different amounts, it can be hard to know how much coverage is appropriate if there’s damage to everyone’s belongings. Roommates may or may not stay on top of payments, resulting in coverage lapses. Also, it can be a hassle to change the policy every time your teen has a new roommate. Finally, claims made by any roommate on a shared policy will show up in your teen’s file and could affect their insurance rates in the future.

Why your kids should understand how tenant insurance works

Tenants are legally responsible for damage they cause to any part of the building they rent in. They are also liable for any harm that comes to visitors in their rental unit, even if it’s caused by an accident.

Hopefully your teen never has to make a claim on a tenant insurance policy. But part of growing up is realizing that unplanned events, like theft or a house fire, can happen to any of us. And even the most careful young person can injure themselves at home or have their apartment become the site of someone else’s injury. Insurance won’t prevent any of these things from happening, but it will ease the financial burden if they do.

When you talk to your teen about renters insurance, tell them that the thrill of having their own place comes with responsibilities. While we can’t prevent unfortunate events, we can control how financially devastating they might be.

For a very affordable rate, tenant insurance is a financial tool that protects your teen in their new home away from the family home. And while they’re still under your roof, tools like the Mydoh app can help by teaching teens the ins and outs of making their own money, budgeting wisely, and spending their hard-earned cash responsibly.

Download Mydoh and help build the foundation of financial literacy for your kids and teenagers.

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This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.