Do you have uninsured tenants? You’re not alone. According to the Insurance Bureau of Canada, nearly 40% of tenants in Québec don’t have insurance. Many of them mistakenly believe they are covered by their landlord’s insurance. This stubborn myth creates confusion and leaves many owners wondering what to do.

To shed some light on the situation, we’ll start by comparing homeowners insurance with renters insurance. Then we’ll give you some advice on how to convince your tenants to get insured. Plus we’ll talk about putting a clause in your lease to require proof of insurance.

HOMEOWNERS INSURANCE VS. RENTERS INSURANCE

Having uninsured tenants is a legitimate cause for concern. Landlords and tenants have separate insurance policies. Both are essential and meet different needs. Unfortunately, too many tenants still think they’re covered by their landlord’s insurance if something goes wrong. But they’re not!

Home insurance for landlords

As a landlord, your home insurance covers you for certain types of damage to your building and property. Your policy also includes civil liability coverage for property damage and injury caused by renting the residence. Take the example of a landlord whose building isn’t properly maintained. They would be covered if part of the building collapses and damages property belonging to tenants or neighbours.

Your insurances covers you for what YOU own and for YOUR liability. But what about your tenants?

Renters insurance

If you’re worried about having uninsured tenants, you’re probably already aware that your insurance doesn’t cover your tenants’ property or civil liability. To start, you should know that your tenants aren’t legally obliged to have renters insurance. In addition to the confusion about homeowners insurance, another common misconception complicates things: many tenants think their personal belongings aren’t worth much. In terms of civil liability, they’re often unaware of the extent of the financial risks they’re exposed to by not having insurance.

So what’s a landlord to do?

EXPLAIN THE IMPORTANCE OF RENTERS INSURANCE TO YOUR TENANTS

You should talk to your tenants about the importance of insuring their property and having civil liability coverage. Use compelling, real-life examples to explain why forgoing renters insurance is such a bad idea.

Begin by explaining the difference between homeowners insurance and renters insurance. The first thing they need to understand is that your insurance doesn’t cover them. Then, use solid arguments and explain the potentially dire consequences of not having renters insurance. Not sure how to make your case? Read on!

Civil liability could prove costly

Explain to your uninsured tenants that if they’re held responsible for water damage or a fire in your building, you could sue them, and so could other tenants and the insurers who covered the damage. Provide examples and point out that the bill for damage can run into five figures. Forgetting to turn off a faucet, accidentally causing a kitchen fire, or getting distracted and letting the bathtub overflow can be very expensive.

There are real-life examples of tenants who caused extensive damage and had to declare bankruptcy or spend years paying off big debts. You can be sure they profoundly regret not taking out insurance. It’s also worth mentioning that renters insurance covers civil liability for the tenant’s spouse and children as well.

Your possessions are always worth more than you think

Encourage uninsured tenants to make a list of their belongings (furniture, clothing, electronics, bicycles, etc.) and the replacement cost for each item to get an idea of the total value. They’re in for a surprise—it’s always more than people think! Remind them that they are responsible for replacing any belongings that get destroyed in an accident or stolen, since your insurance doesn’t cover them. Point out that there are several types of risk (theft, fire, water damage, etc.) and that personalized insurance coverage offers peace of mind.

Renters insurance doesn’t cost an arm and a leg

Do your tenants think they can’t afford the high price of insurance? Yet another myth! Renters insurance costs about $15 per month. At Promutuel Insurance, we offer renters insurance starting at $15.95 per month, including bicycle theft coverage. Encourage your tenants to shop around by requesting quotes and talking to damage insurance representatives. They’ll find out about discounts and other ways to lower their insurance costs, including choosing a higher deductible.

Your relationship with your tenants

As you can see, it’s worth your while to discuss these important issues with your tenants. Both landlords and tenants have rights and obligations. The Tribunal administratif du logement (formerly known as the Régie du logement) can provide more information on the subject. One thing is certain, it’s in your best interest to be as clear as possible with your tenants, including by signing a carefully drafted lease.

For example, it’s a good idea to check the smoke alarm in the presence of your tenants before signing the lease. Then you can indicate in the lease that you have provided a functional alarm and that they are obliged to inspect it, maintain it, and replace the battery if necessary. The lease sets out terms and obligations for you and your tenants. In order to be sure your tenants take out renters insurance, why not put it in the lease from the get-go?

ADDING A CLAUSE TO THE LEASE

Yes, you do have the right to put a clause in the lease requiring your tenant to have renters insurance. You can even require them to provide you with proof. But it’s a good idea to get legal advice to make sure you do it by the book. It needs to be be clearly stated in the lease and agreed to when your tenants sign. If you try to add the clause during the term of the lease, it could be deemed unfair under the Civil Code of Québec if the tenant disputes it. If you want to add it when the lease is up for renewal, you need to respect certain conditions. Protect yourself and your tenants by having the right information and going about it properly. That way, everyone comes out a winner!

Explaining to your tenants why it’s so important to take out renters insurance or making it mandatory in your lease will give you peace of mind and reduce the alarmingly high number of uninsured tenants in Quebec. Your efforts will benefit everyone. Don’t hesitate to contact one of our representatives for more information on homeowners and renters insurance. We’re here to offer advice and give you peace of mind.