Water damage, a kitchen fire or a visitor’s slip and fall in your apartment can all lead to significant financial headaches if you’re found liable.

Tenant insurance, also known as renter’s insurance, is designed to help reduce those costs. The price tag attached to a policy is typically $20 to $50 a month, which covers you if such an event occurs. 

While some landlords may require tenant insurance before handing over the keys to a rental unit, it’s not required in Canada so it’s up to tenants to weigh the pros and cons themselves.

That said, most experts agree that getting caught in a sticky situation without tenant insurance is not something renters should risk.

“It’s a really vital piece in making sure that when the unexpected happens, that you’re put back in the same place you were before that event took place,” said Gina McFetridge, vice president of Atlantic and digital distribution at BrokerLink insurance brokerage

Each insurer will have their own unique policy, but in general, tenant insurance covers you for your personal liability, your personal property, and the extra expenses that may occur after a loss, said Matthew Johnson, customer care manager at Sonnet Insurance, in an email statement. 

The liability portion of a renter's insurance policy covers property damage or bodily injury to someone else while in your home, while personal property coverage reimburses you for belongings such as electronics and furniture. Different policies include various exclusions or limits, depending on how much financial coverage you're looking for or how much you want to pay each month.

Coverage for extra expenses after an insured loss are also there to help in situations where you can't stay in your home at first. For example, if your apartment floods, you’ll likely encounter expenses such as a hotel stay and additional groceries, Johnson said.

Insurers might also cover identity theft, or lock replacement fees if your keys are stolen.

What isn’t covered will depend on the insurer. Some of Sonnet’s exclusions for damages, for example, include damage from rust or corrosion, wet or dry rot, fungi or spores, contamination, as well as direct damage caused by vermin and certain other animals.

When deciding whether to get tenant insurance, Cindy Marques, CEO and co-founder of MakeCents, a financial coaching company for millennials, said people should ask themselves what it would look like financially if they lost expensive items such as a smartwatch or computer to theft or damage and had to replace them out of pocket.  

Tenants also need to consider if they’d be able to afford any legal costs if someone were to get hurt in their home or if they were to cause damage to another unit, she said. The same goes for if their home became temporarily unlivable and they had to relocate.

While some people might create an emergency fund to cover these costs instead, Marques advises against it, explaining that an emergency fund is better used for “income protection” against any earning interruptions due to illness, injury, job loss, a low to no income month as a business owner, or unexpected events, like the COVID-19 pandemic. 

You especially don’t want to find yourself out of luck and having to cover the costs of theft or damage while you’re simultaneously dealing with income loss, she added. 

Marques, like McFetridge and Johnson, doesn’t see any downside to tenant insurance.

“If you’re quite well off and have ample savings and investments, then maybe you don’t need the insurance because you can afford to replace everything without experiencing any financial distress,” Marques said.

“But, if the cost of funding a $30 a month policy feels too expensive to you, then that’s exactly why you need it … if it’s a bit expensive then you definitely can’t afford to not have it and otherwise take on the cost of thousands of dollars without it.”