What You Need to Know About Insuring a Life Lease in Manitoba

Understanding Tenant Insurance

Even though a life lease is different from a traditional rental, it helps to start with the basics of tenant insurance. There are three major areas that tenant insurance is designed to protect:

1. Your Belongings

Your furniture, clothing, electronics, kitchen items and other personal possessions can add up to a significant amount of money. Tenant insurance can provide coverage for those belongings following an insured loss. It’s also worth asking your broker whether your belongings are insured on a replacement-cost basis. The goal is generally to have enough coverage to replace what you own today, rather than simply considering what your belongings might be worth if you sold them. For example, if you have a couch you’ve owned since the 1980s, the question isn’t necessarily what that couch is worth today. It’s what it would cost to purchase a comparable replacement today.

2. Your Personal Liability

Personal liability coverage is sometimes overlooked, but it can be an important part of your insurance. Liability coverage can protect you if you are legally responsible for accidentally injuring someone or damaging someone else’s property. For example, imagine you accidentally leave a tap running and water damages your suite as well as the unit below you. While the incident was completely accidental, you may still have a liability claim to deal with. Your policy will have a specific limit for personal liability, so it’s worth knowing what that limit is.

3. Additional Living Expenses

What would happen if a significant fire or water loss made your suite temporarily uninhabitable? You could suddenly have expenses you don’t normally have, such as temporary accommodation, increased meal costs and other additional expenses. This is where Additional Living Expense coverage can become important. Tenant insurance is about much more than replacing a television or a couch. It can help protect your belongings, your financial liability and your ability to manage additional costs following an insured loss.

Broad vs. Comprehensive Coverage

When discussing insurance, you may hear the terms Broad Form and Comprehensive coverage. The easiest way to understand the difference is to look at how your personal belongings are insured.

Broad Form

With Broad Form coverage, your belongings are generally protected against specific causes of loss, or “perils,” listed in the policy. If the cause of a loss isn’t one of those insured perils, there may not be coverage.

Comprehensive

Comprehensive coverage takes a different approach. Rather than starting with a list of what’s covered, it generally covers accidental direct physical loss unless the cause is specifically excluded by the policy. This can provide a wider range of protection for accidental situations involving your belongings. You don’t necessarily need to become an expert in insurance terminology.

Comprehensive coverage generally costs more because it provides broader protection, although the actual difference in premium varies by insurer and individual policy.

A useful question to ask your broker is:

“Are my personal belongings insured on a Broad or Comprehensive basis, and what does that mean for me?”

Understanding Water Damage

Water damage sounds straightforward, but the source of the water can make a significant difference to your insurance coverage. For example, water entering from outside the building, a sewer or drain backing up, a plumbing pipe suddenly bursting, or water entering through the roof can all be treated differently under an insurance policy. Different types of water damage may have different coverage requirements, limits, deductibles or exclusions. So don’t assume that having some form of “water damage” coverage means every possible source of water is automatically covered. One particular coverage worth discussing with your broker is sewer backup coverage.

Why Sewer Backup Coverage Matters

Sewer backup coverage is something every life lease resident should at least discuss with their insurance broker. Generally speaking, when damage results from a sewer or drain backing up, or from certain sump-related events, the applicable sewer backup coverage needs to be in place for the resulting damage to be insured. It’s easy to understand why someone living on a basement or main floor might be concerned about sewer backup. But what if you live on the second or third floor? The important thing to remember is that insurance coverage is determined by the cause of the loss, not simply the floor you live on. For example, a drain connected to a dishwasher or washing machine can become blocked and cause water damage. Something as simple as an obstruction in a washing machine drain could potentially result in a substantial loss, even in a higher-floor unit.

A water-related loss could also result in you having to temporarily leave your suite while repairs are completed. This connects directly to Additional Living Expense coverage. In order for those expenses to be covered under your policy, the cause of the loss must be an insured peril. If you don’t have sewer backup coverage and the loss is caused by sewer backup, you may not have coverage for that loss. When reviewing your policy, ask:

“Do I have sewer backup coverage?”

“What is my coverage limit?”

“What is my deductible?”

What Makes a Life Lease Different?

A traditional tenant generally rents an apartment or house, pays monthly rent and doesn’t have a significant financial investment tied to the property itself. A life lease arrangement is different. As a life lease occupant, you may have paid a significant entrance fee and then continue to pay occupancy and/or operating fees. You may also have upgrades or improvements within your individual suite. From an insurance perspective, that creates an important distinction. You’re still insuring the things we’d normally associate with tenant insurance:

Your belongings
Personal liability
Additional Living Expenses

But there may also be additional property and financial responsibilities that need to be reflected in your policy.

One of the most important things you can tell your insurance broker is:

“I live in a life lease.”

Don’t simply ask for tenant insurance without explaining the life lease arrangement. Different insurance companies may handle life leases differently. Some may use a tenant insurance policy with specific life lease coverages or endorsements. Others may insure the risk using a condominium-style policy because some of the insurance needs are similar. The name at the top of the policy is less important than making sure the policy properly addresses your actual responsibilities.

Life Lease-Specific Coverages to Consider

There are several areas your broker should look at when arranging or reviewing insurance for a life lease.

Improvements and Betterments

This is one of the biggest differences between a traditional rental and a life lease. Think about anything that has been upgraded or changed within your suite, such as:

Flooring
Cabinetry
Countertops
Permanently installed fixtures
Renovations or other upgrades you’ve paid for
The important question is…Who is responsible for insuring those items: the building or you?

Your life lease agreement can help establish where those responsibilities sit, which is why it’s a good idea to provide your broker with a copy of the agreement. If you’ve completed renovations yourself, keep your invoices and records. Your broker also needs to know about those improvements so the appropriate value can be considered when arranging coverage.

Deductible or Loss Assessment Coverage

There can also be situations where a loss involving the building results in an amount being assessed back to an occupant. Depending on the arrangement, the building’s insurance, your agreement and the circumstances of the loss, this could potentially involve a deductible or another assessment. Life lease-specific insurance may provide coverage designed to address certain assessments.

Ask your broker:

“Does my policy provide coverage if I’m assessed an amount following an insured building loss, and what is the limit?”

Collectively Owned Property

Some life lease insurance products may also provide coverage relating to collectively owned property. This isn’t something you would normally expect to discuss when insuring a typical apartment rental, which is another reason it’s important to identify yourself as a life lease occupant when speaking with your broker.

The Building’s Insurance vs. Your Insurance

There are two sides to the insurance picture. The sponsor or landlord has insurance responsibilities for the building itself. You have your own insurance for your personal property, liability and other interests or responsibilities that apply to you as a life lease occupant. These policies are not interchangeable. A common question in any multi-unit building is:

“The building has insurance, so why do I need my own?”

The building’s policy is designed primarily around the building’s interests and responsibilities. Your policy is designed around yours. After a major loss, both policies may potentially be involved, but they are doing different jobs.

What Should You Do?

Tell your broker you live in a life lease.
- Don’t assume that a standard tenant insurance policy automatically accounts for your life lease arrangement.
Provide your life lease agreement.
- Your agreement can help your broker understand what you’re responsible for versus what the sponsor or building is responsible for.
Tell your broker about improvements.
- If you’ve replaced flooring, upgraded cabinetry or completed other renovations, don’t assume they’re automatically accounted for.
Consider the realistic replacement cost of your possessions.
- Consider what it would cost to replace your belongings today, rather than simply what you think they’re worth.
Review your coverage periodically.
- Your belongings change. Renovations happen. Insurance products change.

A periodic review can help make sure your coverage continues to reflect your circumstances.

Questions to Ask Your Insurance Broker

When reviewing your insurance, consider asking your broker these questions:

Does my insurer know that this is a life lease?
Are my belongings covered on a Broad or Comprehensive basis?
Are my belongings insured for replacement cost?
Do I have sewer backup coverage, and what are the limit and deductible?
Do I have coverage for the improvements or upgrades I’m responsible for?
Does my policy provide coverage for assessments or building deductibles that could be charged back to me?
How much personal liability insurance do I have?
Do I have Additional Living Expense coverage if I can’t live in my suite after an insured loss?

A Final Thought

Life lease insurance doesn’t need to be complicated. The biggest thing to remember is that a life lease isn’t exactly the same as a traditional rental, so your insurance shouldn’t automatically be treated as though it is.

Make sure your broker understands your occupancy, understands your life lease agreement and knows about any improvements you’ve made. And particularly when it comes to water coverage, sewer backup, improvements and assessments, don’t rely on assumptions. Ask what your policy actually provides.

Understanding your coverage before there’s a claim gives you the opportunity to identify potential gaps while there is still time to address them.

If you have questions about your life lease insurance or would like to review your existing coverage, the team at

Garriock Insurance is here to help.