A: Not true. The landlord is restricted to requesting a security deposit only at the beginning of a tenancy and the amount of the security deposit cannot exceed more than one half of one month's rent. The landlord can also request a pet damage deposit of one half of one month's rent as well. So, under the Residential Tenancy Act of BC the landlord can conceivably be holding the equivalent amount of one month's rent in total deposits.
Importantly, the landlord and tenant need to participate in the completion of condition and inspection reports at the beginning and end of the tenancy. This ends a lot of argument about who caused what damage and who is responsible. Where these reports are absent or never were completed, and the landlord didn't give the tenant at least two chances to participate then the landlord's right to claim against the security deposit or pet damage deposit no longer exists.
When the tenancy ends the deposits must be returned within 15 days unless they are claimed against in accordance with the Act, unless an Arbitrator orders that they can be withheld, or unless the tenant agrees in writing that the landlord can withhold any or all of the deposits against unpaid rent, utilities and/or damages.
I've seen many situations like yours where the landlord isn't satisfied that the security deposit will compensate for the potential risk, so many landlords will protect themselves further with added insurance policies.