Home insurance premiums may be just another bill to pay, but it’s one that could protect you from financial ruin.
But as helpful as a home insurance policy may be, is it necessary to have one? More specifically, are you required to have a home insurance plan as a homeowner in Canada by law?
Is Home Insurance Mandatory In Canada?
No, home insurance is not mandatory in Canada. That said, it’s recommended that all homeowners have home insurance to cover the cost of damage or loss, which could be substantial.
For instance, damage from a fire or loss due to theft can leave you with a hefty bill to cover. But with a home insurance policy in place, you won’t be left paying the bill out-of-pocket.
Do You Need Home Insurance To Get A Mortgage?
While there’s no law in Canada that says you must have home insurance, most mortgage lenders will require it when you apply for a home loan to finance a home purchase.
Your lender is taking on a risk by lending hundreds of thousands of dollars for you to buy a house. In this case, the lender will want to make sure that your home is in good condition and that it’s not at an increased risk of damage.
At the end of the day, your lender will want to know that your home is insured to protect their investment. After all, if your house burns down and you don’t have the means to rebuild, forcing you to declare bankruptcy, your lender will have no recourse to recoup their money.
As such, lenders will generally require you to have a home insurance policy before approving you for a mortgage.
Where Can You Get Home Insurance In Canada?
Should You Get Home Insurance?
Even if you’re not buying a new home and don’t have to comply with a lender’s requirements, you might still want to consider taking out a home insurance policy. Here are a few reasons why:
Replace Your Belongings
Whether your personal property is destroyed, lost, or stolen, a home insurance plan will provide you with the funds needed to replace them, as long as they’re covered under your policy.
Repair Your Home’s Structure
In the event of a fire, flood, or another disaster, your home may have undergone extensive damage. This can leave you with tens of thousands of dollars in repairs, which may be covered under a home insurance policy.
Protect You Against Litigation
If someone is injured while on your property, you could be held liable and be taken to court. In this case, you could be slapped with a hefty legal bill. But your home insurance policy will protect you against legal and financial liability. Otherwise, you’d have to pay out-of-pocket for lawyer fees, medical fees, and compensation.
Protect Your Equity
Your home is likely your biggest and most valuable asset. As such, you’ll want to do what you can to protect it. A home insurance policy will ensure that if something happens to your property, you’ll have the financial backing to repair your home and retain its value.
How Much Does Home Insurance Cost?
The cost of home insurance depends on a variety of factors, such as:
- Your coverage amount
- Your location
- Your home’s age and condition
- Your claims history
- Alarms and other security measures
That said, the average cost of a home insurance policy in Canada is approximately $1,000 per year. You can choose to pay your premiums annually or monthly.
Final Thoughts
Your home insurance policy can potentially save you tens or even hundreds of thousands of dollars if your home or its contents are damaged or destroyed. While home insurance in Canada is not mandatory, it’s highly recommended for all homeowners to have.
