Buying and owning a home comes with plenty of responsibilities, particularly your financial obligations to pay the bills to maintain it. Home insurance is one of the many bills associated with owning real estate and is something that homeowners typically need to have.
Homeowners can rest assured knowing that their homes will be protected against damage, vandalism, or damage from a natural disaster with a home insurance policy in place. All belongings within the home will also be protected in case they are ever damaged, stolen, or lost.
By having a policy in place, you can be financially compensated to pay for damages to your home or contents. Further, you may also be protected against litigation in case someone ever hurts themselves on your property.
Is Home Insurance Required By Law?
It is not mandatory to have home insurance in Canada. However, the majority of mortgage lenders will require that a property has a home insurance policy before they agree to extend a loan for a home purchase.
What Factors Impact The Cost Of A Home Insurance Policy?
The price you pay for your premiums will vary a great deal depending on a number of factors, including the following:
- Location of your home. Many factors play a role here, such as proximity to airports, large bodies of water, and a fire hydrant or fire hall, for example. The crime rate in the area is also factored into the location as well.
- Property type. Whether your home is a detached, condo, mobile home, or any other type will influence your policy quote.
- Credit score. A higher score may result in lower premiums.
- Electricals, plumbing, and heating. The electrical wiring, pipes, and HVAC system will all be factored into your premium. In some cases, insurance may be denied if these systems are too old or faulty.
- Roof material. Higher quality materials will protect your home better and for longer than cheaper materials that usually have to be replaced within a few years. Insurance providers sometimes reward a better-quality roof with lower premiums.
- Upgrades. If a renovation project undertaken has increased the value of your home, you may have to pay higher premiums. On the other hand, certain upgrades may help to reduce the risk of your filing a claim — such as waterproofing your basement — in which case your premiums may be lower.
- Replacement cost. This refers to how much it would cost to rebuild your house the way it is today and has nothing to do with its current market value.
- Claims history. If you have made many claims in the past, your premiums may be more expensive.
- Pets. Certain types of pets on the premises may increase your premium. For instance, specific dog breeds that are known to be more aggressive may pose a greater risk, which could result in a higher cost for your policy.
- Business operations. If you operate a business out of your home, you will likely face higher premiums because of added risks.
- Rentals. If part of all of your home is rented out — either occasionally or on a regular basis — you’ll want to inform your insurance provider. In this case, your premiums may be higher to account for the added risk posed by others occupying the property.
- Swimming pool. Since there is a greater risk of drowning when there is a pool on the premises, your premiums may be slightly more expensive, despite any safety measures you may take.
How To Determine What Kind Of Home Insurance Coverage You Need
When it comes to home insurance, there isn’t a one-size-fits-all policy for all homeowners. When you take out a home insurance policy, consider your options, which include the following:
No Frills
As the name suggests, a ‘no frills’ insurance policy is a basic plan that offers just the fundamentals. It’s geared towards those who are unable to get a traditional policy because they do not meet specific standards to be insured. This can happen if there are issues with your home — such as old knob and tube wiring — that prevent it from being qualified for insurance.
Basic Or Named Perils
This type of home insurance policy only covers perils that you specifically name. It’s a more affordable option compared to other more comprehensive plans.
Broad
Homeowners that want more coverage may opt for a broad insurance policy, which offers comprehensive coverage on more expensive items, such as the actual structure of the home and big-ticket contents within it that are specifically named. While more expensive than a basic plan, a broad policy is considered mid-range in terms of price.
Comprehensive
A comprehensive plan is a more expensive home insurance policy, which covers both the structure of the home and all contents within it against all risks, such as fire, lightning, theft, vandalism, and window breaks. It also covers damage from aircraft or vehicle impact. There are some exclusions in comprehensive coverage, such as predictable events and sewer-backup/flooding or earthquakes for which coverage can be purchased separately.
Personal Liability
There may be times when someone on your property may get injured or have their own property damaged, after which the person may threaten litigation against you. If you are ever taken to court and sued, a personal liability insurance policy will protect you and financially compensate you for any costs associated with lawyer and court fees.
What Does Home Insurance Cover?
Property Coverage
| Types of Coverage | Description | Coverage Amount |
| Structure | The actual building will be covered for damage caused by specific perils depending on the policy and includes attached structures, such as a deck or attached garage. It also covers pools and fixed outdoor equipment, such as a swing set. | The replacement cost of the structure. |
| Detached Structures | Detached structures on the property will be covered, including a shed, detached garage, or pool house. | Up to 20% of the replacement cost. |
| Contents | Your personal property will be covered, which can include your appliances, clothing, artwork, jewelry, electronics, furniture, and so on. | Up to 80% of the replacement cost. |
| Temporary Living Expenses | If your home is deemed uninhabitable because of extensive damage, your policy will cover temporary living expenses while your home is being repaired or replaced. | Up to 30% of the replacement cost. |
Liability Coverage
| Types of Coverage | Description | Coverage Amount |
| Personal Liability | You will be covered if a lawsuit is brought against you by someone who was injured on your property. | $100,000 to $5,000,000 |
| Medical Payments | Your policy will cover the cost of medical treatment for anyone who is injured on your property. | $1,000 to $10,000 |
| Property Damage | If you unintentionally cause damage to property that is not yours, your policy will reimburse the owner of the property accordingly. | $500 to $6,000 |
Additional Coverage Options
| Types of Coverage | Description | Coverage Amount |
| Flooding | This coverage protects your home against damage from overflowing water, whether from bodies of water or melting snow. | $1,000 to $50,000 |
| Sewer Back-up | Damage to your home from sewer back-ups overflowing into your home will be covered. | $10,000 to $50,000 |
| Evacuation | If you have to vacate your home because of risk or danger from a natural disaster or some other hazard, this coverage will help pay for accommodations. | 2,500 to $10,000 |
| Earthquake | If you live in an area that is vulnerable to earthquakes, you may want to add this coverage, as it’s not typically included in a standard home insurance policy. | The replacement cost of your home. |
| Identity Theft | This type of coverage will reimburse you for any damages associated with identity theft. | $5,000 to $30,000 |
Where Can You Buy Home Insurance?
Home insurance can be purchased from the following:
- Banks
- Credit unions
- Insurance companies
- Insurance brokers
- Online insurance providers
- Online aggregates
Applying For Home Insurance
When you apply for a home insurance policy, you’ll need to provide specific pieces of information about yourself and the property you wish to insure. Personal information required includes your full name, birth date, social insurance number (SIN), and claims history.
You will also need to provide details about the home you need a policy for, including the following:
- Personal information about yourself (ie. name, date of birth, etc)
- Home address
- Age of the home
- Type of home (ie. single-family home)
- Home construction materials (ie. aluminum siding, brick, etc)
- Square footage
- Roofing details
- Presence of alarm system
- Presence of smoke alarms
- Renovation history
- Plumbing, heating, and electrical details
- Age of furnace
- Current insurance policy (if applicable)
- Home occupants
- Pets
- Tenants
- Personal belongings
- Unique features of the home or property (ie. swimming pool, pool house, etc)
Additional Reading
Factors To Consider When Buying Home Insurance
There are a few things to consider when it comes to buying home insurance to protect your home and the contents within it. Here are a few factors to keep in mind:
Premiums
In order to keep your policy active, you will need to pay your premiums on time every billing period. This is an added bill to pay, so you’ll want to make sure it fits well within your budget. Plus, you may want to compare premiums among a handful of insurance providers before settling on one.
Deductible
Before coverage kicks in after filing a claim, you will need to pay a deductible. This amount is in addition to your premiums and is only required when you file a claim. Generally speaking, higher deductibles translate into lower premiums, and vice versa. Consider the deductible before finalizing your home insurance policy.
Coverage Limits
Be sure that the policy you are buying into will provide you with adequate coverage. The last thing you want is to file a claim, only to find out you are not covered for everything you initially thought you were.
Insurance Provider
Review the insurance provider you are working with. Look into their track record, communication lines, customer service, and financial stability prior to signing on the dotted line.
Home Insurance FAQs
Do I need home insurance?
How much does home insurance cost in Canada?
What is a home insurance deductible?
Final Thoughts
Your home is a valuable asset, so you should do what you can to protect it, and that includes taking out a home insurance policy. Having a policy like this in place can compensate you if your home is ever subject to damage or contents within it are stolen, damaged, or lost. Rather than having to come up with these exorbitant fees yourself to replace your home or your belongings, a home insurance policy can step in and tackle these major expenses for you.
