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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. 
Square One insurance

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 CoverageDescription Coverage Amount
StructureThe 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 StructuresDetached structures on the property will be covered, including a shed, detached garage, or pool house. Up to 20% of the replacement cost.
ContentsYour 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 ExpensesIf 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 CoverageDescription Coverage Amount
Personal LiabilityYou 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 PaymentsYour policy will cover the cost of medical treatment for anyone who is injured on your property.$1,000 to $10,000
Property DamageIf 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 CoverageDescription Coverage Amount
FloodingThis coverage protects your home against damage from overflowing water, whether from bodies of water or melting snow.$1,000 to $50,000
Sewer Back-upDamage to your home from sewer back-ups overflowing into your home will be covered. $10,000 to $50,000
EvacuationIf 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
EarthquakeIf 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 TheftThis 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)

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?

If you own a house in Canada your mortgage provider will require you to have homeowner insurance before your mortgage process is complete. If you rent an apartment, your landlord will likely ask that you purchase renters insurance.

How much does home insurance cost in Canada?

The cost of home insurance can vary greatly depending on the provider, where you live, and the coverage you need. According to RateHub,  the average cost of home insurance in Canada is around $960 a year. 

What is a home insurance deductible?

If you need to make a home insurance claim, the deductible is the cost that you, as the homeowner, need to cover. Your insurance provider will cover the remaining cost.

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.

Caitlin Wood, BA avatar on Loans Canada
Caitlin Wood, BA

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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