Everything You Need to Know About Home Insurance in Canada
Getting home insurance should be a top priority for any home owner. Why? It protects what’s likely the biggest investment of your life. So if you’re new to home buying, I’m here to tell you everything you need to know about home insurance in Canada.
In This Article:
What Is “Home Insurance?”
Simply speaking, home or property insurance is a policy that you buy to help cover the costs if something unexpected happens to your home and belongings.
“It’s one of the most important tools in protecting your financial well-being,” says Jesse Bajwa from Sonnet Insurance. “It usually includes coverage for damage caused by fire, additional living expenses if your home is unlivable from an insured event, theft, and personal liability in case someone gets injured on your property.”
Is Home Insurance Legally Required in Canada?
Unlike auto insurance, property owners in Canada are not legally required to take out a home insurance policy. However, every home owner should have one in place (more on this later).
Why Homeowners Need Home Insurance
So, if the Canadian government can’t force you to have a policy in place, why pay for home insurance and add yet another expense to your monthly budget?
First, if you’re applying for a mortgage, your bank or lender will often require you to hold an active home insurance policy. This was true in my case: the bank would not lend us the money until we produced proof that our new house was insured.
Second, owning a home is a major responsibility, and your financial security could collapse if something goes wrong. What if someone falls in your driveway, gets injured, and sues you? Or what if a fire starts in your house and destroys your next door neighbour’s property? Without a home insurance policy in place, these nightmarish situations could drain you both financially and emotionally.
Lastly, your home is likely the biggest investment of your life. Do you really want to leave it financially unsecured, just to save some cash?
“Everyone should have at least basic insurance coverage,” says Bajwa. “It provides peace of mind that if something ever happens, you can afford to replace your clothes, furniture, or repair your home. Otherwise, you could be left trying to replace your home and belongings at full value.”
Best Home Insurance Quotes in Canada
It’s important to shop around and compare home insurance quotes before making a commitment. Here are few of the top home insurance providers in Canada:
|Home Insurance Provider||Features||Get a Quote|
|InsuranceHotline.com||Shop around and save on home insurance premiums by comparing and selecting an ideal plan from the best insurers in Canada.||Get a Quote|
|Square One Insurance Services||Home insurance plans starting at a little as $12 per month. Get a quote conveniently at home online or over the phone.||Get a Quote|
|Sonnet||Uses available data to simplify quoting and to show you coverage options that fit you and your home.||Get a Quote|
|TD Home Insurance||Offers varying coverage options to ensure a suitable policy, ranging from Gold (basic) to Platinum (add-on coverage) and Platinum Plus (comprehensive).||Get a Quote|
|Desjardins Home Insurance||Save up to 20% on your property insurance when you insure your car with Desjardins, or 20% on your home insurance if you are claims-free.||Get a Quote|
|Allstate Home Insurance||Personalize your insurance coverage: Allstate offers three “Your Choice Home” packages that provide different levels of coverage.||Get a Quote|
|RBC Home Insurance||Licensed insurance advisor guides you through your coverage options and provides clear, upfront advice to help you choose the coverage that’s right for you.||Get a Quote|
|CAA Home Insurance||Policy protects a home's physical structure, belongings and other buildings on your property; safeguards your family from legal liability to others; and offers service line, water, tire, and legal coverage.||Get a Quote|
|Belairdirect Home Insurance||Save on your home insurance and get other advantages when you combine your home and car insurance with belairdirect.||Get a Quote|
|Intact Home Insurance||Customizable coverage that includes house, contents, and personal liability.||Get a Quote|
What Factors Affect the Cost of Home Insurance?
“Premiums” are the amount you pay to buy home insurance, and the price tag fluctuates according to your circumstances. When calculating your premium, insurance companies may consider the following:
The biggest factors affecting the premium are the size and composition of your property. The larger the home, the higher the price tag to replace it – and that influences premiums. In addition to the square footage, insurers consider the quality of construction used to build your property and its age. The type of residence is also considered. Are you living in a single-family home? A semi-detached row house? A condo? A rental property or seasonal residence?
A mansion filled with jewels and sports cars will have a different price tag attached to it than a no-frills starter home. Some of your appliances may affect your premium as well. Do you have a wood stove? If not installed and maintained properly, wood stoves can cause house fires and carbon monoxide poisoning. Understandably, an insurance provider may want to inspect a wood stove before issuing a policy.
Piping and Electrical Setup
Galvanized or lead piping usually means your plumbing is older, which makes it more likely to crack or leak. Insurers generally prefer homes with upgraded copper or plastic plumbing. The type of wiring and the way electricity comes into your house matters as well. Insurers look out for red flags, like knob-and-tube or aluminum wiring that boost fire risk.
Renovations and Upgrades
“Many homeowners don’t know that if they’re doing major renovations, like upgrading a kitchen or building an addition, that they need to tell their insurance provider,” says Bajwa. “Your home’s value will go up with these changes and that needs to be reflected in your policy coverage.”
Bajwa notes that the insurance provider should be notified of smaller changes as well.
“Give your insurer the heads up if you replace your roof, install a sump pump, or add a security system,” he says. “These changes can actually help you save money on your insurance bill.” Aside from upgrading your home, there are also a few other ways to save money on home insurance.
Most insurers prefer your roof to be under 20 years of age. If it’s older than that and your roof is damaged, some policies will only pay out depreciated values (e.g. 25% of the replacement cost).
Location and Use
What’s the distance between your home and a fire hydrant or a fire station? What’s the crime rate in your neighborhood?
And how are you using your insured property? If you’re running an Airbnb or have a biz set up in the basement, this may impact your premiums.
Past claims are often an insurers’ best predictor of future claims activity.
A deductible is the amount of your claim that you agree to pay before your insurance company pays the rest.
What Does Home Insurance Cover?
Trick question! Every home insurance policy is different and depends on how much you’re willing to pay for coverage. In general, a standard home insurance policy may cover:
- Damage or loss to your home
- Damage, theft or loss of your personal possessions
- Personal property stolen from your vehicle
- Damage or injury to others who visit your home or property
- Accidental damage you cause to somebody else’s property
A few caveats: home insurance does not cover normal “wear and tear,” loss or damage from mould, or damage caused by a lack of maintenance. Moreover, there are “exclusions” (specific items/events not covered by your policy) and you may want to consider buying extra coverage for those hypothetical situations. For instance, depending on your location and dwelling, you could also add coverage for sewer backup, overland water damage, and earthquakes. Likewise, paying a few extra dollars a month can insure valuable items not typically covered under your policy. For example, I often travel with expensive camera equipment, and it was cheaper to add these items onto my policy than to take out a travel insurance policy every time I hit the road.
“Be sure to add expensive or valuable items to your policy, like jewellery, artwork, or collectibles,” says Batjwa. “These may not be [automatically] covered if they’re over a certain dollar value, usually $3,000 or more.”
Another consideration? In the age of Airbnb, get a policy that covers renters if you plan to open your home to guests. It may seem extreme, but take this cautionary tale as an example: my friend rented out her condo while in Argentina for six months. While she was away, the toilet exploded, causing $40,000 in water damage to her unit and the apartments below her. But the really bad news? Before departing overseas, my friend forgot to update her policy to cover renters living in her residence. The insurance provider refused to cover the damages, leaving her with a colossal bill. A policy that covers short-term renters may cost only a few extra dollars a month, but it’s worth it if you’re renting out your digs.
The bottom line? The devil is in the detail, and what’s covered varies from policy to policy. Before signing on the dotted line, consider your needs, read your policy carefully, and ask your provider questions about what’s included and excluded. Above all, ask yourself: what do you want covered under your policy and what can you afford?
Types of Home Insurance and How to Choose
Now the hardest part: choosing a home insurance policy. Since there’s no one policy that suits everyone, it’s important to shop around and find a policy that fits your life circumstances.
“While price can be an important factor in choosing a home insurance policy, focus on getting the right coverage for your needs,” says Bajwa. “This means paying a bit more if it means having the peace of mind to be protected and ensuring you can replace all of your personal belongings.”
Generally, the main types of home insurance policies in Canada include:
Covers all risks to your home and contents, except for any risks listed in your policy as exclusions. Also referred to as a ‘special’ or ‘all-perils’ policy. This policy is likely your best bet if you’re risk averse and want all the things covered by the insurance company.
Provides less coverage than a comprehensive policy. It only covers the risks to your home and contents that are specifically named. Also called a “basic” or “named perils policy.” You might want to choose this policy if you’re looking to save money on premium payments and you’re prepared to carry the financial risk of paying for some losses yourself.
A broad (or broad-form) policy falls somewhere in between comprehensive and standard policies.
It has two parts: (1) it covers all risks to your home, except for those named in your policy as exclusions (similar to comprehensive policies); (2) it only covers named risks to your contents (like standard policies). If a comprehensive policy costs more than you can afford, and a standard policy doesn’t suit your needs, the broad insurance policy may be a good mid-priced compromise for you.
This is the bare-bones policy, providing the least amount of coverage. A no-frills policy offers very basic coverage for homes that don’t meet typical standards for insurance. You may consider this policy if there are physical problems with your home that keep it from meeting the standards set by insurers. It may be less costly in the long run if you correct the issues first and then apply for better coverage.
Homeowners can be held liable for bodily injury or property damage unintentionally caused to others. Luckily, most home insurance policies include coverage for unexpected events that occur on your property. For example, if someone slips on your snow-covered driveway and gets hurt. Whether you rent or own your home, personal liability insurance is a must.
Why Should You Protect Your Investment?
Getting home insurance may not be mandatory in Canada, but it’s nonetheless essential when buying a home. There’s no one-size-fits-all policy, so your best bet is to shop around for one that best suits your life circumstances and budget. Consider your specific needs, ask questions, and compare the prices and coverage options before committing to a policy. It’s like buying a new pair of jeans: you’ve got to find the right brand and fit!
Now that I’ve moved into our dream home, I can tell you getting home insurance is worth it. I can breathe a sigh of relief knowing that we’re covered no matter what happens – and that peace of mind is truly priceless.