We rounded up everything you could want to know about your home insurance coverage.
We’ve created this guide to home insurance to answer any questions you might have: from what it is and how it works, to how much it costs and what it covers.
Home insurance is a form of property and casualty (P&C) insurance that protects your home and personal belongings from damage or loss.
It is designed to cover events that are expected and predictable. This means it doesn’t offer coverage for regular home maintenance costs or even major expenses that are part and parcel of home ownership—such as replacing the shingles on your aging roof.
When you purchase a home insurance policy, you agree to make regular payments, called premiums. In exchange, your insurance company assumes certain risks and agrees to pay if you experience any of the losses covered in your policy.
The premiums you pay go into a large pool managed by the insurer, which is used to cover any claims made by policyholders. This is how insurance companies are capable of covering huge losses that would be financially devastating to individuals.
Watch: Do you Need Insurance?
You’ll want to read your contract closely, because your home insurance policy only covers “named perils”—the specific damages or losses outlined within it—unless you purchase comprehensive home insurance.
Common named perils can include:
Home insurance is a service to help with sudden, unpredictable events. It isn’t meant to cover every instance of damage or loss to your home. That’s why it’s important to understand what kind of home insurance policy you’re getting. In Canada, there are three broad categories:
You can also choose to add endorsements to your policy. Endorsements are amendments or changes to your insurance policy used to add optional coverages to your policy, for an extra cost, or to waive certain coverages that are typically included.
Read more on what’s covered by home insurance.
There are certain things standard home insurance won’t cover. Some events that are routinely left out of standard policies include:
These are standard exclusions, but you may be able to purchase optional add-on coverage, known as endorsements, for risks that are not covered by your policy.
Whatever you do, don’t come up with a number off the top of your head. Take a systematic approach to calculating the value of your belongings; otherwise, you may undervalue how much your stuff is actually worth.
Take the time to record a list of your belongings, backed up with written and visual documentation (cell phone pics and receipts). Next, figure out how much it would cost to replace these items if they were lost or destroyed today, and add up the total. Keep a copy of all your documentation in a safe place outside of your home, such as a safety deposit box at your bank.
It depends on your home, its location and your possessions. Most home insurance providers offer calculators to help you figure out how much coverage you’ll need.
No two insurance policies are the same, and not surprisingly, their costs vary, too. But according to Ratehub.ca, the average annual cost of home insurance in Canada is $960. People in Ontario pay an average of $1,250, while those in Alberta pay $1,000, and those in Newfoundland and Labrador pay $780.
Insurance companies consider several factors when calculating home insurance costs, including:
To purchase a home insurance policy, contact an insurance broker, provider or financial institution that offers P&C insurance. They will provide you with a quote, based on the amount and types of coverage you need, as well your personal profile, such as where you live and the type of dwelling you need covered.
Before taking this step, consider using an online comparison site to get an overview of the best home insurance quotes available to you. These sites allow you to quickly compare offers from many providers for free. (Note: Aggregator website Ratehub.ca and MoneySense.ca are both owned and operated by Ratehub Inc.).
Read more on how to compare home insurance policies before you buy.
There are several things you can do to save on home insurance. Here are a few:
Read more on how to save on home insurance.
No, home insurance is not required by law in Canada. But some finance lenders may require that you have it before providing you with a mortgage.
Home insurance settlements are not meant to improve the state of the home compared to before the damage occurred. There is a formula insurers use when calculating a home insurance settlement, and it factors in things like tax (HST) and depreciation.
No, as floods are not considered part of general water damage. But you can buy an endorsement. If you live in an area that is designated as having a high risk of overland flooding, consider purchasing it.
It depends on your policy. For example, if a fire was caused by faulty wiring, the claim may be denied because of poor maintenance.
That’s determined by how the water entered your home. Standard home insurance policies don’t cover damage covered by overland flooding.
Yes. Generally, wind damage is covered by home insurance policies.
Standard home insurance policies don’t cover earthquakes, but you can purchase earthquake insurance.
The simple answer is yes. But, as with a lot of insurance questions, the longer answer is, it depends—in this case, on the type of injury and its severity.
Fireplaces and firepits are warm, cozy and can increase your home insurance premiums. It’s estimated that a wood-burning fireplace can increase premiums by $100 a year. Having a fire pit could increase certain risks, such as property damage. Finally, a firepit may increase the value of your home—which, in turn, can increase your premiums.
It depends on your policy. However, cancelling is very risky. You can switch providers, but it’s never a good idea to cancel your home insurance otherwise. You may have to pay penalties. Plus, if you’re renewing your mortgage, lenders may require that you have insurance. And that’s not to mention the risk of something happening to your home while you’re without coverage.
No. Home insurance covers damage to your home and your possessions. However, mortgage protection insurance, also known as mortgage life insurance, covers the cost of your mortgage payments if you die or are unable to work due to a serious illness or injury.
Finally, home insurance is not the same as mortgage default insurance, which protects the lender when you’re buying a home and have a down payment of less than 20%.
It’s a good idea to talk to your insurance provider and contractor to ensure you and the contractors are covered for accidents that may occur during home renovations.
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