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Home insurance covers your home and the contents within it. It also covers your personal liability if you’re sued for damages or injury that you may inadvertently cause. There are four key components to home insurance:
Here are some of the most frequently asked questions about home insurance in Canada:
Unlike car insurance, home insurance is not a legal requirement. However, mortgage lenders will almost certainly deny you a loan without home insurance in place. Even if you don’t have a mortgage, home insurance is strongly advised to protect your home and possessions, and for liability coverage in case a visitor gets injured on your property. Consider it an essential cost of owning a home.
Considering the protection it provides to your home and all of your possessions, home insurance is surprisingly affordable. Depending on where you live, the cost will range from $800 to $1,200 per year. Residents of Quebec enjoy the cheapest home insurance premiums, while those living in Ontario and Atlantic Canada pay the most.
Insurance quotes are based on risk assessment, and everyone gets a premium tailored to their specific circumstances. For this reason, no company can claim to be the cheapest across the board. Find the cheapest home insurance for you and your family by comparing quotes on Rates.ca.
It should come as no surprise that the answer to this depends on your home. How much would it cost to rebuild your home with similar materials if it was destroyed? A rough estimate for the average Canadian home is $200 per square foot, but it very much depends on where you live. Each insurance company will appraise the rebuild cost slightly differently. These assessments are rarely negotiable, but if the rebuild ends up costing more than the appraisal predicted, your insurance company should cover the difference if you have replacement cost coverage on your policy.
When insuring your possessions, you may have the choice of replacement cost or actual cash value.
With replacement cost insurance, you receive the value of any lost items without a deduction for depreciation. For example, if your five year old laptop is stolen, you are covered for the cost of a new laptop, the same model (or as close as possible) to the one that you had before. This is a good thing, because it will allow you to adequately replace any lost items, but you may have to pay a higher premium for the privilege.
If you opt for actual cash value insurance, the insurer will only pay out the value of your five year old laptop in current, used condition. This is unlikely to cover the cost of replacing your lost item with a brand new model, but you will have benefited from lower premiums prior to the claim.
A home inventory of your belongings is a simple list your insurable possessions. In the event of a claim, the insurance company will want proof that the lost possessions are as valuable as you say they are. Keep receipts for your most expensive purchases, and once per year, take a walk through your home and film everything in it. If something gets stolen, you can use the receipt and video evidence as proof that your claim is real. The more you own, the more contents coverage you need, so if you have made lots of expensive purchases, review your home insurance policy to ensure it is still adequate.
It is worth remembering that there are limitations to contents coverage in a standard home insurance policy. If you have expensive items such as jewelry, musical instruments or a unique piece of art, you may want to insure them with a additional coverage called a rider.
If the sewage line from your home is blocked, the wastewater could back up and overflow out of your toilet. Basements and ground floors are particularly susceptible to this. Sewer back up insurance covers decontamination costs and replacements for your ruined fixtures and possessions.
Mortgage insurance is a specialist policy, utilized by banks and other mortgage lenders. It covers losses if a homeowner defaults on mortgage payments. It has nothing to do with home insurance.
Property insurance and homeowners insurance are often used interchangeably. Property insurance is a wide-ranging term for any policy that protects a building and its contents, whether it is an office, school, hospital or any other insurable structure. Homeowners insurance is a type of property insurance, specifically designed to protect your home.
Until recently, flood insurance was not available in Canada, but overland water coverage provided protection against freshwater entering your home. This could be water from excessive rainfall and a leaky roof, or a nearby river bursting its banks.
Overland water is still a very popular endorsement, but a wider range of flood insurance is now available. See our guide on flood insurance in Canada for more information.
Individual companies may use trademarked names to promote their various home insurance packages, but there are typically three tiers of coverage from which to choose.
There’s also coverage that you can get to protect certain parts of your property from damage.
Besides coverage for your physical property and expenses, liability coverage is used in case of injury or damage to property.
All home insurance packages, whether basic, broad or comprehensive, offer personal liability protection. This helps cover the costs of a lawsuit if a visitor gets hurt on your property and you are sued. An example could be someone who falls and twists their ankle in your driveway in the winter.
It does not apply to injuries sustained by you or members of your household.
What is not included in a typical policy?
Optional coverages such as earthquake insurance and sewer backup insurance are not included in a basic, broad or comprehensive home insurance policies. These additional coverages can be purchased separately.
Additionally, no policy will provide coverage for predictable (expected) events. For example, if you buy a beach house, insurers will refuse protection against flood damage due to your proximity to the water.
You can also opt to have additional coverage added to your home insurance. With weather conditions worsening, many insurers have extended their specialty offerings and are adding coverage for perils they didn't protect against before. Every region has different risks, so depending on where you live you might consider adding one of these optional coverages:
When determining your home insurance premiums, the insurer will calculate the probability of you making a claim. If they decide there is only a small chance of a claim, you can expect a cheaper premium. If you are deemed high risk, however, you will have to pay more. Here are the factors that influence the amount you will have to pay for coverage:
When it comes to home insurance, where you live makes a difference. If you live in a busy neighbourhood with a history of break-ins, insurers will charge more to account for the high chance of theft or criminal damage. If you live in a sleepy village with low-crime rates, your premium will probably be cheaper.
In the event of a major disaster, like a tornado or a devastating house fire, your house may need rebuilding from scratch. While it sounds extreme, these things happen. Not only can it be heartbreaking, but these disasters result in expensive insurance claims. If you live in a modest home built with standard materials, for example, the cost of your rebuild will be less than it would be for a state-of-the-art, one-of-a-kind mansion. A lower replacement cost means lower premiums.
Your personal claims history is a good indicator of your future insurance needs. If you have made home insurance claims in the past, insurers may charge more for future coverage. Conversely, if you have had home insurance before but never made a claim, you’ll typically be rewarded with a lower rate.
Older homes with aluminium wiring, knob-and-tube, or any low amp service are considered a fire risk. While some of these circuits are perfectly safe, many have deteriorated over time. Insurance companies may be willing to offer coverage if your old circuit passes an inspection from a licensed electrical contractor, but your rate will be high. More often than not, insurers will give you a couple of months to upgrade your electrical supply. If you don’t oblige, coverage will typically be denied.
If you heat your home with a wood-burning stove, you’ll pay a higher home insurance premium due to the fire risk. Hot-water radiators and forced air heating are considered low risk by insurance companies.
Mid-century and older homes used lead piping for their plumbing, which may have eroded over time. This deterioration, coupled with Canada’s freezing winter temperatures, makes plumbing susceptible to cracks and leaks. Insurers will be wary of the flood risk, and will offer lower premiums to homes with plastic or upgraded copper pipes.
If your house catches fire, insurance companies want reassurance that the local fire service can quickly extinguish the flames. For this reason, they will note your proximity to the nearest fire hydrant and fire station. Living close to a hospital might also help to reduce your premium. If someone gets hurt in your home, medical help will be close by, reducing the risks associated with homeowner liability. If you live in a remote area, it could take a long time for emergency services to arrive and as a result and your premium will be higher.
Newer roofs are designed for proper ventilation, minimizing the chance of mould or dampness getting into your home. Modern tiles are made of lighter and more durable materials than the old slate ones, making them more resistant to storm damage and less likely to hurt someone if they do come flying off. This increased protection, along with decreased liability, means homes with new roofs are more popular with insurers.
Home insurance covers your possessions in the event of theft, so a home security system will almost certainly help to reduce your premium. Security cameras or an alarm system will reassure your insurer that your home has adequate protection from intruders.
Insurance companies want to know a few details about your lifestyle in order to assess your level of risk. How old are you? Do you smoke? Do you have a home office? Do you rent out a portion of your home? It is important to be honest when answering these questions, as any false information can be used to deny a payout in the event of a claim.
One of the most important pieces of financial information is your credit score. Financial institutions look at your credit score and credit history to help decide if they want to lend you money. Your credit history is an indicator of risk and if your insurer sees you as a higher risk, then your insurance premiums will increase.
Any renovations that you do that increases the value of your home will cause your insurance premium to rise. This is because your home insurance policy is designed to cover the cost of damage in case there’s an accident.
For example, adding in a swimming pool. Along with the added fun of a pool, comes many potential safety risks on your property in the eyes of the insurer, therefore raising your premium.
Keep in mind that certain renovations can also decrease your insurance premium. Any upgrades that help improve the quality and safety of your home, such as new pipes and wiring, could actually help save you some money.
We never want to see our furry friend as dangerous, but sometimes they can be. Dog bites can seriously injure someone and even send someone to the hospital.
Home insurance applications will ask if you have a pet, and if you have a dog, you might have to answer questions about age, size and breed. Many insurers have a list of breeds that are problematic and the insurer might not include the dog in the policy or your premium will be raised.
While every home insurer is different, the most common breeds likely to cause issues are:
Keep in mind that your insurer will never insure wild animals, such as wolves, exotic cats and alligators, among other creatures.
Running a business out of your home may not automatically increase your insurance, but your premium will depend on the type of business you’re running.
Working from home comes with a few variables. For example, if you have a home office set up, you likely won’t need elaborate insurance if you just use essential tools, like a laptop.
But, the situation changes, let’s say, if you run a daycare from your home. Since there is more risk associated with a daycare, standard home insurance won’t be enough to cover you.
And if you’re renting out your basement or listing your home on Airbnb, you need to inform your insurer of the change. Depending on your insurer, it might not necessarily raise your premium, but in some cases it might void your contract, which means you won’t have coverage anymore, even if it’s unrelated to Airbnb.
As seen in this table (data taken from the IBC's annual factbook), Canadian property insurance claims have risen steadily over the last 10 years. Unsurprisingly, net written premiums have also increased:
|Year||Personal Property (Net Written Premiums in $000,000)||Personal Property (Net Claims in $000,000)|
As claims resulting from insured losses go up, insurance companies are increasingly reluctant to provide cheap property insurance. As a result, many Canadian homeowners, even those who have never made a claim, are facing rising premiums.
Fortunately for Canadian homeowners, it has never been easier to compare home insurance quotes and find a great deal. Simply spend a few minutes answering basic questions about your home, and we will show you multiple quotes in one place.
All you have to do is pick the coverage and price that is right for you. Compare quotes and save on home insurance today.
*Based on the difference between the average lowest home insurance premium and overall average home insurance premium from our site in 2019. Excludes tenant and condo insurance.