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Home insurance 101

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:

  1. Property: Protects the actual structure of the home from perils such as damages caused by fire and burglary. Coverage is based on the replacement value of your home, not the market value.
  2. Contents: Protects your personal property when it's at home and when you carry it with you, such as a laptop you bring to and from school, the bicycle you ride to work with, and the camera you bring on vacation, subject to limits.
  3. Personal liability: Protects you the policyholder (as well as your spouse and children) in the event someone is injured on your property, or your property causes them damages, and it is taken to court.
  4. Additional living expenses: Covers you in the event you are temporarily displaced from your home due to a claim.

Frequently asked questions about home insurance

Here are some of the most frequently asked questions about home insurance in Canada:

Is it a legal requirement to have 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.

How much is the average home insurance premium in Canada?

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.

Who offers the cheapest home insurance in Canada?

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 RATESDOTCA.

What is my home rebuilding cost?

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.

What is replacement value of possessions?

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.

What is home inventory and why do we need to update it regularly?

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.

What is sewer backup insurance?

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.

What is the difference between mortgage insurance and home insurance?

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.

Is property insurance the same as homeowners 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.

What is the difference between overland water and flood insurance?

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.

Choosing the right amount of coverage for your home

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.

  • Basic homeowner's coverage
    This coverage option is great for homeowners looking to save a little cash, but willing to risk a financial hit on excluded items. It provides coverage for your house and contents, but only for perils explicitly named in your policy. "Fire" is an example of a named peril you might see in a basic package. If it isn’t stated in your policy, you don’t have insurance protection against it.
  • Broad homeowner's coverage
    This is a more robust form of coverage that serves as an upgrade to the basic package by providing all perils coverage to your home, and named perils coverage to your contents.
  • Comprehensive homeowner's coverage
    The most inclusive (and expensive) type of home insurance. A comprehensive policy applies all perils coverage (with the exception of the exclusions listed in the policy) to your home and your contents, as indicated in the policy.

Property Coverage

There’s also coverage that you can get to protect certain parts of your property from damage.

  • Dwelling coverage
    This coverage may help to repair or rebuild the physical structure of your home and attached structures, such as a garage or sundeck, if it’s damaged. Coverage can also include outdoor structures such as swimming pools and equipment, such as children’s play sets.
  • Detached private structure
    Any structure on your premises that isn’t attached to your home, such as a detached garage or shed, can be covered from damage.
  • Personal property
    You can be covered for any personal property that you use, own or wear. Items can include furniture, clothing, electronics, artwork and more.
  • Additional living expenses
    If you have to live away from your home for a period of time, having additional living expenses coverage will help pay for some or all of the costs. But additional expenses will only be covered for an insured loss.

Liability coverage

Besides coverage for your physical property and expenses, liability coverage is used in case of injury or damage to property.

  • Voluntary medical payments
    If there’s an unintentional injury on your property, your insurer will pay the individual’s medical expenses, including surgery or dental, for up to one year from the date of the accident.
  • Voluntary property damage
    Covers unintentional direct loss or damage that you cause to someone’s property. It also covers loss or damage caused to someone else’s property caused unintentionally by a child in your care that’s 12 years of age or younger.

Personal liability

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.

Optional home insurance coverage and endorsements

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:

  • Earthquake coverage: Usually excluded from policies, by adding this type of coverage you can protect your home from earthquakes, which are common in some parts of Ontario, British Columbia and Quebec. Earthquakes can cause significant damage to homes and contents, so this is a worthwhile type of insurance to consider if you live in at-risk area.
  • Sewer backup: This type of insurance covers you when a region's main sewer line backs up into your home, sometimes ruining entire basements and posing massive problems to your home and your health. Severe weather has increased the likelihood of this claim, which is why it comes increasingly recommended.
  • Rider: If you have expensive items such as jewelry and engagement/wedding rings, musical instruments and equipment, and high-end art, you may want to insure them under a separate policy called a rider. There are limitations to how much these items are covered under a standard home insurance policy.
  • Identity theft: More and more, insurers are adding identity theft protection. If someone steals your identity, the insurance company will help you get everything back in order
  • Overland water: Overland water coverage is to protect against damage when water enters the home through the foundation and basement floors or walls. It also covers damage caused by floods from rivers, lakes or other bodies of water due to heavy rainfall, melting snow and rising rivers.
  • Mass evacuation: If you live in an area that’s susceptible to weather emergencies, such as wildfires, you should consider getting mass evacuation insurance. This type of insurance is used in the case of having to evacuate your home and community and helps covers extra expenses, such as food and lodging.
  • Identify theft and identity fraud: Identity theft occurs when someone steals your identity and identity fraud occurs when someone uses your identity. Both of these situations can occur through stealing your credit card, social insurance number or passport. Having your identity stolen can give access to your bank account and while some banks may reimburse you for lost funds, other costs can quickly add up.
  • Freezer food: Food in freezers on your premises are protected if a power outage occurs or your freezer breaks. This insurance would be good if you have multiple freezers with food.
  • Credit and debit card forgery: This insurance helps to offset any financial loss or other losses due to credit or debit forgery.
  • Lock replacement: If you’ve experienced a burglary, lock replacement helps to cover the locks in your home if they were damaged and your keys were stolen. Some insurance may even help cover the cost of lock repair or replacement.

Factors that determine your home insurance premium

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:

Your home address

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.

Your home’s replacement cost

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 claims history

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.

Your electrical supply

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.

Your heating system

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.

Your plumbing

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.

Your proximity to help

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.

Your roof

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.

Your home security system

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.

Your lifestyle

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.

Your credit score

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.

Your renovations and betterment

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.

Your dog and other pets

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:

  • Rottweilers
  • Dobermans
  • Great Danes
  • Staffordshire Terriers
  • German Shepherds
  • Siberian Huskies
  • Pit Bulls – which are currently banned in Ontario.

Keep in mind that your insurer will never insure wild animals, such as wolves, exotic cats and alligators, among other creatures.

Your home used as a business or home office

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.

Home insurance premium trends 2011-2021
Year Avg Ontario home insurance premium (CAD) Avg Alberta home insurance premium (CAD)
2011 $782 $741
2012 $746 $845
2013 $763 $830
2014 $730 $931
2015 $791 $991
2016 $918 $1192
2017 $918 $1212
2018 $957 $1288
2019 $1150 $1265
2020 $1164 $1355
2021 $1284 $1779

*Home insurance prices are based on RATESDOTCA home insuramap data for policy transfers from 2011 through early 2021. Personal property damage claims growth rate is based on Insurance Bureau of Canada (IBC) data from 2009 through 2019, the most recent ten-year period available.

Personal property insurance statistics in Canada, 2009-2019

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)
2019 12,461 7,197
2018 12,012 7,250
2017 11,226 6,533
2016 10,663 6,253
2015 10,187 5,489
2014 9,971 6,045
2013 9,024 6,161
2012 8,565 5,013
2011 8,192 5,336
2010 7,598 4,566
2009 7,013 5,071
Personal property insurance statistics in Canada, 2009-2019
2019 Premium Net Written
2019 Premium Net Claim

What does this mean for Canadian homeowners?

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.

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