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Home insurance in Alberta

Buying or owning a home in Alberta does not legally require you to have home insurance. That said, if you intend to take out a mortgage so you can purchase that home, your lender will require you to have home insurance – to protect their investment.

So, in an indirect way, home insurance is mandatory. Unfortunately for many homeowners, premiums have been on the rise, making home ownership – combined with high mortgage rates – a very expensive proposition. Let’s examine why that is and what you can do to lower those costs.

Climate change and rising damage costs

Severe weather brought on by climate change has been one of the most significant factors behind home damage in recent years. According to the Insurance Bureau of Canada (IBC), severe weather cost the country $3.1 billion in insured damage in 2023 alone. This wasn’t the first time severe weather damage exceeded the $3 billion mark, as this has been a recurring phenomenon for several consecutive years. In 2023, summer storms cost Alberta and the Prairies over $300 million in insured losses. There is also the increased prevalence of seasonal wildfires throughout the province, which have gotten worse in the last decade, with 2023 being a record-setting year for the entire country.

The 2023 IBC Fact Book shows that from 1983 to 2022, catastrophic losses have risen dramatically in both Alberta and Canada at large. For example, from 1983 to 2000, average catastrophic losses in Canada amounted to $440 million per year (loss and adjusted expenses in 2022 dollars). Between 2011 and 2020, those losses rose to the average of $2.3 billion. Alberta is no exception. In 2016, for instance, the Fort McMurray wildfire accounted for 75% of Canada’s national losses. Though the province hasn’t seen such losses since, wildfires continue to be a costly problem in 2024 – alongside hails, windstorms and flooding.

Higher home insurance premiums

With the losses being this high, home insurers have no choice but to increase their premiums. In Q3 2024, personal property premium rate change was 7.7% nationally – compared to Q3 2023. Relative to Q2 2024, the rate change was -0.4%. In Alberta, the rate change in Q3 2024 was 5.5% compared to Q3 2023 and -1.5% compared to Q2 2024. Overall, Alberta’s premium increases are below the national average, which is good news. The bad news is that premiums are continuing to increase.

So, what can you do as a homeowner? Start by learning about different types of coverage, so you can customize your home insurance policy accordingly – and hopefully decrease those costs.

Different types of home insurance coverages in Alberta

Home insurance usually comes in four different flavours, depending on the amount of coverage you’d like to get – or in some cases, allowed to get (as your home may not be safe enough to warrant standard coverage).

These are the coverage types you’re likely to encounter:

• Named perils: This package offers the least amount of coverage for your house and contents; your home is only protected against perils explicitly named in your policy. If it isn’t named in your policy, you don’t have insurance protection against it. You may also see some insurance providers describe this type of policy as ‘basic’ or ‘limited.’
• Broad form: A broad home insurance policy gives more coverage; it provides all perils coverage to your home and named perils coverage to your contents. Some insurance providers describe this type of policy as ‘standard.’
• Comprehensive: This is the most inclusive and costly type of home insurance. A comprehensive policy applies all perils coverage (except for exclusions listed in the policy) to your home and contents, as indicated in the policy. This type of coverage is sometimes referred to as an ‘all perils’ policy.
• No-frills: This is the most bare-bones coverage you can buy and is not recommended for most homeowners, as it usually only protects your property against a handful of perils (usually fire and nothing else). This coverage is meant for old or damaged homes that are too risky to insure under normal circumstances. Given that such homes are often unlivable, homebuyers typically use no-frills insurance to temporarily protect the home until it is made more insurable.

What gets covered

• Property and building: This coverage protects both the structure(s) on your property, as well as the property itself, from a variety of perils. Protected incidents include fire, theft and water damage, among others. Because some policies may require additional coverage for secondary structures, like a garage or guest house, consult your insurer if anything is unclear.
• Contents and personal property: Contents and personal property coverage protects your possessions, such as furniture, clothing and sports equipment, against theft and vandalism. Some items, like fine art and expensive jewelry, may not be protected under a standard policy. Excluded items can be protected with additional coverage.
• Additional living expenses: If you’re temporarily displaced by an insurable event, this protection covers your temporary housing costs. For example, if damage to your home forces you to spend a week at a hotel, additional living expenses protection will cover the cost of the room and food, up to a certain amount.

Liability coverage

• Personal liability: This coverage provides protection against liability in the event someone is accidentally injured on your property.
• Voluntary medical payments: If you unintentionally injure someone, or someone accidentally injures themselves on your property, this coverage will pay for the medical expenses for up to one year from the date of the accident.
• Voluntary property damage: This coverage is for unintentional direct loss or damage you cause to someone’s property. It also covers unintentional loss or damage to someone else’s property by a minor (12 years or under) in your care.

Add-ons to home insurance coverage in Alberta

In addition to the components of an Alberta home insurance policy, there are add-on coverages you can purchase to further protect your home and contents.

Some you can add to your home insurance policy include:

• Earthquake: Will cover loss or damage caused by an earthquake which is especially useful in your home is in an area that's vulnerable to earthquakes.
• Identity theft: Covers many of the costs that can arise when your identity is stolen. For example, costs for replacing important government-issued documents, such as your passport, lost wages resulting from having to take time off work to deal with the theft as well as any costs associated with challenging damaged credit reports, dealing with collection agencies or initiating a lawsuit to resolve the wrongful transfer of property.
• Lock replacement: If you need to replace the locks on your house, this add-on will cover the cost of re-keying. If your keys have been stolen, most insurance providers require that a police report be filed before a claim is paid out.
• Mass evacuation: This add-on will cover your costs if you're forced to be away from your home due to a government-issued evacuation order such as that many Albertans experienced during the historic wildfires in Fort McMurray in 2016, which IBC estimated to be among the costliest in Canadian history.
• Windstorm: A windstorm can wreck your home’s structure, possessions and windows and shower everything you own in debris. Depending on your insurer and policy, you may have this covered from the get-go, but it’s worth inquiring about the coverage just in case.
• Overland water: It's a good idea to add flood protection to your home insurance policy since most of them don't have coverage built in. Although not every carrier offers an add-on for protection against overland water, it covers property damage from overflowing water stemming from nearby rivers, streams, lakes and thawing snow.
• Sewer back-up: Protects your home when a sewer line backs up and causes damage to the line between your home and the city's main line. In many instances, this add-on also covers the cost of removing sewer water from the home as well as repairing damage caused by it.
• Personal valuables: If you own expensive things like jewelry, collectibles and artwork, then you may need extra coverage for them. Do an inventory of all your possessions and assign monetary value to them. Then talk to your provider to find out if you need extra coverage.
• Personal umbrella: If you’re worried that your standard liability coverage isn’t enough (e.g. if your lawsuit costs you more than expected), this add-on can make up the difference.

What an Alberta home insurance policy may not cover

Even if you have the most coverage money can buy, having opted for every available endorsement, there are some perils against which no policy will protect you. In the insurance world, these are referred to as ‘exclusions.’

Common exclusions include:

• Mold: Since mold occurs slowly due to pre-existing conditions, such as extreme humidity, there is usually enough time for you to prevent it. Home insurance isn’t meant for maintenance – it's here to address major perils only.
• Pest infestations: Like mold, pest infestations, including mice, bedbugs, cockroaches and termites, are also a maintenance concern. That’s why it’s unlikely that your insurance would cover an infestation if it were to occur in your home.
• Deliberate damage or injuries: If you purposely damage your property (whether it’s the home itself or your personal items) or you deliberately hurt someone on your property, your insurance will refuse to cover you. In fact, if you file a claim for either of the two, you may be accused of insurance fraud, which is illegal.
• Absence from the home: Damage that takes place while you’re away from the home for an extended period of time.
• Alterations: A homeowner will only be protected against damage to a property that occurs during an alteration to it if they have received written permission from the insurance provider to undertake the alteration. However, common repairs such as painting or fixing a broken railing are not subject to this exclusion.
• By-law enforcement: You are not likely to be covered for costs stemming from the application or enforcement of a bylaw.
• Damage from renters: Most insurance providers require specific coverage for landlords. A standard home insurance policy is unlikely to protect you if a renter damages the property.
• Earthquake: Most policies exclude protection against earthquakes, though you can add coverage in the form of an endorsement.
• Existing damage: You’re unlikely to be covered for damage that began before you held the policy, even if the policy covers that type of damage.
• Flooding: Most policies exclude flood protection, though coverage can be purchased as an endorsement.
• Volatile substance: If you have more than one gallon of a volatile substance on your property and a fire or explosion takes place, you may be denied coverage. This is likely to include gasoline.

There are also some perils for which no coverage is available. They’re referred to as ‘uninsured perils.’ For example, if your home is built on a known flood plain, no insurance protection may be available.