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Home insurance in Canada

Congratulations. You either own a home or are in the market to purchase one. It will likely be the most expensive asset you own. That’s why you’ll want to protect it, and the contents within it, with the right home insurance coverage.

Home insurance in Canada is not mandatory. But it will save you tens of thousands of dollars, and more, should your home or possessions end up damaged or lost due to a natural disaster, theft or some other peril. Furthermore, most mortgage lenders require home buyers to have home insurance to protect their investment. So, unless you can afford a home without taking out a mortgage, you’ll probably need insurance.

Home insurance 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

Home insurance is regulated at the provincial level by Superintendents of Insurance, who license insurance companies, oversee insurance products and market conduct (underwriting, rating, claims, and marketing practices) and monitor solvency and financial soundness of the companies incorporated in their province.

You can learn about each provincial regulator from the Insurance Bureau of Canada (IBC).

Different types of home insurance coverage

People interested in home insurance have a variety of choices and ways to protect their homes. There are four types of coverage to choose from, including:

• Comprehensive coverage: This policy provides the most coverage. It covers all risks to your home and contents except for any risks named as exclusions. Also referred to as a ‘special’ or ‘all perils’ policy.

• Coverage/named perils: This policy provides less coverage than a comprehensive policy. It only covers the risks to your home and contents that are named in your policy. This is sometimes referred to as a ‘named perils’ policy.

• Broad coverage: This extends beyond the basics to include rare events that may be of serious risk to the insured. This type of insurance usually commands a higher premium and has a deductible.

• No-frills coverage: This policy provides the least amount of coverage. It offers very basic coverage for homes that don’t meet the usual standards for insurance and only pays for damages outlined in your policy.

What most policies cover

Those seeking home insurance should also consider the specifics within each type of policy. They might want to include:

• Building/property coverage: This provides protection if there is damage to the structure of your home, including the walls, roof and floors. It can sometimes also include things like fixtures. If you own your own home, you'll need to have building coverage just in case your home is damaged and needs repair.

• Contents: Besides the physical structure, your home is filled with your prized possessions, furnishings, electronics – essentially everything you own. You’ll want to have a solid inventory of your possessions, with their value listed, if possible, in case of a claim. More expensive items like fine art or jewellery can be insured separately through ‘riders’ or ‘endorsements’ that single out these items due to their intrinsic value.

• Personal liability: Home insurance can protect your possessions from damage or theft. It can also protect you from personal liability. For instance, if you cause damage to a neighbouring home, or someone is injured on your property, and you are sued, personal liability will save you money on legal fees and protect you from potential financial ruin.

• Additional living expenses: In cases of extreme damage or a mass evacuation from a dangerous area, your home insurance can pay for additional living expenses (ALE). Depending on your policy, ALE will pay for temporary rent, transportation and food. However, ALE will not cover expenses if you move out for convenience purposes, say, during a renovation.

Common optional coverages

There are several optional coverages, or ‘endorsements,’ that can be added to home insurance policies.

• Flood protection: Sewer back-up and overland floods are rarely covered by most policies – unless you add them as an endorsement. Sewer back-up covers water damage from overflowing drains, eavestroughs, sewer pipes and sump pumps, while overland water covers flood damage due to overflowing bodies of water, such as rivers or streams. While sewer back-up can happen to almost anyone, overland flooding only happens in certain areas.

• Earthquakes: Depending on where you live, damage from earthquakes can be a very real threat. Earthquakes are more prominent on the west side of Canada, but the east isn’t necessarily off the hook either. According to the IBC, there is a 5%-15% risk that a powerful earthquake can hit areas between the St. Lawrence River Valley and the Ottawa Valley, which include cities like Quebec City, Montreal and Ottawa. 

• Home-based business: Most home insurance policies should cover lower-value possessions like books, tools or instruments. However, if you are running a small business from your home, consider a home-based business insurance add-on to protect your work equipment. 

• Exceptions: Exceptions to home insurance coverage often mold, maintenance and infestations. All these issues can be prevented by the homeowner through basic upkeep, which is why insurance companies almost never cover them.

• Freezer food: If your food spoils due to a freezer malfunction or power outage in your home, this will cover the costs of replacing the food, and in some cases, the freezer itself. This is especially useful if you have multiple freezers in your home. Do note that if your food spoils for other reasons, such as you not closing the freezer door, then you won’t be covered.

• Mass evacuation: If you find yourself under an evacuation order, whether it’s due to wildfires, flood or a tornado, this will cover the extra expenses you may incur as a result, such as hotel fees, groceries or travel. 

• Identity theft and fraud: Whether someone steals your identity or uses it for fraudulent activities (e.g. your social insurance number is stolen to gain access to your bank account), your insurance provider can cover the costs of restoring your identity.

• Lock replacement: If your lock gets damaged due to a break-in or burglary, your insurance can cover the cost of replacing or repairing the damaged lock.

Tips on how to get the cheapest home insurance.

There are many ways to lower the price of your home insurance, starting with comparison shopping on sites like LowestRates.ca. Doing so will get you a variety of cheap quotes from top providers in seconds, and for free.

Other ways to lower your home insurance premiums are:

• Increase your deductible. The more you add to your deductible, the lower the risk is for your provider and the higher the discount they can offer. It may cost you more if you make a claim, but you can save money in the long run. 

• Install a theft alarm system and smoke detector. The more security features you have – to protect your home from theft and damage alike – the less risk there is for losses. Insurance providers will reward that with discounts.

• Upgrade your electrical, heating and plumbing systems. Any upgrades to your home’s systems mean a reduction in risk for damage or fire.

• Protect your home from severe weather and water damage. If you’re worried about extreme weather damaging your home, adding safeguards such as sump pumps, reinforcing basement walls or re-doing your roof can save you money in the long run and protect your belongings.

• Ask your broker or agent for discounts. You can do this around policy renewal time.

• Pay your premium annually instead of monthly. Many providers offer discounts for upfront payment as it helps reduce their own administration costs.

• Don’t increase the replacement value of your home. If you’re planning renovations, let your insurance provider know ahead of time to ensure you don’t accidentally increase the replacement value of your home – because this can also increase your premiums.

• Bundle with your car insurance provider. Your loyalty to one provider is often rewarded with discounts for the extra business. Bundling can also reduce the hassle of payments and can simplify the claims process.

• Compare home insurance quotes from various providers. LowestRates.ca is your one-stop shop for cheap home insurance quotes. Just input a few bits of information about your insurance needs and location, and we’ll do the rest. You’ll receive instant quote comparisons from top providers. It’s free and there’s no downside.