Home Insurance: Our 2024 Guide
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Discover the methodologyHome insurance provides crucial assurance that your prized possessions are safe. It protects not just the residence itself but also the belongings inside it and your personal liability.
While it isn’t required in Canada, going without it is a mistake. It can make you whole again following a fire, flood or theft.
This guide explains how home insurance works in Canada. Learn what is covered, how it works and how to get the best deal on your home insurance policy.
What is home insurance?
Home and property insurance refers to a category of insurance products that protect both one’s home and the possessions within it. Policies cover both personal property and personal liability. Home insurance includes homeowners insurance, condo insurance and tenant’s insurance.
This versatile insurance is inexpensive and protects what is likely your largest asset.
In Canada, the terms “home insurance” and “home and property insurance” refer to several different types of insurance. These most commonly include homeowners insurance, tenant insurance and condo insurance. Let’s explore these:
- Homeowners insurance protects the physical structure of your home and detached private structures on your property like garages, decks, driveways and sheds.
- Tenant insurance, also known as renters insurance, does not cover the entire property. As renters are only responsible for certain types of damage to a rented dwelling, this insurance covers only those types of damage and your possessions. The landlord will typically have a separate policy on the property.
- Condo insurance covers the inside of a condominium unit, the belongings within it and damage to common areas originating from your unit (such as a water leak or fire). As a condominium includes joint property, the condominium corporation will have its own insurance policy for commonly-owned areas and the exterior of the building.
All of these types of insurance typically also include personal liability coverage to protect you financially from incidents like a guest who slips and injures themselves in your home.
Note that there are additional types of property insurance too! These include seasonal and cottage insurance, home-based business insurance and rental insurance (for landlords with rental properties).
Do you need home insurance?
Neither homeowners nor tenants are required to purchase home insurance by Canada’s federal or provincial governments.
You may, however, still be required to buy home insurance. If you have a mortgage, the mortgage lender may require you to purchase homeowners or condo insurance. It protects their investment and yours. Additionally, some condominium corporations may require their residents to hold individual condo insurance policies, even if they own them outright. Similarly, a landlord may require a renter to have insurance coverage.
Expert advice
Even when not required, we strongly recommend getting home insurance. It is an inexpensive way to cover your most valuable assets.
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How much home insurance do you need?
Experts recommend that your home insurance policy cover the replacement value of your residence and provide $1 to $2 million in personal liability coverage.
Finding the best policy for you is not always easy. It is a balance between your risk tolerance and your budget. Your belongings factor in too. If you are a university student you may not have many valuables in your apartment and prefer a cheaper plan. On the other hand, someone who is more established with a large house full of valuable electronics, art, bikes or jewellery would get peace of mind from more coverage.
Basic home insurance will often cover losses to common valuables like
- Bicycles
- Tools
- Electronics
- Furniture
- Clothing
High-value and unusual items will probably need to be named on your policy, so ask your insurer if your art, antiques, grandmother's diamond ring or collection of rare vinyl records. Home insurance can sometimes even protect these items when you're not at home. For example, if your bike or camera is stolen while you are out and about.
Watch out!
When choosing a policy, consider your ability to replace the property or belongings. If you cannot afford to repurchase or to lose something, you should insure it. Don't hesitate to name expensive electronics, sports equipment and more.
What does home insurance cover?
Home insurance encompasses two types of coverage — personal property and personal liability:
- Personal property coverage protects the residence itself and its contents.
- Personal liability coverage protects a policyholder from financial liability for injury or accidents.
Most home insurers will have up to three main levels of coverage available. Here’s how they work:
- Basic policies, or named perils policies, cover only the risks to your home and the contents specifically named in the policy.
- Broad policies cover most risks to one’s home and coverage for many common valuables. Excluded valuables can be added as named contents.
- Comprehensive policies cover almost all risks to one’s home and most contents. There may still be some named exceptions like earthquakes.
Here is what a typical comprehensive policies will cover:
| Risks | Covered |
|---|---|
| Personal liability | |
| Fire | |
| Theft | |
| Vandalism | |
| Water leaks | |
| Furniture and possessions | |
| Building structure | |
| Natural disasters | Most covered |
| Flood | Endorsements available |
| Pool | Endorsements available |
Expert advice
Expert advice: policies from basic to comprehensive may have exclusions that are not covered. This could be something like flooding or an earthquake if you live in areas prone to these disasters. If you're not sure, ask! In these cases, you can often purchase separate coverage against these risks.
What does personal liability home insurance cover?
Home insurance's personal liability coverage protects you financially from incidents that happen on your property. Typical policies are worth $1 to $2 million. This amount, or more, is recommended because accidents can get expensive quickly.
Wondering what could go wrong? You can be sued if someone slips on ice or unshoveled snow on your sidewalk or if your tree falls on your neighbour’s garage in a storm. In these situations, your home insurance’s liability would protect you.
What does home insurance not cover?
As always, coverage depends on your insurance policy and the activity that the property is used for.
Common exclusions from standard home insurance policies include:
- Intentional, fraudulent and criminal losses
- Flooding (if located in a coastal area or flood-prone area)
- Sewer backup
- Landslides
- Earthquakes
- War and terrorism
- Failure to reasonably protect your home
- Vermin and insect damage
- Gradual deterioration
Your location can come into play too. If you live along the coast or a river your policy may explicitly exclude flood insurance. Similarly, in places that are more prone to extreme weather such as hail and wind in Alberta or wildfires in British Columbia, policies might exclude those types of damage. This is to keep the overall cost of the insurance down in locations where these disasters are more likely to occur. In these cases, specific endorsements may be available for many of these risks.
Good to know
You're better safe than sorry. Unless something is clearly named in your policy, ask your insurer if you want to protect against a specific kind of risk or cover a valuable object.
How much does home insurance cost?
A leading online insurance company shares their average annual cost for home insurance across Canada nationwide. These hover around the average prices for home insurance in Canada.
| Type of insurance | Annual premium |
|---|---|
| Homeowners Insurance | $1,171 |
| Condo insurance | $470 |
| Tenant insurance | $355 |
That isn't all of the story though. Some provinces like Alberta and British Columbia have higher prices than others because of the relatively higher risk of an expensive claim. Let's explore home insurance pricing in more detail.
How are home insurance prices calculated?
Home insurance prices are ultimately set by how much risk an insurer perceives in offering a policy on your home. They consider the following factors.
- The value of the property
- The age of the property
- The age and condition of the electrical and plumbing systems
- Security systems and smoke detectors
- Completed renovations
- Pools
- Named personal belongings covered
For example, having a pool at home increases the chance that someone may drown. That significant personal liability risk drives up the cost of a policy. On the other hand, modernizing electrical wiring in an old house decreases the chances of a house fire and helps drop prices.
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How does location affect the cost of home insurance?
Location is a major factor driving home insurance prices. What your policy costs you changes depending on your province, city and neighbourhood. Insurers weigh risk by looking at the frequency of
- High crime
- Flooding
- Windstorms
- Wildfire
- Hail and ice
- Earthquakes
For example, insuring an apartment in a neighbourhood with frequent burglaries costs more than insuring an equivalent apartment in a lower-crime neighbourhood.
Good to know
Weather matters too. The frequency of natural disasters in British Columbia and Alberta has fueled sharp insurance rate increases there. The average annual costs of claims from severe weather quadrupled from the decade of 2000-2010 to 2010-20. Other provinces, less prone to these disasters, like Quebec, enjoy significantly low rates.
How does a deductible affect the cost of home insurance?
A deductible is a contribution that you pay when making a claim on your home insurance. You are generally responsible for the first $500 or $1,000 before the insurer picks up the rest. You can decrease your premiums by increasing your deductible. A $2,500 deductible vs a $500 deductible, for example, means more money out of your pocket if you make a claim. In exchange for that, you save each month. It can be a good option if you have infrequent claims and ample savings.
How do previous claims affect your home insurance?
Wondering how much home insurance goes up after a claim? It depends on your claims history and the nature of the claim. Insurers see policyholders who file a claim as more likely to file future claims. Accordingly, they often increase premiums following a claim.
It is not always worth making a small claim. Even if premiums do not increase following a small claim, it may make you ineligible for a no-claims discount.
What are home insurance endorsements?
Endorsements are additional types of coverage added to your home insurance policy. They either protect you from a risk that is not covered by a standard policy or they offer additional insurance for that risk.
- Earthquake
- Equipment breakdown
- Home business extension
- Identity theft
- Glass breakage
- Guaranteed replacement cost on building
- Jewellery endorsement
- Overland water
- Personal items
- Sewer back-up
- Windstorm
Good to know
Optional insurance coverage for RVs or watercraft is considered a home insurance endorsement. Protecting your travel trailer or boat under your home policy cant save you money!
Now that you know some of the factors that affect home insurance pricing, try comparing plans.
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