They probably said something like, “Home insurance is one of those things you hope you never have to use but will always be thankful for if you need it.”
They’re right. Things happen when you own a home. Unexpected things. Expensive things. And they always happen at the worst time.
But with good home insurance coverage, you can rest assured that you’re going to be okay.
“My house isn’t going to burn down.” You’re probably right. But a 5-millimetre black spot on your basement wall could become a $50,000 mould removal three weeks before Christmas.
The apartment above yours could have a flood that leaks through your ceiling. And what’s stopping a storm from toppling a giant tree through your roof other than luck?
Home insurance is money when you need it the most, and the security of knowing that your path back to whole is going to be a lot easier.
Is home insurance mandatory in Ontario?
Home insurance is not technically mandatory in Ontario, but few lenders will give you a mortgage without it – and you should be cautious of any lender who does. Since they have a financial stake in your property until you pay it off, whoever owns your mortgage should want to see that you’re protected.
So why not forego home insurance and pocket the money?
If your home is in the 2% severely damaged by water or ice this year, the 2.5% damaged by wind and hail or the 0.028% destroyed by fire, wouldn’t it be great to have the money to get yourself back on your feet?
As for having home insurance coverage after your mortgage is paid off, ask yourself whether you’d ever be comfortable covering the whole cost of completely rebuilding your home.
When NOT to buy home insurance coverage
The only time we would recommend not buying home insurance coverage is if you’re not yet sure of what you need. It’s strongly advisable to have a basic understanding of how home insurance in Canada works before making such a big investment.
That’s what the rest of this article will focus on, so let’s get started.
What is home insurance?
Home insurance is protection from going out of pocket to repair unexpected damage to your home, to cover the costs of someone getting injured on your property, or to pay for any damage you accidentally cause to someone else’s.
These terms are important to know when having any discussion about home insurance in Canada:
- Coverage: The maximum amount of money that could be covered by your insurance company for a given event.
- Policy: Outlines everything included in your coverage. This will dictate the specific things you are protected from.
- Premium: The monthly fee to keep your policy active. The riskier the coverage, the higher the premium.
- Claim: The request you make to your insurance company to cover costs if you believe they’re covered by your policy.
- Deductible: The amount you pay when making a claim. Your insurance company covers the rest (up to your limit).
What kind of home insurance should I be buying?
The right home insurance policy will protect you against whatever life throws your way. The wrong kind will tell you you’re not covered for whatever happened and leave you playing catch-up for years.
These are the most common types of home insurance policies:
- Homeowners: This type of insurance covers private residences. It protects the contents of the home, as well as the homeowner’s liability. A typical policy will usually cover damage and losses as a result of fire, theft, hail or windstorm.
- Renters: Tenant or renters insurance is property insurance for those who don’t own their home. It’s used to protect their belongings, and to provide liability coverage.
- Condo: Condo insurance will protect individual units within a condo building. Purchased by condo owners, this type of policy will protect the contents of the unit like appliances, clothing and furniture. It’ll also cover additional living expenses in the event that you need to relocate while your condo is being repaired.
- Seasonal: Insurance for seasonal homes will typically cover the outdoor structures on your property, the contents of your seasonal home and provide liability coverage.
Why do I need home insurance?
You need home insurance to protect yourself from having to pay out of pocket to replace your home and everything in it in the event of a disaster. It’s also protection for the equity you have in your home.
But what if you’re only renting?
Home insurance is a necessity for renters as well because landlord’s insurance on the property won’t extend to a tenant’s belongings.
As a renter, your home insurance will also cover liabilities and living expenses in the event of a relocation due to repairs. If you have nowhere to go after an event beyond your control, your home insurance could cover accommodation and food until you find a new place.
What does home insurance cover?
Home insurance can cover your physical home, its contents, the property it’s on, any secondary structures (like a guest house or a pool shed) or any combination of the four. What your policy covers will depend on what your provider offers, how much you’re prepared to pay in premiums, and how much you’re prepared to accept as a deductible.
For example, if you have a kitchen fire, your home insurance will cover the costs to repair the room and replace damaged appliances. While all home insurance policies will offer basic coverage, you could add additional coverages to your policy that increase its protection. This will vary based on your provider.
Home insurance coverage will also differ depending on whether you live in a condo or you’re renting.
If you own a condo, your home insurance will typically cover any improvements you make to your unit, as well as your belongings. If you’re renting, your policy will protect your belongings but may not cover changes you make to the property.
Home insurance options and pricing could also change depending on a number of risk factors. These include where you live, the size of your home, the age of the building, the construction materials used and the number of people living on the property.
Home insurance against fire damage
Fire damage is unfortunately a common reason a claim is initiated. While some of these claims are a result of resident negligence (like a dinner napkin too close to the table candles), just as many could have never been prevented. In 2017, the National Fire Information Database was created to compile statistics on fires across Canada over a whole decade (2005-2014). The study found that out of all fire-based incidents, fires to structures were the most common with an average of 20,533 per year. In 2014, 74% of all structural fires occurred in residential buildings.
Fires are unpredictable and can cause major damage even when caught early – be they a result of a lightning strike, a power surge or a fire in a neighbouring house/condo/apartment.
Most home insurance policies with fire coverage will include the cost of repairing or rebuilding the structure and replacing the personal property that was inside. They will also cover damages if a fire that started in your space spread to neighbouring rooms, units or buildings.
Depending on your policy, you’ll likely be covered for cost-of-living expenses if you’re left without a home to stay in. This will pay for hotel stays, rentals, restaurant bills and utilities you may have lost.