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Published April 4, 2022

Home Insurance: What Buyers Should Know

Home insurance policies compensate property owners in the event of destruction or damage, theft, injury to visitors and more.

Home insurance is a type of policy that may provide financial compensation to a homeowner in the event that theft, loss or damage occurs on their property.

Although home insurance isn’t legally mandatory for homeowners, most mortgage lenders will expect you to have a policy in place before closing your loan and allowing you to take possession of your new home.

However, some people scramble to get home insurance since they didn’t realize it’s something they need before buying a house. Instead of rushing out and buying the first policy offered, it’s a good idea to understand how house insurance works, so you can get a policy that makes sense for you.

» MORE: What to look for when buying a house

What is home insurance?

Home insurance — also referred to as house insurance, homeowners’ insurance or property and casualty insurance — is a type of insurance policy that covers your home and its contents in case something happens, such as theft or damage.

Not only does home insurance protect what’s inside your home, it also covers what’s outside on your property. In addition, house insurance may cover additional living expenses (like a hotel room and meals) if your house becomes unlivable for a period of time.

Let’s say there’s a fire in your home, for example. As a result, some of your contents are destroyed and you need to move out until the interiors and exteriors are fixed. A home insurance policy may cover the costs of repairs and replacing destroyed items, as well as staying in a hotel or renting an apartment while repairs are carried out.

Home insurance is separate from title insurance, which is an optional policy Canadians can purchase for protection against property title issues, such as liens or fraud.

Renters who want similar coverage should purchase tenant insurance rather than home insurance, since they don’t own the property, just the belongings in it. That said, it’s typically a good idea to verify that your landlord has house insurance before signing a lease.

» MORE: Should you rent or buy?

What does home insurance typically cover?

What you get with your home insurance policy can vary quite a bit since every piece of real estate and insurance provider is different. Generally speaking, there are standard and additional home insurance policies available.

Standard home insurance coverage

  • Personal belongings. Basically, anything inside your home or vehicle counts a personal belonging and can be covered by home insurance. That would include things like electronics, furniture and clothing. Note that special or very expensive items like jewelry and art may not be covered or may require additional insurance.
  • Personal liability. If a person is injured while inside your home or on your property and decides to sue, your home insurance policy’s personal liability coverage may cover the costs of hiring a lawyer and any associated costs with the case.
  • Dwelling and detached structures. If your home, which detached elements such as your garage, suffers damage and needs to be repaired or rebuilt, your house insurance will cover some or all of the cost. Note that repairs necessitated by normal wear and tear aren’t typically covered.
  • Identity fraud. Victims of identity theft may be able to claim legal fees and expenses for replacing their documents under their house insurance.
  • Living expenses. If you need to vacate your home while it’s being repaired, your additional living expenses may be covered by your insurance.

Additional home insurance coverage you may need

In some cases, you may want to add supplementary coverage to your standard house policy. This extra coverage may include:

  • Sewer backup. If water backs up into your home through a sewer, floor drain, septic tank or sump, your damages will be covered.
  • Overland water. Any damage or flooding that occurs from excessive rain or melting snow could be covered.
  • Extreme weather. Hail and earthquakes could cause major damage to your home, so this type of additional coverage will appeal to some homeowners.

Like any insurance policy, it’s important to read and understand the details. A condo owner living on the 20th floor may not think they need flood insurance, but the policy may include coverage for events where your unit floods and damages the property below. For example, if one of your pipes burst or your tenant leaves the water running and it floods.

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Who should get home insurance?

Since most mortgage providers require home insurance before they’ll release the funds for closing, anyone who plans to own a home should get house insurance.

Your real estate agent can help you decide the right time to buy a policy, but generally, insurance can be purchased before you formally own the home if you set the policy to begin on the date you plan to take possession.

» MORE: Mistakes to avoid when buying your first home

How much does home insurance cost?

According to the J.D. Power 2019 Canada Home Insurance Satisfaction Study, the median homeowners’ insurance premium was $1,200. Policy holders in the Atlantic/Ontario region paid the highest for homeowners’ insurance coverage at $1,260, according to the study, followed by the Western ($1,248) and Quebec ($984) regions.

The price you pay for house insurance will vary depending on the property and insurance provider, as well as:

  • Your credit score.
  • Whether you’ve had home insurance in the past, and for how long.
  • The market value (i.e. replacement cost) of your home.
  • The location of your home.
  • The size of your home.
  • The age and construction of your home.
  • Security and fire alarms in your home.
  • Required coverage.
  • Chosen deductible.

Every insurance provider has its own calculations when determining premium rates. Quotes can range significantly between providers. It’s always worthwhile to shop around.

If you’re looking to save, you could also bundle multiple insurance policies (such as home and car) together with the same provider, as they may give you a discount.

How to buy home insurance

Here are the typical steps for purchasing a house insurance policy:

  • Call or go online to check out different insurance providers. Alternatively, you could speak to an insurance broker.
  • Provide all the relevant information about your home, such as type of home, address, coverage start date, etc.
  • Disclose additional information including high-value items (like a valuable antique or piece of jewelry), security systems and your claim history.
  • Choose your group (if any) for discounts. For example, you may get a discount as a graduate of a specific university.
  • Provide your personal and contact information.
  • A quote with the policy will be sent to you.

Depending on the insurance provider, you may be contacted to complete your policy. That said, some companies will allow you to purchase your policy immediately online. The entire process is relatively quick and hassle-free.

About the Author

Barry Choi

Barry Choi is a personal finance and travel expert. His website is one of Canada's most trusted sites when it comes to all things related to money and travel.


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