Home Insurance: What It Covers And Why You Need It
Home insurance is an insurance policy that provides financial protection in case your home is robbed, damaged or the scene of an accident.
Canadian homeowners aren’t legally required to purchase home insurance. However, most mortgage lenders require you to have a home insurance policy in place before approving your home loan.
It’s a good idea to understand how home insurance works before buying a house so you can get a policy that makes sense for you.
NerdWallet's First-Time Home Buyer Guide
If you have questions about buying your first piece of real estate, our guide for first-time home buyers in Canada can answer them.
What does home insurance cover?
Every piece of real estate and insurance provider is unique, so home insurance coverage can vary quite a bit.
Standard home insurance coverage includes:
Personal belongings. Anything inside your house counts as a personal belonging and can be covered by home insurance, including vehicles. Unique or expensive items like jewellery and art may require additional insurance.
Personal liability. If a person is injured while on your property and decides to sue, personal liability coverage may offset the costs associated with the case.
Dwelling and detached structures. If your home, including detached elements such as a garage, suffers damage and needs to be repaired or rebuilt, your house insurance will cover some or all of the cost.
Identity fraud. Victims of identity theft may be able to claim legal fees and expenses under their home 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 might include:
Sewer backup. If water backs up into your home, your damages will be covered.
Overland water. Any damage or flooding that occurs from excessive rain or melting snow could be covered.
Extreme weather. If hail or earthquakes could cause major damage to your home, this type of additional coverage may appeal to you.
It’s best to consider all possible outcomes when designing your insurance policy. For example, a condo owner living on the 20th floor may not think they need coverage for extended water damage. But it could come in handy if their storage area floods.
Have questions about home inspections? Consult our handy home inspection checklist for buyers and sellers.
How much does home insurance cost in Canada?
Some estimates peg the average home insurance cost at around $1,000 a year. Premiums vary from province to province, though. Home insurance in Ontario and B.C., for example, is generally more expensive than in other provinces.
How much you pay depends on many factors, including:
Your credit score.
Whether you’ve had home insurance in the past, and for how long.
The market value, size, location and age of your home.
Security and fire alarms in your home.
Required coverage.
Chosen deductible.
Every insurance provider has its own calculations for determining premiums. Quotes can range significantly between providers, so it’s always worthwhile to shop around.
If you’re looking to save money on home insurance, consider bundling multiple insurance policies, such as home and car, together with the same provider, who may give you a discount.
How to buy home insurance
Insurance can be purchased before you formally buy a home. You just need to set the policy to begin on the date you'll take possession.
Here are the typical steps for purchasing a house insurance policy:
Step 1: Call or go online to compare different insurance providers. You can also get the same information by speaking to an insurance broker.
Step 2: Provide all the relevant information about your home, such as property type, address, coverage start date, etc.
Step 3: Disclose additional information, including high-value items , security systems and your claim history.
Step 4: Choose your group (if any) for discounts. For example, you may get a discount as a graduate of a specific university.
Step 5: Provide your personal and contact information.
Once that’s all been completed, a quote with the policy details will be sent to you. You may be contacted to complete your policy, but some companies will allow you to purchase your policy online immediately. The entire process is relatively quick and hassle-free.
Frequently asked questions
Do I need to purchase home insurance?
Do I need to purchase home insurance?
Most mortgage lenders require home insurance to be in place before they can release the funds that allow you to close on a home purchase. Anyone who plans to get a mortgage to pay for a home should get home insurance.
Does home insurance cover theft outside the home?
Does home insurance cover theft outside the home?
Yes. There are policies that cover items that are, for example, stolen from your car or taken while you’re on vacation. Be sure to check with your insurance provider if you’re looking for a specific kind of insurance coverage.
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Clay Jarvis
Kurt Woock
Clay Jarvis