Why should you get home insurance?
The value of homes is constantly rising, and the purchase of a property usually comes with a substantial mortgage. When the unexpected strikes, you’ll want the financial protection that homeowners insurance provides. After all, even if your home goes up in smoke, you’ll still have to pay your mortgage.
Home insurance policies include third-party liability coverage. This covers your legal defence costs and any property damage, bodily injury or loss (indemnity) you’re legally obliged to pay for accidentally injuring someone or unintentionally damaging their personal property.
What are the risks of not having home insurance?
While home insurance doesn’t protect you from risk or loss, it can protect you from the financial consequences that these events can cause. Being the victim of theft is bad enough without having to worry about money when it comes time to replace lost items. That’s why investing in home insurance could be the key to your financial peace of mind.
Is home insurance mandatory?
Though it’s not mandatory, it’s always a good idea to take out home insurance – even if you’re a renter. This protects your property and provides third-party liability coverage if you unintentionally cause damage to others.
Most banks and other lending institutions require you to take out home insurance before granting you a mortgage. And all condo owners are required by law to obtain and maintain liability insurance.
Good to know: Insurance jargon can be tricky. Check
out our glossary of the key terms used in the insurance industry
for a clearer understanding.
How do you choose your home insurance?
Evaluate your assets
The Insurance Bureau of Canada and the Autorité des marchés financiers in Quebec suggest that you carefully assess your protection needs to ensure you choose the right home insurance coverage.
Make an exhaustive inventory of your personal property and its value. People frequently underestimate the value of all their possessions.
Identify your needs
Your insurance needs will vary depending on your status, whether you’re a homeowner, an owner of an income property, a co-owner or a tenant.
There are also different types of coverage: basic, comprehensive or supplemental (temporary rental, self-employed, collections, works of art, valuable bicycles, spa and pool, etc.).
If you have pets or travel frequently, don’t forget to specify this to your insurance provider. Your home insurance policy will include third-party liability coverage for property damage or bodily injury caused to third parties by yourself, members of your family or your pets.
Work with specialists
An insurance agent has the necessary expertise to guide you through the application process. For example, they can help you determine the reconstruction value of your property. In the case of condominiums, Bill 141 requires that the reconstruction appraisal be carried out by a qualified expert. In the event of loss or damage, this will ensure that you have sufficient coverage to rebuild your home, regardless of the state of the real estate market.
Good to know: Is your agent or firm authorized to offer you a home insurance product? Consult the Register of firms and individuals authorized to practise to make sure you’re working with the right people.
Review quotes and contracts
Once you’ve asked for insurance quotes, you’ll need to verify the clauses of the proposed coverage based on your needs. For example, if you own a collection of high-end bicycles, be vigilant when looking through your contract, as home insurance policies have limits for certain categories of goods.
Be transparent
Changes such as the replacement of your water heater, the installation of an alarm system or the addition of an extra insured person are likely to alter the terms of your insurance policy. Don’t forget to keep your insurance company informed.
Good to know: With natural disasters on the rise, water damage claims have soared over the last ten years – they’re the leading cause of home insurance claims. However, there are many exclusions relating to this type of incident, so be sure to check the water damage clauses of your policy.
What is a deductible?
The deductible is the amount the insured person needs to pay in the event of a claim. In general, the higher the deductible, the lower the premium (i.e., the amount you pay annually for coverage).
As an insured person, you can choose a higher or lower deductible depending on your risk tolerance. You could also obtain a more affordable premium by comparing offers, upgrading your alarm system or grouping your home and car insurance with the same company, for example.
Home insurance contracts sometimes include clauses that waive the deductible, especially in the event of a very large claim. Take the time to read your policy carefully.
Good to know: When it comes to replacing your property after a loss, the “replacement cost” option in your policy could be particularly useful. For a television purchased in 2023 for $1,500 and stolen a year later, you’d get the price of a new, identical or equivalent television instead of its estimated value after a year of use.
How much does home insurance cost?
The cost of home insurance will vary depending on a number of factors:
- Your home: its size, location and condition, including the state of the plumbing, electrical systems and roof.
- What it’s used for: whether you rent your home in whole or in part, whether you work in it or whether it’s used for commercial activities.
- Your furniture and personal belongings, including clothing and electronics.
- Other features, such as a swimming pool or wood-burning stove.
- Whether you’ve made a claim in the past.
What does home insurance cover?
The Insurance Bureau of Canada lists the following risks as typically covered by home insurance policies: damage due to wind, hail, lightning, fire, explosion, smoke, leakage or overflow of certain sanitary installations, theft, vandalism, impact of objects, collision or riots.
What doesn’t home insurance cover?
Risks related to pollution, war, nuclear energy, flooding due to overflowing water and landslides are not covered. However, you may request additional coverage for damage caused by floods, oil spills or earthquakes.
Damage resulting from neglect of the premises on the part of the insured person, such as damage caused by undue wear and tear to the exterior envelope of the house, mould or vermin, isn’t generally covered.
Note that standard coverage usually doesn’t cover damage caused by water infiltration through the roof or by a sewer backup. However, it’s sometimes possible to add this type of coverage at an additional cost if your home qualifies.
The most important thing to remember is that the risks covered may vary depending on your insurance policy and your insurance provider.
What do you need to provide to the insurance company?
To draw up your profile, an insurance agent will ask you several questions to determine the risk factor of both your property and you as a homeowner.
You’ll need to describe your home in detail, including its value, the age of the roof, the heating system, its location and its claims history. You’ll also need to provide personal information such as the ages of the people occupying the house and their jobs and habits, including whether they ever work from home or whether anyone smokes.
The insurance company will then propose a policy and premium that reflect the risk you’re exposed to.
In the event of a claim, the insurance company has the option of repairing, replacing or reimbursing the damaged goods, depending on the terms of the contract. You may need to provide bills.
Selecting the right insurance coverage may take some time, but it can ultimately save you a lot of hassle. Specialist advice can help simplify the process and help you make informed decisions.
To learn more about the different types of insurance, consult our resources:
- Understanding the different types of insurance
- Why should you get travel insurance?
- Why take out life insurance?
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