What is Contents Insurance in Canada (and When Do You Need It)?

As a homeowner or as a renter, contents insurance is one of the most significant investments you can make. In exchange for a small monthly premium, you get the peace of mind that comes with knowing that if your personal belongings are damaged or stolen, you will be reimbursed.

Contents insurance provides coverage for your personal belongings, whether you are a homeowner or a renter. All contents can be covered whether you are at home or on the road. Deciding to have a contents insurance is the best way to protect your belongings such as furniture, electronics, clothing, art, and jewelry.

There are two types of contents insurance, namely homeowner’s content insurance and tenant’s contents insurance.

• A comprehensive policy for homeowners will already have contents insurance as part of its offering. Coverage may differ for homes and condos. Each provider may have its restrictions, exclusions and may cover stuff you don’t own. This kind of coverage as a bundle is considered best practice.
• Contents insurance for tenants is more clearly defined. The tenant would be required to inform the insurer of the amount of contents insurance they will need to secure all of their possessions. This can be done by adding up the total value of the contents they wish to insure and then purchasing content insurance to that value. How much they choose to insure is solely up to the tenant.

It’s best to keep track of your possessions, ideally retaining their receipts. It makes managing claims a lot easier.

Fire, smoke, water damage, theft, vandalism, windstorms and hailstorms, and falling objects are perils or risks covered under a typical contents insurance policy. You may choose to add an “endorsement” (extra coverage) to your policy that protects your contents from an earthquake or overland flooding. Such an endorsement is dependent on where you live and if you would be susceptible to this kind of risk. Because these occurrences are uncommon, they may not automatically be covered by contents insurance plans.

Your policy specifics determine how you are compensated and how much money you receive from a claim. For example, the type of contents coverage you choose can significantly impact how much you will be reimbursed if you experience a loss. Between replacement cost and actual cash value, there is a crucial distinction to be noted. Here’s how it works:

• Replacement cost: After a claim, you will be given the amount required to replace your products with something of equal quality. This option is the more expensive of the two, but you will receive a more significant reimbursement amount for your belongings.
• Actual cash value (ACV): You will receive similar-quality products at the current market value of a used item of the same model. This is a more cost-effective coverage, but your insurer will compensate you less.

Your contents restrictions should correspond to the cost of replacing your personal belongings with new ones. Going through your home contents one by one to calculate the entire value of your belongings would be the easiest way to determine the total value. In most cases, your limit will be around 70% of the total amount of building coverage.

Consider obtaining specific coverage for high-value items. Some high-value objects are subject to restrictions or may not get coverage from a standard policy.

A contents insurance policy typically covers your possessions up to a predetermined amount. Therefore, the first step in shopping for insurance is to make a detailed inventory of your belongings and determine their entire value. The level of coverage provided by your policy should be enough to replace all or most of the contents in your home.

Check our home insurance comparison tool to find the best home insurance corresponding to your needs.