When it’s time to buy a house or rent an apartment,insurance may be the last thing on your mind in the midst of the move and excitement, but it’s a necessary step to take before you pack your bags!
If you’re new to home insurance and don’t know where to start, we’ll explain why you need home insurance and what type of policy is best for you.
Why you need home insurance
Home insurance is not mandatory in Canada if your home is fully paid for (although you still need it), but you will need it to get a mortgage.
Home insurance protects your property and belongings against damage, loss or theft. If you have to leave your home temporarily because of necessary repairs, home insurance can also help cover these costs. In addition, home insurance can also cover medical expenses if someone is injured while visiting your property.
Your home is more than just a place to lay your head at night, so it’s very important to be protected from damage or loss.
Types of policies
When you choose a home insurance policy, there are two types of coverage you need to apply for: personal property coverage and liability coverage.
Personal property coverage provides financial protection against loss or damage to your personal property and/or home. Liability coverage legally protects you from liability for losses caused by injuries to visitors to your home.
Once this is settled, there are four main types of home insurance policies to consider.
A comprehensive policy (also called “all risks”) provides the best coverage for your home and property. It protects you financially against any loss, damage or theft of your goods and property.
It is the most popular choice among Canadians because it covers any loss or damage.
Standard or basic font
Standard or basic coverage offers less protection than comprehensive coverage because it only protects you financially against the risks listed in your policy.
This means that not all accidents or events such as theft, flood or fire will be covered. The advantage is that your monthly premium will be lower with the basic coverage than with the comprehensive coverage.
That being said, it is important to understand what types of risks are covered by your policy before making your decision.
A large font is somewhere between a standard font and a full font.
With a broad policy, you are covered against all risks except those listed as exclusions in your policy. This means that your home may not be protected against certain events such as an earthquake, but it is covered for all other risks. Just be sure to talk to your insurance broker to be clear on what your policy covers.
Because not all risks are covered, a broad policy generally costs less than a comprehensive policy, but more than a standard policy.
No-frills coverage is the least common type of policy because it provides basic coverage, but only for homes that qualify. These are usually homes that do not meet the standards of other types of home insurance.
This is the least expensive form of home insurance.
As mentioned earlier, it is very important that you understand what types of risks or events are covered by your policy before you sign anything.
Generally, your insurance policy covers disasters or unexpected events such as flash floods, theft or hurricanes. Home insurance does not generally cover foreseeable events, i.e. speculative risks.
An example of a speculative risk would be leaving a candle burning all night in your bathroom, causing a fire. The outcome of the action was foreseeable and, if you were at fault, your insurance policy would generally not cover the cost of repairing your home.
Again, be sure to speak with your insurance broker to understand what is and is not covered.
Types of home insurance
As mentioned earlier, you don’t just need insurance when you buy a single-family home. There are also other assets you should consider insuring:
- The first and most important ishomeowner’s insurance. This type of insurance is for owners of a detached home and covers the building itself and any other structures on the property, such as a shed. Most homeowners opt for comprehensive coverage because it offers the best protection for their home and belongings.
Renter’s or Tenant’s Insurance
is for people who rent an apartment, condo or house from another person or company. Renter’s insurance primarily protects your personal property, but it also covers medical expenses for visitors who are injured on the rental property. Renter’s insurance does not cover damage to the property (the landlord is insured for that), but it does cover living expenses if you have to move out temporarily to make repairs.
- If you are a condominium owner, you will opt for a condo insurance . Like home insurance, condo insurance protects your unit and personal items, as well as shared common areas such as the gym, roof, garage, etc. Like renters insurance, you will also be covered if you have to live elsewhere while your building or home is being maintained or repaired.
- Do you have a vacation home or apartment? If this is the case, you must apply for vacation property insurance. This type of policy requires you to choose your perils (or risks), as the risk of damage is higher since you are not there year round. Many insurance companies will list your permanent residence and your secondary residence on the same policy.
- Finally,rental property insurance is required for landlords who rent their property to others. Like homeowner’s insurance, this type of policy protects the building and covers liability if someone is injured on the property. The main difference with rental property insurance is that it can reimburse lost income if the building or dwelling is damaged and tenants are unable to occupy it.