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A Guide to Home Insurance in Canada

When it’s time to buy a home or rent an apartment, insurance may be the last thing on your mind in the midst of moving and excitement, but it’s a necessary step to take before packing up your things!

If you’re new to home insurance and not sure where to start, read on for a breakdown of why you need home insurance and what type of policy is right for you.

Why you need home insurance

Home insurance isn’t mandatory in Canada if your home is fully paid off (although you’ll still want it), but you will need it to get approved for a mortgage.

Home insurance protects your property and belongings from damage, loss, or theft. If you need to move out of your home because of necessary repairs temporarily, home insurance can help cover those costs as well. Besides, home insurance can also cover any medical costs if someone hurts themselves while visiting your property.

Your home is so much more than a place where you lay your head down at night, so it’s super important to be protected against damage or loss.

Types of policies

When choosing a home insurance policy, you’ll need to have two types of coverage—personal property coverage and liability coverage.

Personal property coverage financially protects you from loss or damage to your personal belongings and/or home. Liability coverage legally protects you against liability for losses caused by injuries to visitors in your home.

Once you have that covered, there are four main types of home insurance policies to consider.

Comprehensive policy

A comprehensive (also known as all-perils) policy offers the most coverage for your home and possessions. It financially protects you from any loss, damage, or theft of your property and belongings.

This is the most popular choice among Canadians because it covers any loss or damage.

Standard or basic policy

Standard or basic coverage provides less coverage than comprehensive because it only financially protects you against the risks listed in your policy.

This means that not all accidents or events such as theft, flooding, or fires will be covered. The upside to this is that your monthly premium will be lower with basic coverage when compared to comprehensive.

With that being said, it’s important to fully understand what types of risks are covered under your policy before making your decision.

Broad policy

A broad policy falls somewhere between standard and comprehensive.

With a broad policy, you’re covered against any risks except for those listed as exclusions in your policy. This means that your home may not be protected from certain events such as an earthquake, but it’s covered for all other risks. Just make sure to talk with your insurance broker so that you’re clear on what your policy covers.

Because not all risks are covered, a broad policy typically costs less than a comprehensive but more than a standard policy.

No-frills policy

No-frills coverage is the least common policy type because it provides super basic protection but only for homes that qualify. These are usually homes that don’t meet the standards for other types of home insurance.

This is the cheapest form of home insurance.

Like previously mentioned, it is so important for you to understand what type of risks or events are covered under your policy before signing anything.

Typically, your insurance policy will cover disasters or unexpected events such as flash floods, theft, or hurricanes. Home insurance usually won’t cover predictable events, otherwise known as speculative risks.

An example of a speculative risk would be leaving a candle burning overnight in your bathroom, which causes a fire. The outcome of the action was predictable, and at your fault, your insurance policy typically wouldn’t cover the costs to repair your home.

Again, make sure to talk with your insurance broker to understand what is and isn’t covered.

Types of home insurance

Like we mentioned previously, you don’t only need insurance when you’re purchasing a free-standing home. There are also other properties that you should look into getting insured as well:

  • First and foremost is homeowner’s insurance. This type of insurance is for people who own a free-standing home, and it covers the actual building and any other structures on the property, such as a shed. Most homeowners go for comprehensive coverage because it offers the highest protection for their home and property.
  • Tenant or renter’s insurance is for renting an apartment, condo, or house from another person or company. Renter’s insurance primarily protects your personal belongings, but it also covers any medical bills for visitors that injure themselves on the rental property. While the renter’s insurance doesn’t cover any damages to the actual property (the owner has insurance for that), it does cover any living expenses if you have to move out temporarily for repairs.
  • If you own a condo, you’ll opt for condo insurance. Like homeowner’s insurance, condo insurance protects your unit and personal items and any shared common areas such as a gym, rooftop, parking garage, etc. Like renter’s insurance, you’ll also be covered if you have to live elsewhere during maintenance or repairs to your building or unit.
  • Do you have a vacation home or condo? If so, you’ll want vacation property insurance. This type of policy requires you to choose your perils (or risks) because there is an increased chance of damage since you are not there all-year-round. Many insurance companies will list your permanent and vacation home together on the same policy.
  • Lastly, rental property insurance is needed for landlords who rent their property out to others. Like homeowner’s insurance, this type of policy protects the building and covers liability if someone injures themselves on the property. The key difference with rental property insurance is that it can pay back lost income if the building or unit is damaged and tenants cannot occupy it.
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