Purchasing a home is a huge step, but properly protecting your brand-new house is an even bigger responsibility. To ensure you will be covered financially in the event of an emergency, it's important to take the time to carefully research and compare all of your options for insurance coverage. You'll be paying insurance premiums every month, quarter, or year for as long as you own your home which is not a commitment to be taken lightly.
Am I required by law to purchase home owner's insurance in Canada?
Yes, a home owner's insurance policy is required by law to purchase and close on a home in any Canadian province. The minimum required value you need to purchase would be the amount needed to replace your home if it were destroyed (which is calculated by the insurance agent/realtor).
What types of coverage does home owner's insurance offer?
While every policy is different, the following basic coverage options are included under every plan as required by Canadian law.
- Liability Insurance coverage - exists for a situation in which you or a household member is accused of causing damage to someone else's body, personal property, or home. It's meant to cover things like legal fees, and the cost to replace an item or make a home repair if you are found guilty of damages.
- Personal Property Insurance - allows you to file a claim to obtain the depreciated replacement value of any personal belongings of yours that are damaged or stolen under the eligibility requirements laid out in your specific contract. These items could include clothing, electronics, jewelry, tools, lawnmower, etc.
- Home Structure Insurance - in the event of unexpected damage caused by things like a vehicle, trees, weather, contractors, or other possible reasons that fall under the requirements of your contract you're covered for the cost to repair or replace the damaged portion of your home or items in your home. Be sure to ask your agent to be clear about the events or items that would not be covered under this clause.
- Flood Insurance - covers the cost to repair damage caused by water damage due to flood. Read your insurance policy carefully on what the eligibility requirements are as there are often loophole clauses for flood damage limiting claims and in favour of the insurance company.
- Medical Insurance - if you or a guest experience an injury while in your home or on your property your insurance policy provides reimbursement for medical costs associated with ambulance, doctor, hospital, dental, or surgical costs. Every policy is different so ask your representative about what level of coverage you need in this area and what is and is not covered.
- Identity Theft Insurance - reimbursement provided in the event of major financial damage due to identity fraud or theft.
How much can I expect to pay and how do I get the best deal?
The premium rate of your policy is calculated primarily based on something called the "Replacement Value of your Home" in the event that it were destroyed completely. Factors like age and condition of the home, location and neighbourhood, property taxes, and which company you choose can all have bearing on what rate you will pay for your home owner's insurance. Keep in mind that the higher your deductible rate, the lower your monthly premium, but the higher your financial obligation out of pocket if you do end up filing a claim. Most monthly premiums range from $300 to $1,200 per year depending on how much coverage you have.
One major thing that can raise the rate you would pay is if you are in a high risk area for floods, hurricanes, tornados, earthquakes or other natural disasters. Another little known fact that can raise your rate depends on how recently your roof was replaced and how quality the materials are. If you have an old, unreliable roof it is much more likely that you will have problems with leaks and damage from water and wind. Subsequently, if your plumbing or electrical system are old it will increase your premium as well. Lastly, if your house is older, or in a bad neighbourhood with high crime your monthly bill will be significantly higher. To get the best deal it is important to keep all these things in mind before you purchase your home and insurance.
Once you have completed all your preliminary research you will want to compile a list of all the insurance providers in your area so you can contact them to get a quote. Make sure to have questions written out ahead of time so your insurance agent can clarify any confusion you might have. It'll also be to your advantage to have the most accurate accounting possible and photo or video evidence of all your personal belongings to secure the appropriate amount of coverage. The more companies you call, the better since you will have more accurate pricing information which will give you leverage when negotiating the final deal.
If you are in the process of closing on a new home in Canada and are serious about comparing quotes for home owner's insurance there are a few resources you can utilize to locate insurance agencies. If you are looking to save time, there is a free service called Kanetix that allows you to enter in your contact information once and compare multiple home insurance quotes instantly. If you have questions about insurance terminology or the process in general you can find a wealth of information on the Insurance Bureau of Canada's website.