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A beginner’s guide to home insurance in Canada

Buying a home is a big step for Canadians. It is a significant investment, and as such, you will want to be well-informed about managing the potential risks that come with it. Home insurance can be very beneficial to you in this regard.

A comprehensive home insurance policy will keep you covered with respect to some of the risks that are inherent with home ownership. A home insurance policy is essentially an agreement between you and your insurance provider; you sign on to paying premiums monthly or annually, and in return, you receive insurance coverage against the potential risks that could impact your property and its contents (fire, theft, floods, earthquakes and other forms of property damage are good examples of what is covered by a home insurance policy). There are two types of home insurance, the first type is for the actual building and the second is for the contents or your personal property. If you own a single family detached house then your house insurance policy will cover both the building and the contents, if you live in a strata property (Condo, Townhouse) then the strata insurance will cover the building and you will be responsible for obtaining your own contents insurance.

An in-depth description of how home insurance works in Canada. Includes information on how to shop for the best rates and how to plan your payment schedule.

What does home insurance cover in Canada?

In a variety of situations where your property and/or belongings could be lost, stolen or damaged due to unforeseen circumstances, a home insurance policy is a great option to have in place. Your insurance policy will finance the cost to repair your house and potentially replace any lost, damaged or stolen items. Additionally, you will also be covered for any potential liability suits or the living expenses of staying at a hotel or Airbnb while the damaged aspects of your house are being fixed.

In short, home insurance in Canada will cover the following aspects:

  • Dwelling—Protection of your dwelling or physical structure of your house.
  • Liability—that means that if a visitor attempts to sue you after incurring some sort of bodily harm on your property, you will be protected.
  • Personal Property—your personal belongings and or possessions will be compensated for if they are damaged or lost due to unforeseen circumstances.
  • Cost of temporary accommodation—You will be compensated for living in a temporary accommodation while your home is being mended.

Is home insurance mandatory in Canada?

Home insurance is not mandated by law in Canada in the same way that auto insurance is, however, if you have a mortgage or home equity line of credit (HELOC) secured against the home your lender will require you to have valid insurance in place for the life of the mortgage/HELOC. If you are just getting a mortgage, all lenders in Canada will ask potential homeowners to have some sort of home and fire insurance policy prior to providing them with a mortgage. It is not a legal obligation if your home is owned free and clear, but having a home insurance policy on your property is considered best practice.

How much does home insurance cost?

Home insurance is primarily paid through home insurance premiums, which are calculated based on a wide variety of factors. In most cases, insurance providers will look at the type and value of your home, the coverage you require and request, the risk level of both you and your property and then they will make a decision accordingly. The range is typically between a $100 up to $500 per month depending on the coverage; note that high net-worth or specialty homes and content riders for expensive furnishing and art can significantly increase the costs.

Listed below are a few examples of the factors that influence the amount of insurance you’ll have to pay:

  1. Home replacement cost—this points to the funds needed to reconstruct your home in an event where it’s irreparably damaged. Therefore, the more expensive this is the more costly your insurance coverage will be.
  2. Property type, age, size—various aspects of your property such as the age, size and type can all have an effect on insurance premiums. Your property type is determined by the number of people living in it or whether you rent it out as a source of income. Therefore, the amount of risk that your home carries influences the premium amounts. Similarly, the older your home is, the more prone it is to damage. As such, a newer home will have lower insurance premiums on offer. Furthermore, the bigger your home is the more insurance it will require purely because a bigger house will have more components.
  3. The neighborhood—the location of your home has a significant impact on your insurance premiums. Property located near a body of water or in an area with a lot of crime are more likely to have frequent insurance claims. Therefore, your insurance premium will be more expensive in this case.
  4. Heating, plumbing and electrical—similar to the age of your home, the older your appliance systems are the costlier your insurance premium will be. Do consider upgrading your appliances as it will save you more energy and more money in the long run.

How to shop for the best home insurance quotes

Homeowners can use different strategies when it comes to looking around for the best and cheapest home insurance quotes. Here are a few examples:

  • Shop and look around—Home insurance quotes vary from one company to another. As such, it’s important to spend time looking around for the insurer that gives you the coverage you want at a cost that fits your budget. Looking at the rating for the insurance provider should also be taken into consideration. Sometimes the cheapest isn’t the best coverage or service from the provider.
  • Group insurance products together—if you buy coverage for your car as well as your home from the same provider, they will likely reward you for your loyalty by providing you with discounts on premiums.
  • Having a clean insurance claims history—a clean insurance history with little to no redundant insurance claims will demonstrate to insurers that you’re less probable to make unnecessary claims in the future. This will lower the insurance rate you’re offered considerably.
  • Invest in home upgrades—Investing in home improvements can help you secure cheaper home insurance quotes. For example, making improvements to your plumbing, electrical, or your roof can help mitigate risk thereby lowering the cost of your insurance premium.  An alarm system is also looked favorably upon by insurance providers so, adding an alarm system not only gives you piece of mind when you are away from your home but also brings the added benefit of lowering insurance premiums.

How Mortgage Maestro can help?

Mortgage Maestro can help provide you with a list of mortgage insurance providers in your area in addition to mortgage options using our extensive network of lenders. We can place your mortgage with lenders who can provide you with the best mortgage solution, one that is catered towards your specific financial needs and goals.

Contact us today and we’ll have an experienced mortgage professional reach out immediately.

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