Shopping for home insurance means learning a whole new vocabulary. There are two primary types of home insurance policies you may have heard of: comprehensive and broad coverage. If you’re curious about the difference between these two types of home insurance and whether you can save money by choosing one over the other, you’ll find the answers to your questions in this article.
What is broad home insurance coverage?
“Broad” home insurance is a type of insurance that covers your home in case it’s damaged or destroyed by something outside of your control, but only extends coverage to your home’s contents for specifically named perils. This means there will be a set number of perils (e.g. theft) that will be listed on your policy that your contents will be insured against.
If your home was destroyed in a fire, for example, a broad home insurance policy would pay for all the costs related to rebuilding the structure. This could include clearing the land, hiring an architect and builder, and the cost of construction itself. The policy, however, only covers the cost to replace your furniture, clothing, appliances or electronics for specific risks listed on the policy – so if you don’t have contents coverage against fire, you’ll be left on your own to replace all your belongings.
Broad home insurance commonly only covers damage to your dwelling caused by fire, lightning, smoke, theft, explosions, electrical current, aircraft or vehicle impact and falling objects. It will be a cheaper option than a comprehensive policy, but the savings aren't massive.
What is comprehensive home insurance coverage?
Comprehensive home insurance is also known as “all perils” insurance. Is the most common type of home insurance coverage in Canada. It protects both your home and your belongings in case of an incident - not limited to a set number of named perils.
Continuing our example above, a comprehensive home insurance policy would still pay the cost of replacing the building after a fire. It would also pay to replace your furniture, clothing, appliances and electronics.
Comprehensive home insurance also covers your contents if the house itself isn’t damaged. For example, a comprehensive insurance policy would pay to replace items stolen in a burglary or those damaged by a power surge.
What is named perils home coverage?
"Named perils" home insurance covers only those perils named on your policy. With this type of coverage, you can pick and choose what items are covered, and what perils you’re covered against. Everything not named in your policy is not covered by insurance.
For example, let’s say you purchased a named perils policy that specified coverage for your home, appliances and electronics from fire, flooding, and theft. If your home were destroyed in a fire, insurance would pay the cost to rebuild your home, but not your detached garage. It would also pay to replace your appliances and electronics, but not clothing or furniture. If your home was damaged by a car crashing into it, you wouldn’t be covered because that peril wasn’t named on your policy.
NOTE: Keep in mind that named perils, broad, and comprehensive home insurance coverage may be defined differently depending on the insurance company, so always double-check with your provider to make you understand the terms of your policy.
What isn’t covered by broad or comprehensive home insurance?
No matter what type of home insurance you buy, it won’t cover everything. Typical exclusions include:
- Things within your control like a flood caused by frozen pipes or a bathtub left running (i.e. negligence).
- Damage caused by animals (i.e. family dog).
- Natural disasters like floodwater and landslides. Sewer backup insurance, overland water coverage and earthquake coverage can optionally be added to your policy.
- Loss caused by war or terrorism, or your own criminal activity.
Home insurance also won’t cover anything that’s considered maintenance. The cost to replace a broken-down furnace or worn-out roof will have to come out of your own pocket.
You should also be sure to ask your insurance broker whether you need to buy separate coverage for any valuables you may own. For example, a standard comprehensive policy may only provide $6,000 in coverage for jewelry even if your collection is worth much more than that. Additional coverage would be needed to insure the full value of your collection.
Should I choose broad home insurance or comprehensive?
You should almost always choose comprehensive home insurance over broad home insurance. There’s not much difference in the cost between the two coverages, and a comprehensive policy will ensure that you don’t have to pay to replace your contents in case of an incident you aren’t insured against.
If you do choose broad home insurance, you need to be confident that you can pay to replace everything in your home in case it’s destroyed due to a risk that isn’t listed on your policy. That includes all of your furniture, appliances, electronics and clothing. After a total loss, it can easily cost tens of thousands of dollars to replace everything.
Ratehub.ca’s home insurance comparison tool shows quotes for comprehensive policies by default for just this reason. Unless you’re sleeping on an air mattress in an otherwise empty house, there’s little reason to choose broad home insurance.
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How else can I save money on home insurance?
The best way to save money on home insurance is to keep an eye on your renewal and compare quotes online to make sure you’re getting the best deal. You might find that you can get a lower price for the same coverage you’re already paying for just by switching providers.
You can also reduce your premiums by choosing a higher deductible – the amount you pay out of pocket before your insurance kicks in. While most policies have a $1,000 default deductible, you can lower your rates by raising it up to $5,000. This is a good way to balance the cost of home insurance with your willingness to pay out of pocket for a portion of a potential claim.
The bottom line
Broad home insurance coverage offers good protection for your home, but it won’t always cover your belongings. To ensure your personal property is fully protected the savvy financial decision is to choose a comprehensive home insurance policy.
If cost is a concern, look for other ways to reduce your premium instead of foregoing coverage. Compare insurance quotes online to make sure you’re getting the best deal, bundle your auto and home insurance, or choose a higher deductible to save even more. Also, don't be afraid to speak with your insurance broker to see if there are any other applicable ways to save.