Home Insurance Basics

If you own a home or even vacant land, you’ll want to insure it. Property insurance protects you in the event that your premises and its contents are damaged. And it also covers you in case someone is injured in your home and you’re deemed liable.


How does property insurance work?

Property insurance works just like other kinds of insurance. You pay premiums to the insurance company in exchange for coverage. Property insurance covers you up to specified amounts for the following:

  • Damage, destruction or loss of personal property There are a number of different ways your home could be damaged or destroyed. Common risks that insurance protects against include fire, windstorms, falling objects, vandalism, lightning, explosions, water damage, impact by aircraft or land vehicles, and smoke. A home can also suffer a loss of value due to theft, which is also covered by insurance.
  • Liability coverage This aspect of your policy protects you in the event that someone is injured on your property and you’re held legally responsible. An example of this would be if a visitor slipped on your stairs and broke a leg, and sued you as a result. It also covers instances where your negligence damages someone else’s property. For example, if you live in a duplex and cause a fire that affects your neighbour’s unit, your insurance would cover you.

What's covered

When you purchase property insurance, you’re protecting the dwelling itself (the actual house or condo unit), as well as your contents (electronics, jewellery, carpets, etc.). The structure is typically insured up to its replacement value. What this means is that if your home is destroyed by something like a fire, the insurance policy will pay for it to be rebuilt. It’s important to note, however, that replacement value refers to the materials and labour required for rebuilding, and not the resale value of your home.


Property insurance isn’t regulated

In Canada, auto insurance is very tightly regulated. However, this isn’t the case with property insurance. There are no standard policies or terms and conditions in contracts. With dozens of companies offering insurance, this means consumers have a dizzying variety of plans to choose from. But it’s buyer beware. You shouldn’t assume that one company’s policy will include all the things that another insurer’s policy does. So do your homework before signing on the dotted line.


Insurers may inspect your property

If you sign up for insurance coverage, it’s possible your insurer will occasionally want to do an inspection of your home. There are a few reasons insurance companies do this:

  • To see if there are any fire hazards or other risks on your property that should be fixed; insurers may check the electrical systems or plumbing, for example, to see if you need to replace or upgrade anything in your home
  • To make sure your coverage is up to date
  • To have an accurate sense of the replacement value of your home and its contents

Keep an inventory of your belongings

In addition to insuring the home itself, one of the key things insurance does is protect the value of your contents. For this reason, you should have an inventory of all your valuables. This list plus any relevant documentation should be kept in a secure place to protect it from fire or flooding.

Having a list of what you need insured will also make the process of applying for insurance easier. You can tell the insurance company what you want to insure and they can suggest the appropriate policy.


Home maintenance will save you money

If something happens to your home, it’s always a relief if you’re covered by insurance. But insurance is not something you want to have to rely on. The process of repairing your home and filing a claim will be tedious and take up a lot of your time and energy. It’ll also cost you money if your premiums go up. In this regard, prevention is key. Keep your home adequately maintained against things like floods and fires. You’ll be glad you did and you may even save on insurance if the insurer sees how well you’re taking care of your property.


Where you’re not covered

There are a number of situations in which your insurance won’t cover damage or destruction to your residence. These include:

  • Personal liability resulting from running a business out of your home
  • Damage as a result of pipes or indoor plumbing freezing
  • If you have a flood in your house because of cracks in your home’s foundation, you won’t be covered by insurance
  • General wear and tear
  • Damage caused by rodents, insects, or termites
  • Damage caused by earth movements, such as landslides
  • Any damage or destruction due to an intentional or criminal act

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