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Home insurance 101

Find out all you need to know about how home insurance works in Canada and compare personalized home insurance quotes for free.

How does property insurance work?

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. It also covers you personally in case someone is injured in your home, or on your property, and you’re deemed liable.

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 protects you.

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  • Step 3: Save money

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What does home insurance cover?

When you purchase property insurance, you’re protecting the dwelling itself (your house or condo unit) and your contents within (electronics, jewellery, carpets, etc.). It also protects you from someone pursuing you for damages resulting from an injury that took place on your property.

The main 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. A detached shed, gazebo, and deck would also have coverage. 

Replacement cost vs. actual cash value

Actual cash value includes depreciation and is cheaper than replacement cost. Read more about ACV vs. replacement cost.

Is home insurance regulated?

In Canada, auto insurance is tightly regulated by provincial bodies, but not so with property insurance. There are no standard policies, or terms and conditions, in contracts. Still, most Canadians choose a comprehensive home insurance package that covers the building, its contents, any detached structures, and your liability.

With so many companies offering home insurance, consumers have a dizzying variety of plans to choose from, so buyer beware. Don't assume that one company’s policy will include the same coverage as another.

For example, flood insurance is typically only for burst pipes and not for sewer backup or water seeping through your foundation permeating into your basement. Earthquake insurance is sometimes mandated by where you live, sometimes it's optional. 

Best to do your homework before signing on the dotted line.

What is a property inspection report?

A home insurer may want to inspect for risks that require repair or upgrades. The report will detail what needs to be done and could be the difference in you being insured or not.

How does contents insurance work?

Contents insurance

Want to know about contents insurance in more detail? Read our page: Contents insurance

In addition to insuring the home itself, one of the key things house 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 (receipts, pictures, etc.) 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 values and any add-ons you may need for jewellery or other expensive and valuable items.

How to get cheap home insurance: maintenance

If something happens to your home, it’s always a relief knowing home insurance will cover you.  But, insurance is not a maintenance plan, and won't cover you in all situations, depending on your coverage. 

Also, the claims process of repairing your home and filing it with your insurer can be tedious and take up a lot of your time and energy. After a successful claim, your premiums may go up as a result. 

In this regard, prevention is key. Keep your home adequately maintained against common risks like floods and fires.

For floods, waterproofing your foundation, upgrading pipes, and installing weeping tile and a sump pump will help. Also, make sure to shovel snow away from your foundation, and ensure your eavestroughs are clear of debris and point away from your home.

For fires, ensure you have active fire alarms, fire extinguishers ready, and leave any electrical work to professionals. 

You’ll be glad you did. You may even save on insurance if the insurer sees how well you’re taking care of your property. 

Ready to find your cheapest home insurance?

Compare personalized home insurance quotes from Canada's top providers to uncover the best rate to meet your needs, for free.

What does home insurance not cover?

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

  1. Personal liability resulting from running a home business

    Any business that increases risk inside your home should seek the proper business insurance.

  2. Water damage beyond a burst pipe

    If a pipe bursts in the winter from freezing, you're fine. But without comprehensive flood coverage, a sewer back up or a rising lake requires a special add-on.

  3. General wear & tear

    Home insurance isn't a maintenance plan. If your roof leaks due to old age, don't expect your insurer to foot the bill.

  4. Damage caused by rodents, insects, or termites

    Termites can create severe damage to your home's structural stability. If you're aware, and neglect to hire professionals, you could be paying a substantial bill.

  5. Damage caused by earth movements, such as landslides

    Some earthquake insurance add-ons can protect you from landslides, but it will never be included by default.

  6. Any damage or destruction due to an intential or criminal act

    If you're dishonest, it could result in a denied claim. Honest is the best policy.

  7. Certain valuables

    If you have rare art, expensive jewellery, or a fancy road bike, there are often limits to the coverage. You can ask for more, be sure you do.

Author Bio

Matt Hands, Business Director of Insurance

Matt started his professional career at CARPROOF where he honed his marketing and analytical skills for over 3 years. Matt then took his wealth of experience to Ratehub.ca’s Toronto offices, working with insurance providers, agents, and brokers to grow and expand the Insurance business unit. He is a thought leader in the community and a valuable insurance resource to respected publications like the Globe & Mail, Toronto Star, Huffington Post, Yahoo News, and 680 news radio in Toronto.

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