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What Does Home Insurance Cover in Canada?

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When it comes to protecting your most valuable asset, home insurance in Canada is a must-have. But what exactly does it cover? There are three main types of home insurance coverage in Canada. These include:

      Comprehensive home insurance: This protects everything inside and outside your home from any unexpected damage.

      Named perils: This protects and accounts for specific “perils”, such as fire, natural disasters, or flooding. You decide which named perils are listed in your insurance to ensure they get coverage.

      Broad home insurance: A combination of comprehensive and named perils. It covers the structure of your home, and any named personal belongings inside it.

Most types of home insurance in Canada will fall under one of these broad types. But what sort of damage protection can you expect from each type? In this article, we explore basic home insurance coverage, common exclusions, and how to ultimately get the best coverage for your budget.

To learn more about home insurance in Canada, read on!

What Do Most Basic Home Insurance Policies Cover?

Home insurance in Canada typically provides basic coverage for the structure of your home, personal belongings, liability, and additional living expenses in case you’re unable to stay in your home due to covered damages. Each basic type of coverage is described below:

     Structure of Your Home: Home insurance covers the physical structure of your home, including the walls, roof, floors, and foundation. It protects against damages caused by events such as fire, windstorms, or vandalism.

     Personal Belongings: Home insurance provides coverage for your personal belongings, including furniture, appliances, electronics, clothing, and other valuables. Whether they are stolen or damaged in a covered event, such as a fire or a burst pipe, your insurance policy will help cover the cost of repairs or replacement.

     Liability – Home insurance includes liability coverage, which protects you financially if someone is injured on your property or if you accidentally cause damage to someone else’s property. This coverage can help cover legal fees and medical expenses associated with a liability claim.

     Additional Living Expenses – If your home becomes uninhabitable due to an event, such as a fire or severe storm, home insurance can cover the additional costs of temporary living arrangements, such as hotel bills or rental expenses, until your home is repaired or rebuilt.

With comprehensive insurance, all of these expenses will be covered by your insurance. With named perils or broad-form insurance, the coverage is more selective and you need to check your policy before submitting a claim.

Additional Coverage Options for Homeowners

Some coverage options need to be added to your policy as an extra. It’s important to note that even if coverage is comprehensive, it will not include the following:

      Water Damage: Water damage caused by burst pipes, sewer backups, or overland flooding can be devastating. Basic home insurance policies may not include coverage for all types of water damage, so it’s important to check the specifics of your policy and consider adding additional coverage if necessary.

      Earthquakes and Floods: Earthquakes and floods are typically not covered by basic home insurance policies. Consider adding this coverage if you live in an area that’s prone to natural disasters.

      Home Business: If you run a business from your home, it’s crucial to discuss this with your insurance provider. Basic home insurance policies may not cover business-related equipment, inventory, or liability.

In short, unusual types of damage might need additional coverage in your policy, even if you have comprehensive insurance.

What Is Not Covered in Most Home Insurance Policies?

While the above coverage is something you can add to your current home insurance as an extra, some types of damage are never covered by home insurance. These are outlined below:

      Wear and Tear: Home insurance is designed to cover sudden and accidental damages, not normal wear and tear. So, if your roof starts leaking due to its age or your appliances break down due to regular use, your insurance policy may not cover the repairs or replacement.

      Negligence: If damages occur due to your negligence, such as failing to maintain your property or neglecting to fix a known issue, your insurance provider may deny your claim.

      High-Value Items: While home insurance covers personal belongings, there are usually limits on coverage for high-value items such as jewellery, artwork, or collectables. If you own expensive items, you may need to purchase additional coverage, known as a floater or an endorsement, to ensure they are adequately protected.

Remember to check whether your insurance covers something before submitting a claim.

Factors That Affect Home Insurance Premiums in Canada

Several factors can influence the cost of home insurance premiums in Canada. To get a better deal on your home insurance, it’s helpful to first understand why coverage is so expensive in the first place:

      Location: Your home insurance might cost more, depending on where your home is situated.  Factors such as crime rates, proximity to fire stations, and the risk of natural disasters can impact the cost of coverage.

      Type of Home: The type of home you own, whether it’s a detached house, a condo, or a townhouse, can affect your insurance premium.

      Age and Condition: The age and condition of your home, including the plumbing, electrical systems, and roof, can influence your insurance premium. Older homes or homes with outdated systems may have a higher risk of damage, resulting in higher premiums.

      Claims History: Your claims history can affect your insurance premium. If you have a history of filing frequent claims, insurance providers may view you as a higher risk and charge higher premiums as a result.

Home Insurance Discounts and Ways to Save Money

Now that you understand some of the factors affecting home insurance costs, let’s dive into how you can decrease these costs while still maintaining proper coverage:

      Security Systems: Installing security systems, such as burglar alarms, smoke detectors, or a home security system, can often lead to discounts on your insurance premiums.

      Bundle Policies: Bundling your home insurance with other policies, such as auto or life insurance, can result in cost savings and discounts.

      Higher Deductibles: Opting for a higher deductible, the amount you pay out of pocket before your insurance coverage kicks in, can help lower your premium. However, be sure to choose a deductible that you can comfortably afford in case you need to file a claim.

      Maintain a Good Credit Score: In Canada, some insurance providers consider your credit score when determining your premium. Having a better credit score means better prices.

Final Thoughts

Home insurance can be a worthwhile investment. You never know when disaster may strike, and having funds to pay for damage to your home or property can save you from a financial disaster one day.

When choosing between comprehensive and named peril insurance types, remember to compare prices and premiums where possible. Also, remember to keep in mind that some things are never covered by home insurance, including wear and tear, and negligence.

 

Home insurance is not just an expense; it’s an investment in protecting your most valuable asset. So, take the time to review your policy, assess your needs, and choose a home insurance provider that will provide you with the peace of mind you deserve.

Author Bio

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Mohamed Konate

Mohamed Konate is a personal finance expert, blogger, and marketing consultant based out of Toronto. He is a former financial services professional who worked for many years at major Canadian financial institutions where he managed the marketing strategy around various financial products ranging from credit cards to lines of credit. Mohamed is passionate about personal finance and holds a Bachelor in Business Administration from the University of Quebec (Montreal) and a Master in International Business from the University of Sherbrooke (Quebec).He is also the author of the Canadian Credit Card Guidebook. Read his full author bio