What is home insurance and why do you need it?
Home insurance–also known as homeowners insurance, and not to be confused with mortgage insurance–is a type of insurance policy that gives you financial protection for your home and personal belongings, in case of damage or loss due to events like fire, theft, or natural disasters.
How does home insurance work?
Generally, it’s a policy you pay on a monthly basis, to keep your home protected throughout the year.
But how much you pay can depend on a couple factors: the type of coverage you choose, your home’s location, the potential replacement cost of your home, if you’ve previously made any past claims, property style, how old your home is, the state of your roof (if applicable), if you have a hot tub or pool, if you’ve made any renovations to your home, your credit score, and the valuables you choose to insure.
Similarly, there comes a point you’ll have to make a claim, depending on the coverage plan you’ve chosen your policy will have a deductible– the minimum you’ll need to pay, which can range depending on your plan–with your insurance provider covering the rest.
But why exactly do you need home insurance?
For starters, your home is likely one of the most valuable assets you own. It's where you and your family live, and it's also a big financial investment. Home insurance helps protect you by providing coverage for things like the structure of your home, your personal belongings, and liability in case someone gets hurt on your property.
And, if you're a homeowner in Canada, you probably already know that home insurance is something you need to have. In fact, your mortgage lender and real estate lawyer will need to see proof of it before closing on your home.
So, what exactly does home insurance cover?
Generally, most standard home insurance policies provide coverage for:
- The structure of your home, including detached structures like sheds and garages.
- Your personal belongings, such as furniture, appliances, and clothing.
- Liability in case of injury on your property
- Additional living expenses, which can help cover the cost of temporary housing if you're unable to live in your home due to damage.
In Canada, you have a couple options when it comes to what type of home insurance works best for you: basic, broad, comprehensive, and personal liability.
- Basic home insurance: This type generally protects your home from specific events that may cause damage, like fire, lightning, or falling objects.
- Broad home insurance: This type is one step above basic home insurance, giving you more coverage. Usually it covers what basic insurance covers, but can also include protection for the structure of your home and belongings.
- Comprehensive home insurance: This is the most extensive type of insurance, covering both your home and the belongings within your home–with exceptions.
- Personal liability insurance: While this insurance isn’t completely necessary, this can be greatly beneficial and especially help pay for legal fees and medical expenses if someone gets hurt on your property–like if you forgot to salt your icy walkway and someone slipped.
What does home insurance not cover?
When you first sign up for home insurance, these exclusions will often get listed from the start. In Canada, certain situations or items aren’t covered in the general home insurance packages:
- Damage from earthquakes, landslides, and avalanches isn’t generally protected under standard insurance. You’ll have to add extra coverage to your plan if the area you live in is at risk of this kind of damage.
- Damage from pests like rodents, insects, or termites.
- Damage from sewer backup or overland water
- Pricey artwork, jewellery, or belongings. While comprehensive home insurance generally covers the items within your home, there are dollar-amount limits–so it might help to consider getting extra coverage to insure your more expensive things.
Overall, when it comes to home insurance, it's important to remember that different insurers can have different policies, options, and pricing. It's a good idea to shop around and compare quotes from different insurers to find the coverage that's right for you at a price you can afford.
How do you make a home insurance claim?
Let’s say you experience some damage to your home, the most important thing is to report it ASAP and to always have documentation and proof to back up any home insurance claim.
You’ll then have someone from your insurance provider assigned to help you work through the process. If needed, they'll help you find temporary accommodation if your home has been damaged, they’ll arrange to have repairs completed, or they’ll suggest contractors to help fix your space.
However, based on your deductible size and how much the repairs will cost, you may choose to make or not make the claim. In some cases, what you’ll pay for the deductible if you process the claim, may not be worthwhile, as making claims can also increase your monthly insurance premiums.
The bottom line
Regardless of whatever insurance policy you choose, it's always a good idea to review your policy, understand the coverage, and check for any exclusions. Don't hesitate to reach out to a professional if you have any questions, concerns or if you need help with choosing the right coverage for your needs and budget.
And, if you choose to sign your mortgage with Pine for a semi-detached home, you’ll get complimentary home coverage for 12 months, up to $10,000, from the Encompass Home System Warranty Program. Contact one of our Pine mortgage agents for more details.