Our First Home: Home insurance basics

Our First Home: Home insurance basics

Finding the one place that rings “Home Sweet Home” when you first enter its doors is an exciting and heartwarming experience for Canadians of all ages. Mostly because home is a place where we find protection and safety. A part of that safety is assured to us by having home insurance just in case a disaster, accident or emergency strikes.

What is home insurance? Am I required to have it?

Home insurance is similar to other types of insurance policies. It is a substantial amount of financial coverage to your home, surrounding property and any personal belongings you and your family owns within it.

 

While you aren’t legally required to have home insurance in some provinces, most do require it. Your lender may also require you to purchase a policy before any talks of closing are on the table.

What benefits come with getting an average home insurance policy?

A “standard” home insurance policy doesn’t actually exist, so to speak. What your policy will and won’t cover greatly depends on where you live, but when you’re getting different quotes and estimates, the companies that are handling your case will ask you about the following details. These details will determine the cost of your premium, so be honest – and don’t hesitate to call around and get a few estimates!

 

  • Construction materials of your home (is it brick, wood panel, cement, etc.)
  • The location of your home (geography/distance from fire hydrant)
  • Home value
  • Electricity and heating sources
  • Type of plumbing pipes
  • Actual replacement (or cost) value of all belongings
  • Age of home
  • Security system type

Some policies with higher premiums may even cover the cost of your down payment or reconstructing a new house on your property if an accident or natural disaster requires you to rebuild or buy a new home.

 

If an accident occurs to someone on your property, your insurance plan may cover this as well.

What doesn’t home insurance cover?

Home insurance policies typically don’t cover claims for property taxes, condo fees, mortgage payments you owe, or the land on which your home was built.

 

Take regular inventories of all your household belongings. Keep a copy on a cloud drive in case you need to access it remotely.

I’ve bought a policy that I’m not too sure about. What should I do?

Firstly make sure that you’ve read through your policy documents to see if any cancellation or plan change fees apply.

 

If you still have enough time to shop for a new policy before closing your housing offer, call up your insurance provider and explain the situation. From there, they will work with you to suggest alternatives to the policy you currently have.

 

If you aren’t convinced, confirm your intent to cancel your policy in writing. Be sure to keep copies of all correspondence, including refund statements and cheques if you’ve prepaid your fees.   

I want to rent out or sublet a part of my home/condo to help with mortgage payments, but didn’t indicate this in my application. Will my insurance policy cover having a tenant?

Most likely not. When you apply and get approved for your insurance policy as an owner-occupied home, your insurer expects that you will be the occupant of your home. If you rent out your property and it gets burglarized with your tenant’s property stolen from it, your insurer may choose not to cover either of you and cancel your plan for breaching your contract.  

 

If you want to rent out your property or house tenants, there are plans available to cover you both. Although, this means how your home is classified will also change.

 

Contacting your insurance company representative about renting out your home can help answer more detailed questions.

Who can I contact about applying for home insurance?

There are many companies (including your bank/financial institution) that can offer you general information, current rates, quotes, product plan types. Asking your peers, current homeowners, and your realtor for suggestions also works.

 

If you’re into using price comparison sites, two popular Canadian pages called Insurance Hotline and Lowest Rates Canada are excellent places to surf. Makes your shopping and elimination process a bit faster and less biased.

 

Whichever plan you choose, remember that home insurance is available to protect you. 

 

Check out our Mortgage Insurance Calculator!

 

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A Maryland native and Toronto-area transplant/graduate of the University of Toronto, Christine is a content writer at Loanerr. When not writing articles, she's an avid swimmer, cat lover, violinist in a indie band, and a humble food aficionada.