Home insurance in Canada is a form of habitational insurance. Other types of habitational insurance include tenant’s insurance, condo insurance, secondary home insurance, and vacation home insurance.
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Habitational insurance policies are meant to protect buildings, contents and liability exposures of the private property owner. Home insurance also includes rider endorsements (insurance floaters) to protect items of high value, such as jewelry or fine art, broadening the scope of insurance coverage.
Insurance coverage on a home insurance policy can be divided into two parts.
The first section usually deals with:
- The dwelling building
- Detached private structures
- Personal Property
- Additional living expenses
The second section deals with:
- Personal Liability
- Voluntary Medical Payments
- Voluntary Payment for Damages to Property
- Voluntary Compensation for Residence Employees
Note: Condo insurance policies have additional first-party and liability coverages suited for common and private areas
Home Insurance Extensions of Coverage usually includes:
- Debris removal
- Property Removed
- Moving to another Home
- Fire Dept. Charges
- Change of Temperature to Frozen Food
- Lock Replacement
- Tear out
- Arson Conviction Reward
- Identity Theft
- Inflation Protection
Types of Home Insurance in Canada
There are three main types of home insurance policies:
- Basic or Named Perils
- Broad Form
- Comprehensive Form
Basic or Named Perils Home Insurance
Basic form home insurance or Named Perils is the most limiting of coverage compared to all other forms of home insurance. The perils in which the home insurance policy responds to are specifically stated. Insurance coverage only responds if loss or damage occurs due to a named peril. Typically, the broad form covers things such as fire, smoke, lightening vandalism, malicious acts, falling objects, impact by aircraft or land vehicle, windstorm, hail, theft or attempted theft and also some types of water damage.
Broad Form Home Insurance
Broad form home insurance represents a broadening of home insurance coverage compared to the named perils or basic type policy. The broad home owner’s policy is somewhat of a middle ground between basic and comprehensive home insurance.
Comprehensive or All-Risk Home Insurance
The Comprehensive home insurance policy, also known as All-Risk home insurance, is the most expansive in insurance coverage. The scope of coverage is determined by the exclusions in the policy. Therefore, if the peril is not excluded, insurance coverage should be in force.
Choosing the right home insurance policy requires the help of an insurance professional.
Best Home Insurance Companies in Canada
Finding the best home insurance company in Canada is a subjective exercise. The home insurance market in Canada is fiercely competitive and your interpretation of “best” can stem from:
- Customer service from the Insurance Broker or Agent, or proper claims handling
- Price – obviously this is a huge factor because no one wants to pay more for property insurance if they don’t have to.
- Reputation – For others price is not as important as customer service or the reputation of the insurance company.
- Insurance bundling – may be the convenience and discount savings from bundling your home and auto insurance is a favourable option.
Speak to a home insurance broker to find out what insurance company and coverage is best suited for you.
Tenant insurance is another form of habitational insurance. Tenant insurance is also referred to as renters insurance or contents insurance.
Tenant insurance is designed for people who do not own their homes but instead rent or lease their home.
The main difference between a Tenant’s insurance policy and a Homeowners’ policy is that a Tenant policy does not cover buildings. Learn More.
Insurance for Mobile Homes | RV Insurance
Mobile home insurance, sometimes referred to as RV Insurance, in Canada was developed to meet the needs of this type of homeownership.
Mobile home insurance is similar to a basic home owner’s policy. One notable characteristic of mobile home insurance is that coverage does not exist while the motor home is being moved.
Also, furnishings attached to the motor home are considered part of the building, not the contents.
Short Term Rental Insurance | Airbnb
Short term rental insurance is a relatively new concept in the insurance industry in Canada. More and more homeowners are deciding to rent out a part of their homes such as basements or separate bedrooms for extra income. Some even decide to rent out their homes completely to tenants who require short term rental accommodations.
Home rental networks such as Airbnb offer their insurance program but the insurance coverage can be limited. Whether you are a Host or renter your insurance needs may be different. Speak to your licensed insurance representative for more information regarding becoming an Airbnb host or renter!
Seasonal and Secondary Home Insurance
Seasonal Home Insurance is usually meant to insure a cottage or vacation home. Since seasonal homes are usually vacant for an extended period, insurance companies might not offer home insurance coverage as broadly as your primary residence. Seasonal home insurance is essentially meant for people who use the home a few times a year and do not occupy that home year-round.
Secondary home insurance is similar to seasonal home insurance, but instead of occupying the home a few times a year, or seasonally, it is usually occupied year-round. Insurance for secondary homes tends to be more comprehensive since it’s continuously being occupied.
Condo insurance is very similar to other home and tenant insurance policies with a few important differences. Because condominium ownership includes both common areas and your unit, special coverages such are needed to cover the risk exposure associated with condo ownership. Read Further about condo insurance.
Water Damage Coverage
Water damage protection is paramount when it comes to home insurance. Water can cause a multitude of damages to your home, including mold, delamination, wood rot, corrosion and destroy your home, contents or both. Not having the right water damage protection could be financially catastrophic!
Under the umbrella of water protection coverage, Insurance companies market and package their water protection coverages in different ways. It’s important to know the differences in how insurance companies word their home insurance policies and water protection endorsements so that you know what you’re buying.
Ground Water Coverage
Groundwater coverage is an optional layer of protection that responds when groundwater enters your home accidentally through the foundation, basement walls, and floors.
Water and Sewer Lines
Some home insurance companies offer “water and sewer line” coverage for damages, leaks, ruptures, and breakage of your connected sewer line. Ask your Independent Insurance Broker for more details on this coverage.
Sewer backup, home insurance coverage has been around for some time. Sewer back up protects you from water back up from your sewer system, private septic tank, or through the malfunction of a sump pump system.
Overland Water Flooding
Originally, Flood insurance was a term used by home insurance companies to describe flood water as originating from a body of saltwater. Flooding from bodies of freshwater, such as rivers or lakes was considered Overland or inland flooding.
Flooding of any kind is usually excluded from a homeowner’s insurance policy; however, flood insurance can be purchased as an endorsement attached to your existing policy to add that coverage. Keep in mind that some perils are excluded regardless if flood insurance is purchased or not. Check with your insurance provider or representative to fully understand what is and what is not covered with flood insurance.
Overland flood insurance covers water damage resulting from rising river or freshwater bodies of water and excess rainfall.
Flood insurance or “overland flood insurance “can be added to your home, tenant or condo insurance policy as an endorsement. Overland flood insurance protects you from financial loss to your home and contents due to flooding. Overland flooding is defined as floodwater from an outside source or body of water onto dry land.
The term flood insurance usually refers to commercial risks where Overland Water insurance is normally for personal lines insurance.
Flooding is a common exclusion among habitational insurance policies leaving a need for the insurance, market to respond with a product that will fill in that gap of coverage.
Home Insurance Canada Comparison
When comparing home insurance or property insurance it’s very important to understand the coverages that you require so that the proper habitational policy is purchased. Whether you use an independent Insurance broker or a captive broker or agent, full details and disclosure must be provided about your home so a proper insurance quote can be generated.
Home Insurance Coverages – Claims Settlement Basis
When shopping for home insurance you must understand the difference between replacement cost, guaranteed replacement cost, and actual cash value. Ask your insurance representative for a full and detailed explanation of the said coverages.
Most habitational insurance policies use replacement cost as the basis for settling property insurance claims, as it relates to the actual dwelling and detached private structures. However, this isn’t always the case as property insurance policies are not created equally. It’s important to use an independent insurance broker to help you understand the insurance coverage you’re purchasing!
Replacement Cost in Home Insurance
Replacement cost in Home insurance means that a claim will be paid out on the actual cost to replace the damaged property to its pre-loss condition. Essentially, replacement cost doesn’t consider deprecation.
Replacement cost in Home insurance can apply to your dwelling, detached private structures and also personal property. i.e. a comprehensive homeowner’s policy. Moreover, replacement cost may apply only to the dwelling and private structures but not personal property. i.e. a broad form homeowner’s policy.
Guaranteed Replacement Cost in Home Insurance
Another indemnity standard offered in home insurance is guaranteed replacement cost. Guaranteed replacement cost is identical to “replacement cost” coverage but with one big difference. Not only will the insurance company pay for the cost to replace the damaged property to the pre-loss condition, but if required, pay more than the amount of insurance you initially purchased.
Guaranteed replacement cost home insurance coverage is usually reserved for the actual dwelling.
Actual Cash Value (ACV) in Home Insurance
Actual cash value is defined as the cost to replace the damaged property, of like, kind and quality, less depreciation. ACV is the least favourable option for the basis of a home insurance claim settlement. Simply put, factoring depreciation into the loss settlement provides the least coverage compared to either replacement cost or guaranteed replacement cost.
Home Insurance Quotes
Home insurance quotes can be obtained from either:
- An insurance broker
- An independent Insurance Broker
- Directly from Insurance company
- Insurance Agent
- Managing General AgentKnowing the difference between the various distribution channels is paramount in getting the best home insurance coverage for the best price.
Insurance for Vacant Homes
Insurance for vacant homes usually has reduced coverages due to the hazard of merely leaving the home vacant. There also comes the added exposure of pipes freezing in the winter if the dwelling isn’t being used or any other exposure from leaving your home vacant. The chances of vandalism, theft, fire, etc increase if you’re simply not there to supervise your home. There many other hazards or perils that surface from leaving a home vacant that can’t all be mentioned here. The mere fact that you’re not there to prevent, monitor or mitigate a potential loss is the reason why insurance coverage is usually reduced while your home is vacant. For this reason, insurance for vacant homes would generally have less coverage than a home which is constantly being occupied.
Insurance for Mobile homes and Motor homes
Insurance for mobile homes or RVs can be insured through a habitational or auto policy depending on the type and characteristics of the RV or motor home in question.
Some factors that will help determine if a mobile home should be insured through an auto or home policy consist of the following:
- Year-round use of the RV or Motorhome
- Style of RV
- Weight of RV
- Where the RV or Camper will be stored or parked
- The ability for the Camper or RV to be driven or towed by a trailer
Insurance for rental homes
Insurance for rental homes usually falls under commercial insurance. However, depending on the insurance company and their Underwriting guidelines, some companies will insure a rental property under a personal lines home insurance policy. However, most rental property insurance falls under the commercial umbrella of insurance.
Rental properties normally are meant to generate income, and the owners of rental properties need to protect their income. Rental home insurance can cover loss of rental income should an insured peril trigger insurance coverage.
Home Insurance Canada FAQs
The difference between guaranteed replacement cost vs replacement cost is that, if required, the former will pay more than the limit of insurance you purchased to rebuild or replace your home.
Replacement cost on homeowner’s insurance means that a covered loss or claim will be paid out on a basis that does not deduct for deprecation. Replacement cost is designed so that you do not have to spend more money to get a similar new item. Replacement cost in homeowners insurance is superior to Actual Cash Value insurance.
Replacement cost is a better claim settlement proposition than actual cash value as depreciation is not factored in, while actual cash value does deduct for depreciation.
Technically replacement cost can be more OR less than the market value of your dwelling. The market value of your home is separate from the replacement cost. Market value is what your dwelling would cost in the real estate market, which is subject to the ebb and flow of the real estate market. The prices of homes or condos increase or decrease depending on what one is willing to pay or sell in the real estate market. Market value also includes the land or lot on which the dwelling is built, where replacement value does not.
Replacement cost is the actual cost to construct your dwelling of similar, like kind and quality. This would include all the building materials and labour to rebuild or repair your dwelling to its pre-loss condition.
Replacement cost does not factor depreciation in the claim settlement compared to actual cash value, or ACV basis for claim settlement.
A single limit clause, sometimes also called “combined single limit” in-home insurance means that an aggregate limit of insurance is available from individual coverages to make up shortages in coverages from other areas in the policy. Here’s an example: let’s say you purchased a home insurance policy with a 400,000 limit on the dwelling, 200,000 in personal property and 40,000 in additional living expenses. If your home suddenly burns to the ground and your insurance company calculates that the cost to replace your home is roughly 450,000, almost 50,000 more than the limit of insurance you purchased. With a single limit clause, you can use money from other coverages and apply it to where it’s needed. Think of it as an aggregate limit, and a benefit to you as it allows greater flexibility in how your home insurance can respond. Not all home insurance policies have a single limit endorsement, so it’s important to ask your insurance representative about this coverage and how you can add it to your home insurance policy.
Liability coverage on home insurance is protection from any damages or injuries you may cause to an innocent third party. Liability coverage covers your negligence arising from your premises (ie. slip and fall on your driveway or porch) that result from your actions or inaction.
Home insurance is not mandatory like car insurance; therefore the choice is normally yours to purchase habitational insurance. Although home insurance isn’t a requirement it doesn’t mean that you shouldn’t have it! Home ownership is one of the biggest investments someone can make, so leaving it exposed to perils without fallback to indemnification isn’t sound financial advice.
Mortgage and lien holders who hold a financial interest in the dwelling usually require that you have home insurance with specific requirements so that their financial interest is protected, as well!