For many Canadians, the dream of home ownership has faded somewhat over the past few years. The costs seem to be increasing at a rate that are making many of us second guess our dreams of becoming homeowners. If you are saving and borrowing to have a home of your own, don’t forget you’ll also need to protect it from a variety of damages. In other words, you’ll need home insurance. Still, many believe that nothing will happen to them and they don’t need any coverage. There are others that purchase insufficient coverage for their home. But what happens if your home is underinsured? Let’s take a look at what proper coverage should look like.

5 considerations when purchasing home insurance

According to, there are five considerations that every homeowner should understand when evaluating how much insurance their home needs:

  1. Outside structure: If your home suffers damage and you need to make a claim, the amount of money you require to repair it may not be enough. If it costs $250,000 to rebuild, but your coverage is only $150,000 you won’t be able to rebuild it.
  1. Structural damage: Partial damages occur all the time. Wind, lightning or a thrown stone can be at fault. While a window with damage is relatively inexpensive to repair, a roof in need of repairs can create a deeper hole in your pocket.
  1. Value: While being aware of your home’s market value is important, it’s also crucial to remember, especially as of late, the market itself is overvalued. The market value of your home might be $300,000, but it may only cost $200,000 to rebuild. When insuring your home, the cost to rebuild is the number to insure by.
  1. Contents: When buying insurance, you need to take into account what’s inside and out. Whether it’s furniture, appliances, clothing or electronics, it’s important to insure your belongings. While some items are replaceable, more sentimental items cannot.

For more information about how to complete a home inventory list, please click here

  1. Valuables: If you are a collector of stamps, jewelry or works of art, it might be worthwhile to get an appraisal. A basic homeowner’s policy won’t cover certain valuables, or may not offer enough coverage.  

How to tell if your home is underinsured 

During the lifespan of your home ownership, your coverage needs don’t remain static. Each year, there can be a number of factors that can affect the amount of coverage you’ll need:

Minimum coverage

Many of us when starting out opt for a minimal amount of insurance coverage when we buy our first home. It may have been a way to save money, or you may not have thought that you didn’t own very much, so a minimum amount of coverage will do.

No home inventory

Many homeowners skip compiling an inventory, or were not advised to do so prior to buying insurance. But, if you don’t know what you are worth, how do you know how much coverage you need?

No endorsements

Even with home insurance, you can still be underinsured. Gaps in your coverage can include specific coverage, from valuables to protection from natural disasters. Endorsements, such as scheduled personal property and equipment breakdown coverage, help protect individual items, like jewelry. You can also obtain extra protection from natural disasters, like flood insurance.

In general, it’s recommended to get enough coverage to rebuild or replace your home to at least 100% of its worth, if not more.

Haven’t reviewed your policy

Each year, it is a good idea to review your coverage, taking into account any changes that occurred. Large purchases, like electronics or furniture, can have a huge effect on your coverage.


Any renovations completed should be reflected in your home policy. Be sure to speak with your insurer or isure broker about updating your rebuilding cost or contents coverage.

Labour and supply costs

As a result of the skyrocketing increases in building material costs, your current policy may not be sufficient. Guaranteed replacement cost coverage pays for replacement without reduction for depreciation. This endorsement covers any shortfall if your replacement cost is insufficient.

What happens when your home is underinsured? 

When your home is underinsured, it means you don’t have sufficient insurance coverage if your house or contents are damaged or lost. Insurance companies typically cover the amount of your claim up to the policy limit you chose at the time of purchase. Selecting a lower level of coverage may save you a few dollars on the policy itself. However, if you’re underinsured, you may not receive the full cost to replace or repair the damages, which may result in out-of-pocket costs. Since insurance companies are only required to pay up to the amount you’re covered for, you can’t claim more than the coverage you have.

How to ensure you’re properly insured

The best way to avoid being underinsured is to be certain that you are appropriately covered for your home and your contents. In doing so, you’ll have peace of mind should something unexpected happen to your house, such as a fire, it will help lessen any significant burden you might face.

According to the experts at Aviva Insurance, here are some things you can do to ensure you have sufficient home insurance coverage:

  • Review your house insurance coverage annually with your insurance representative to make sure that you have sufficient coverage based on your current situation.
  • Update your personal property inventory to ensure you’re adequately covered for personal items and belongings.
  • Notify your insurer prior to any changes or renovations to your home. Making improvements to your house can add value, but it can also mean you become underinsured or not covered in the event of a loss.
  • You can also ask your insurance representative about Guaranteed Replacement Cost. It’s an add-on coverage that’ll cover the actual cost of repairs or replacement of your home, even if the costs are greater than the cost to rebuild your home (Note: This is not the same as the market value of your home, which includes the land cost.)

Figuring out how much insurance you really need

To make sure your home is adequately insured, notify your isure broker if you have made any updates or renovations to your home. Then, discuss that information with your isure broker to potentially increase the limits on your policy. There is an easy remedy to being underinsured. Let us help you get the coverage need.

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