In the market for a new home? Looking to make some upgrades with the extra time spent indoors? Or maybe your children are looking to move to a place of their own? Let’s review the different types of home insurance available and tackle some of your frequently asked questions.
Homeowners insurance is a form of property insurance that covers losses and damages to an individual’s house and assets inside the home. Your policy usually covers interior damage, exterior damage and loss or damage of personal assets. It is also purchased by homeowners to protect them against liability in case of injury that occurs while on the property.
There are three main types of home insurance:
- Homeowners’ policies for detached single-family homes
- Renters’ policies
- Policies for people in a condominium.
Each has a different set of parameters and coverages available. Let’s explore the answers to your questions below.
Why do people buy home insurance?
Home insurance is the best-known way to manage risks. Buying a home is expensive, so it’s a good idea to protect your investment. Additionally, insurance is often required by mortgage lenders, like banks, in order to have your mortgage approved.
What is a home insurance premium?
A home insurance premium is the amount of money you pay in exchange for coverage. Premiums are determined on a case-by-case basis, and reflect the risk of each individual case (e.g. house, condo, tenant or home-based business).
Why do home insurance premiums increase every year?
You may see an increase in your premium year-to-year due to inflation, increased building costs or an increase in the number of claims in your area across the industry as a whole. Why does this have an effect? Because these losses must be paid for by your insurer’s only source of income a.k.a. your premiums.
What is “replacement cost”?
Replacement cost is the total amount your insurer will pay to fully rebuild your dwelling if it is destroyed. This can include scenarios not included in the resale value, such as the fees for skilled labour, debris removal, extra expenses from stricter building codes and so on. Recent upgrades and renovations can make rebuilding your dwelling more expensive than originally estimated.
Have the home improvements I’ve made affected the replacement cost?
In simple terms, they can. By expanding your kitchen and adding new appliances and granite countertops, you have added value. Your insurance should reflect those changes to ensure you have ample coverage. Always check with your isure broker to be sure, even if you think the changes are small.
Does my insurer need to know about renovations or changes to the house?
Yes. Your home insurance rate is based on the level of “risk” to which your home is exposed and how much it would cost to repair damage if something were to happen. If you do not disclose to your insurer that work has been done to your home and an accident occurs, your claim may be denied for material misrepresentation.
Remember: If your insurer doesn’t know about your renovations, you may not have enough protection.
Does having a pool make a big difference for home insurance?
Swimming pools have a direct impact on your insurance rates for several reasons. Owning a pool increases the cost to rebuild your home, if necessary. Pools come with additional risks to personal safety that could result in cases of legal liability if someone were to be injured on your property. As well, if the water from the pool somehow leaked into your home’s foundation, it could lead to a serious water damage repair bill.
What is tenant insurance? Do I need to have it?
Tenant insurance, also known as renter’s insurance, is a type of property insurance for tenants, that is, people who live in (but do not own) the property. It is purchased by tenants to protect the personal contents within their rental and to provide liability coverage. Landlords may require tenants to purchase tenant insurance prior to moving in as a precaution. While landlords have building insurance for the entire rental building, that building insurance does not cover a tenant’s contents or liability.
Do I need Tenant’s insurance? The answer is yes. If for no other reason than the damage you could very easily cause to your own apartment and other ones, too. The tenant policy not only protects your own belongings, but also provides protection against damage you might cause to others.
What is condo insurance?
Condo insurance is a type of property insurance that protects units within a condo building. It is purchased by condominium unit owners to protect contents such as appliances, clothing and furniture, as well as items stored in a locker. It is also purchased to provide additional living expenses in the event of an insured loss. Condo insurance protects the condo unit owner’s liability for any bodily injury or property damage unintentionally caused to others.
What are the benefits of home insurance history?
A continuous insurance history shows your insurance provider that you’re willing to manage the risks faced in owning or renting a home. Having no gaps in your coverage also means you’re never left unprotected. And, if you’ve held continuous insurance for a number of years without making any claims, this may entitle you to lower premiums. Why? Because insurance providers will see that you do a good job of managing your risk and preventing avoidable losses.
What types of insurance policies are there?
As outlined on the Insurance Bureau of Canada’s (IBC) website, there are several types of home insurance policies you can purchase. They include:
“No-frills” policy
Offers coverage to properties that don’t meet normal insurance standards. If there are physical problems with your home that keep it from meeting the standards set by insurers, you may save money in the long run by correcting these problems to qualify for better coverage.
“Standard” policy
Provides protection against a number of “named perils” that might cause damage to your dwelling and its contents. Named perils could include such things as fire, lightning, windstorm, hail, theft and specific types of water damage.
“Broad” policy
This is considered the mid-tier policy, meaning more coverage than a standard policy, but less than a comprehensive policy.
“Comprehensive” policy
Provides all-risks coverage on both the dwelling and the contents within it.
How much insurance do I need for my personal property?
This depends on the value of your home’s physical structure and the value of all of your personal property (i.e. furnishings, clothing, appliances, entertainment systems, etc.). Be sure to take a thorough inventory of your possessions and update it periodically to ensure you have an accurate value. There are limits and exclusions that apply to your personal property, so be sure to check with your insurance company about how much coverage is right for you.
Should I have a backwater valve installed?
Absolutely! Also called a back-up valve, this is a device that helps prevent basement flooding by preventing sewer water from getting into your home. Make sure yours is installed in accordance with your municipality’s standards and regulations
Do I need different insurance for my kids’ personal belongings at college?
If your child is dependent on you and is a student living temporarily away from home, the personal property your teenager takes to college or university would be covered under your homeowner’s policy. If you are unsure, please feel free to contact your isure broker with any questions.
Does my home insurance policy cover my valuable possessions, such as jewelry or artwork?
Yes, but for limited amounts of coverage. You may want to consider buying a Personal Articles Floater, which provides all-risks coverage for theft and mysterious disappearance. This will also reimburse you for misfortunes, like a diamond that falls out of a ring.
Why do I need personal liability insurance if I have liability coverage on my auto policy?
Your auto liability protects you if you are in an accident and you’re held legally liable for injury or death to other people. It also covers damage to their vehicle or property.
The personal liability coverage on your home covers you at home or anywhere in the world for bodily injury to others or if you accidentally cause damage to another person’s property.
What activities could affect my coverage?
Your home insurance policy is designed for you based on information you provide about your home, contents and activities. If you break the conditions of your policy, your actions could mean your insurer refuses your claim or your home insurance policy becomes void. If you engage in the following activities, your insurer may deem this as increased risk to your home:
- Renovations. Adding square footage, additions, upgrades or swimming pools can substantially change the value and risk of your house.
- Being away for long periods of time. If you’re away for an extended amount of time regularly, make sure someone is checking on your house in your absence.
- Not maintaining your home. If you don’t maintain your house and complete repairs as needed, any resulting damages may not be covered by your insurer.
- Starting or running a home business. Losses that result from business activities, as well as losses to the business itself (damaged stock, inability to use the work space) will not be covered under your home insurance policy without the appropriate coverage (see Home-Based Business Insurance.)
What does disclosure mean when setting up a policy?
When purchasing home, condo or tenant insurance, it is important that you disclose information about your home and its contents. If information is not disclosed and a loss occurs, your home insurance company may deny your claim or void your policy, leaving you with the full cost of repairs or replacement.
How can I reduce my home insurance premium?
- Shop around. Seek out discounts.
- Increase your deductible. The higher your deductible, the lower your premium will be.
- Bundle. Buy your home and auto insurance from the same provider to get a multi-product discount. Visit our bundles page for more information on how isure can help you save!
- Improve security. Install a centrally monitored alarm system in your residence.
- Be consistent. Don’t switch your insurance company midway through the policies.
- Be honest and follow-up. Inform your agent/broker about any major home improvements that are likely to lower the risk of loss (new roof or upgrades to the plumbing, electrical or heating systems, etc.)
- Don’t smoke. If everyone in your house is a non-smoker, you’ll pay a lower home insurance premium, because there’s less risk of a fire in a smoke-free home.
Does my basic home insurance policy cover my home daycare?
No, it doesn’t cover your home daycare. Your basic home insurance policy doesn’t provide liability coverage for home-based businesses or provide coverage for loss of business income. What you really need is home insurance that includes coverage for home-based businesses (as mentioned above).
I’m moving. What should I do?
With most insurance companies, you can transfer your policy to your new home online or over the phone. That way, there’s no gap in your coverage and your property is insured while in transit. Speak to your isure broker for more details.
I want to run an Airbnb. Am I covered under my home insurance?
Uninsured activities, also known as exclusions, are risks that your insurance company will not cover. Home-sharing activities, such as running an Airbnb inside your home, will require a separate insurance policy, and not all insurers offer it.
Do more expensive homes always pay more insurance?
The more expensive your home is, the more you’ll pay for home insurance. However, this isn’t a reflection of market value. A more expensive home means a more expensive home to rebuild or a home with more expensive attributes to protect. According to the IBC, if your home falls in the $1 million to $1.2 million range, it’s reasonable to see the average home insurance cost in Ontario hit the $1500 mark annually, and over $2,000 for homes in the $1.5 to $5-million range.
Can climate change affect my home insurance?
Yes. Between 2009 and 2020, Canadian insurers spent an average of $2 billion annually on losses related to natural catastrophic events — that’s more than four times what was paid out annually from 1983 to 2008, according to the Insurance Bureau of Canada (IBC). Extreme weather events, such as snowstorms, hail, floods, wildfires and extreme heat, will mean more damage to homes. The corresponding rise in insurance claims means prices could climb, depending on your location.
Speak with a member of our isure team if you have any questions about you home insurance policy – we’re always happy to take your call!
