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| home and property insurance |
Home insurance and property insurance are often used to describe the same thing. A home insurance policy covers the building you live in and the property in it, as well as liability. A tenant or renter’s policy covers your possession but does not insure the building (as you don’t own it).
Why have home insurance?
Home insurance reimburses you for your financial loss arising from accidental losses such as fire, vandalism and water damage. Home insurance also ensures you are protected against lawsuits arising from your personal actions or ownership of your property. Most banks and mortgage companies will insist that you purchase home insurance before lending you money to buy a home or condo. Most people forget about home insurance when buying a home.
If you are renting an apartment, room or house, tenant's insurance offers two kinds of coverages: liability and contents. Liability coverage will protect you from your personal actions where you are held responsible for damage to the building or injury to others who live or visit your rented premises. Contents coverage reimburses you for loss or damage to your personal belongings arising from insured perils including fire, smoke and theft.
Is it legal to not have home insurance in Canada?
You can legally own a home without home insurance, but if you have a mortgage, your lender will almost certainly require you to obtain home insurance. Even if you are mortgage free, not purchasing a home insurance policy is a huge financial risk that leaves your home and valuables vulnerable.
Is home insurance really necessary?
Yes! House fires are real, flooding is occurring at an increasing frequency across the country, and criminals still break into houses. The peace of mind provided by home insurance, not to mention the financial protection in the event of a disaster, is why the vast majority homeowners (even those who are mortgage free) see home insurance as a necessary purchase.
Are mortgage insurance and homeowners insurance the same?
No. Mortgage insurance is a specialist policy taken out by mortgage lenders to compensate them for losses if the borrower can no longer make the payments. It is not related to homeowners insurance.
Can I get a mortgage without home insurance?
No mortgage lender in Canada will approve a loan without first ensuring you have home insurance. If you were to default on your mortgage, the lender could take possession of the property. Your home insurance is a way of protecting their investment.
When should I file a home insurance claim?
Before rushing to contact your insurance company and file a claim, you’ll want to consider a few things.
1) Is it covered?
Make sure you are familiar with your home insurance policy and understand your coverage before you file a claim. This will help you understand what exactly is covered, and for how much.
2) How much would it cost you to fix it yourself?
If the cost to repair the damage is less than your deductible, or will only cost you slightly more, it is wise to forego an insurance claim. The more claims you make, the higher your future premiums will be, so asking your insurance provider to reimburse you for every little thing is short sighted. Sure, a claim could save you a few dollars this month, but keeping your premiums low will save you more money in the end.
Generally, as long as the claim isn’t too serious and will cost you less than your deductible, you are better off keeping insurance out of it. However, if during the repair process you make significant improvements, like replacing a damaged countertop with expensive marble, you should let your insurance know so they can update your coverage.
3) The amount of damage
If your home has sustained significant and costly damage, you should make an insurance claim. The same is true if your home has been burgled and valuable items have been taken.
The financial protection offered by your home insurance company is exactly why you took out home insurance in the first place. You will still have to pay the deductible, but use your home insurance to save you from taking a real financial hit when repairing your home or replacing your things.
4) Liability
If you are facing liability-related legal fees, send a copy of the lawsuit notice to your insurer immediately. They have to defend you, subject to the terms laid out in your policy.
Don’t try to take matters into your own hands. There is no such thing as a cheap lawsuit and you will need the liability insurance to help pay for legal representation, even if you are ultimately cleared of any wrongdoing.
How do I file a home insurance claim?
When it comes to submitting a claim, documentation is the most important step:Take your smart phone and photograph or video record evidence of damage to your home.
If you have lost possessions due to theft, you will want a police report, old photos showing the missing items in your home, and ideally the original receipts too.
Contact your insurer as soon as you decide to make a claim against your policy. They will explain exactly what they need from you, and will tell you how to file.
These days, submitting a home insurance claim is often just a matter of completing an online form.
Home insurance rate changes
As indicated in a recent report by The Applied Rating Index, average premiums for personal property insurance have increased across Canada.
Ontario, Quebec and the Atlantic Provinces have all seen big jumps in the last 12 months.
10 Factors that can affect your home insurance premium
Insurance companies take a number of factors into consideration when determining your home insurance premium. If the data suggests you are likely to make a claim, you may be deemed high risk and consequently face a higher premium. Conversely, if you are considered low-risk, you will receive a cheaper premium.
To make this determination, insurance companies consider the following:
1. Where you live.
Home insurance providers use detailed local statistics to track the number and severity of insurance claims. If your neighbourhood has a high number of burglaries, vandalism, house fires, or anything else that might potentially lead to a claim, you can expect a higher home insurance premium.
2. Heat source.
How you heat your home can have a big impact on your home insurance rates, as some heat sources are inherently riskier than others.
Radiators are considered safe by insurers, as they rely on hot water rather than combustible substances to distribute the heat throughout your home.
Wood stoves are at the other end of the spectrum. If they are not maintained properly, they can cause carbon monoxide poisoning and are a common source of house fires.
3. Type of electrical distribution.
In Canadian homes, especially those built before the 1950s, knob-and-tube wiring is commonplace, but insurance companies are increasingly reluctant to provide coverage to any house that still has it. Over the years, either through tampering or simple deterioration, this technology has become a fire risk.
Most Canadian insurers will give you a few months to remove and replace it with insulated wiring. Once this work is complete and a licensed electrical contractor has approved it, finding an affordable home insurance rate will be much easier.
4. Pipes and plumbing.
As with electrical, the age of your home is a good indicator as to whether or not plumbing will be an issue. Older homes, built before the mid-1950s, used lead piping. This type of plumbing has eroded over time, making it more likely to crack, leak and lead to a home insurance claim. Insurers will reward plastic or copper pipes, more modern and stable technologies, with a lower home insurance rate.
5. Age of roof.
The roof over your head does much more than keep you dry. Modern roofs are surprisingly complex; the angle of the pitch has been perfected to ensure the best possible water run-off, the materials used for tiles is lighter and more durable than ever, and the introduction of fascia and soffits means the roof over your head allows for proper ventilation, decreasing the likelihood of trapped water and mould. Considering this, insurers may provide a cheaper quote to a house with a roof that is less than 20 years old.
6. Primary use of your home.
If you are planning to rent out your basement, allow people to book your spare room on Airbnb, or even use your house as a home office, you must inform your insurance company to ensure you’re covered for these usages. Any peripheral use of your home (aside from normal living), will increase your premium as it increases your coverage.
7. Your claims history.
Past claims are the best predictor of your future insurance needs. If you have a history of making insurance claims, insurance companies will consider you high risk and will set a higher premium. A no claims history, especially if you have had home insurance before, will reassure insurers that you are deserving of a lower rate.
8. Proximity to fire hydrant and fire station.
If a fire does break out in your home, insurers want reassurance that the local fire service will be able to put it out quickly. If you live in a city, your proximity to a fire station is unlikely to make a dramatic difference to your insurance, as all properties should be accessible. However, if you live in a remote area, especially if there is no water source nearby, a fire could do a lot of damage before help arrives, and as a result, you will face a higher insurance premium.
9. Alarm system.
An alarm system, especially one that is monitored by a home security service, will act as a deterrent to thieves and will help lower your home insurance costs. The same is true if you install a monitored security system.
10. Value of your home (replacement cost to rebuild)
The largest home insurance claims come from catastrophic disasters, whereby the whole property has to be rebuilt from scratch.
For this reason, the square footage of your home, and the construction materials used to build it, are hugely influential when it comes to determining your insurance. The larger and more valuable your home, the more it will cost to rebuild, and the higher your premium will be.
