Do I Have to Get Home Insurance?
Protecting your investment in your house is probably a top priority for you. Does that mean you should get house insurance? Yes, it does.
Is home insurance mandatory in Canada? The short answer is no, but if you’re carrying a mortgage, you can expect that your lender will require you to have home insurance. And even if you’ve paid off your home, going without insurance is a risky move that could leave you financially at risk.
Is home insurance required by law in Canada?
No, there’s no provincial or federal law in Canada that requires homeowners to carry home insurance. You could technically own a home without any insurance at all, provided you’re not financing it through a mortgage.
Mortgage lenders require home insurance as a condition of the loan. That’s true whether you’re with a major bank, a credit union, or a private lender. Until the mortgage is fully paid off, you’ll be required to maintain an active home insurance policy that names your lender as the beneficiary in case of a major loss like fire, flood, or structural damage.
Why do mortgage lenders require insurance?
Your lender has a financial stake in your property. If your home burns down or floods and there’s no insurance in place, the lender risks losing the entire value of the loan.
In some cases, if your insurance lapses or is cancelled, the lender may step in and take out a “force-placed” policy on your behalf. These are usually more expensive and only protect the lender’s interest, not your personal belongings or personal liability.
The risks of going without home insurance
Not having home insurance leaves you vulnerable to a number of financial and legal risks:
- Damage to your home: Fires, burst pipes, hailstorms, or wind damage can lead to repair bills in the tens or hundreds of thousands of dollars. Without insurance, that’s all on you.
- Loss of belongings: Imagine replacing everything in your home—from electronics and furniture to clothing and appliances—on your own dime.
- Liability claims: If someone is injured on your property, you could be held legally responsible. Home insurance typically includes liability coverage to protect you in these situations.
- Temporary living expenses: If your home becomes uninhabitable, insurance can cover hotel stays, meals, and rentals while it’s being repaired.
- Building code compliance: Older homes often need upgrades to meet current building codes after a rebuild. Insurance can help cover these compliance costs.
What does your home insurance cover?
A typical home insurance policy in Canada covers:
- Dwelling coverage: It protects the physical structure of your home, including the roof, walls, foundation, and attached structures like garages.
- Personal belongings: Your furniture, clothing, electronics, and other possessions are protected from events like fire, theft, and vandalism. Some policies also cover belongings when they’re temporarily outside your home, like on vacation.
- Liability protection: If someone is injured on your property or if you accidentally cause damage to someone else’s property, your insurance helps cover medical bills, legal fees, and settlement costs.
- Additional living expenses: If a covered claim forces you out of your home temporarily, insurance will help pay for a place to stay and related costs.
- Detached structures: Sheds, fences, and detached garages are typically covered up to a certain limit.
- Optional coverages: You can also add coverage for events not included in standard policies, such as overland water (flooding), sewer backup, and earthquakes—depending on where you live in Canada. You can also add coverage for an art, jewelry, or wine collection.
To sum it all up
Home insurance protects your investment in your home. Having home insurance that is customized to your needs at the right value for you, protects you financially and gives you peace of mind.
5 FAQs about Canadian home insurance
Is home insurance required in Canada?
No, home insurance is not legally required anywhere in Canada, but mortgage lenders will make it a requirement before finalizing a loan.
What can happen if I don’t insure my home?
If you own your home outright (no mortgage), you take on 100% of the financial risk if something happens. If you still have a mortgage and your insurance lapses, your lender could put a more expensive policy in place and charge you for it.
How much does home insurance typically cost in Canada?
Home insurance premiums vary depending on your location, the value of your home, the age of the building, and your coverage selections. Canadians can pay between $800 and $1,200 per year for home insurance. Homes in flood or earthquake zones may pay more.
Is condo insurance or renters insurance the same as home insurance?
Condo insurance covers your individual unit, contents, and liability, but not the building itself. Renters insurance only covers your personal belongings and liability. Homeowners insurance protects your home, contents, and the land you own.
Can I switch home insurance providers?
Yes. You can change home insurance providers at any time. Just make sure you avoid a coverage gap by setting up your new policy before cancelling the old one. If you’re switching mid-term, you may need to pay a cancellation fee, but the savings could still outweigh the cost.