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What exactly do you get with your home insurance policy? This guide breaks down the types of policies in Canada and what is covered for each.
Like so much of the home buying process, home insurance can be confusing, and it requires spending some of the money you were planning to put toward a designer Scandinavian kitchen reno. However, if you ask the right questions, you can protect your home and its contents, including your shiny and new Sub-Zero fridge, within the insurance industry’s rule book.
There are three types of home insurance policies: basic, broad and comprehensive. You can think of them in tiers.
The coverage provided by basic and broad policies can come up short of insuring your needs because they only cover a list of “named perils.” (A peril is an event/risk that causes damage to a property.) Both policies have a capped list for what is insured and a basic policy’s list of named perils is shorter than that in a broad policy. For example, if you have a backyard chicken coop that a visiting coyote destroys and the loss is not clearly described as a peril in your policy—think “damage caused by coyote”—then that financial loss will not be covered.
Comprehensive insurance, on the other hand, offers the most coverage. Instead of naming perils, it lists all the instances in which you are not covered or your “uninsured perils.” In other words, the damage a hungry coyote causes doesn’t have to be spelled out clearly in the policy and you’ll have peace of mind knowing that more possibilities are insured.
The home insurance coverage you receive depends on the type of policy you choose:
| Basic | Broad | Comprehensive |
| A pre-set list of events that may damage the home, which may or may not include fire, lightning, smoke, theft, falling objects, etc. | This is the same as basic but with extra coverage for bigger-ticket items, like the structure of the home and belongings. | This policy covers both the building and contents (some exclusions) for many risks. Optional add-on coverage can include earthquake and sewer backup, as well as other “perils.” |
Here’s a quick checklist to help you determine the best coverage for you:
Everything covered in your home insurance will be listed from the get-go in your policy. As for what’s not covered, know that there are some risks that can be protected with additional coverage. And there are some that won’t be covered at all. Here’s a list:
Also on the no-coverage list? “Sewer backup or overland water sometimes catch people by surprise,” says Natasha Noordin, director of PC Insurance. “They’re typically not automatic coverages included on a homeowners policy, and if they are included there are likely sublimits applied.” Sublimits are caps for the coverage. If in doubt about how much coverage you may require, ask your broker or agent about adding onto your policy. They can help you to weigh the risk, price and the cost to replace or fix.
Noordin also suggests inquiring about by-law coverage. Picture this: You bought your new home over 15 years ago and there’s a fire in the kitchen today. Your municipality may have changed building codes since your house was built and now your home has to meet new safety standards while you repair it. This is when by-law coverage kicks in to help you afford those unexpected upgrades.
The risk of flooding varies across Canada, so it’s difficult for insurers to provide a one-size-fits-all solution for Canadians. “Carriers will often review the claims experience right down to your six-digit postal code when offering optional coverage for sewer backup or overland water. This ensures they are offering the right coverage at the right premium to protect pricing for the rest of their policyholders,” explains Noordin.
In other words, if you live at the bottom of a ravine next to a river, your home’s chance of flooding is higher than if you lived near busy streets, and you will need optional coverage at a price that’s fair for you—and your neighbours. (Find out if you need flood insurance.)
What kind of water and flood insurance is included in common home insurance policies? Damage from leaky appliances or burst pipes. However, there is one exception: If your pipes burst while you’re on vacation, you may have to pay for flood repairs out of pocket. Some policies dock coverage if your house has been empty for too long and no one has checked in on it after a certain number of days.
Essentially, the insurance industry makes it your responsibility to check that your water valve is shut off before your mid-winter break to Napa. Also, ask a friend or neighbour to check in on your home while you’re away. Often, their extra daily attention is all you need for your policy to stay in effect.
“Fire is standard coverage under all types of homeowner’s policies,” says Noordin. “The policy form for fire coverage is extremely important since it can determine the amount of coverage you are eligible for.” She explains that a comprehensive homeowners policy will provide “a guaranteed insurable value for the damage caused by fire” whereas a fire & extended homeowners policy “will only pay to the policy limit…which could result in a coverage gap for the policyholder.”
You’re covered even if the fire starts at your neighbour’s house. However, any and all fire damage has to be unintentional. If the fire is found to not be an accident, then the coverage will be denied. Fire investigations are typically mandated across the provinces.
Wondering if you should tell your insurance company about fire or water damage you fixed yourself?
It’s more needed than you might think. While Canada’s nice-and-polite reputation reaches far and wide, Canada’s civil caseload from 2019 to 2020 topped 900,000 cases during 2019. If you’re unlucky enough to go to trial for an accidental injury that occurred on your property, there will be court and lawyer’s fees to pay and personal liability coverage included in a home insurance policy will help foot the bill.
And remember that an accident can be a result of something as simple as forgetting to salt your icy walkway, and then your neighbour slips on their way over to drop off some fresh cookies.
According to the Insurance Bureau of Canada, “home insurance covers the property, contents and personal liability for you (the policyholder), your spouse or partner and your children.” “Children” include those under 18 years of age and dependents who are students up to the age of 21 who live in your primary residence or on their own near school.
If they’re a kinder and gentler personality who doesn’t want to go to court, rest assured their medical needs will be covered by the voluntary medical coverage that’s part of your policy. (Now, that should help you breathe easier).
Getting what you want covered depends on the type of policy that you buy—basic, broad or comprehensive—and the add-ons required to top up your coverage and match your needs. Your best bet is to speak to a home insurance specialist or broker who can customize a policy to be your almost perfect match—because 100% coverage can never be guaranteed.
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