If you’re about to purchase your first home, you’ve likely considered all the expenses you’ll have to deal with. In addition to your mortgage payments, property taxes, maintenance fees, closing costs, and other moving expenses, you’ll have to consider home insurance. Even though the cost of home insurance may seem like a hassle, it’s something that we can’t ignore.
How much does home insurance cost? According to data from Ratehub.ca, the average cost of home insurance in Canada is about $960 per year. However, home insurance costs involve many factors, and you’ll want to compare home insurance quotes before choosing a provider.
Key Takeaways
- The average cost of home insurance in Canada depends on where you live; however, the cost may range between $780 and $2,500 per year
- While home insurance is not legally required in Canada, your mortgage lender will likely require proof of insurance
- How much coverage you need depends on the replacement cost of your home
What is Home Insurance?
As a new homeowner, you likely allocated a significant portion of your savings toward your home purchase. You want to ensure that everything you’ve accumulated up until this point, and your largest asset (your home), is protected.
Home insurance will protect you, your home, and your belongings in case of damage, theft, or loss.
Your home insurance policy usually also includes liability coverage, which will protect you from legal liability for injury to other people on your property and damage you may cause to the property of others. For example, if your condo’s leaky toilet causes water damage to the unit below you, insurance would cover the damage to that unit.
It’s also worth noting that home insurance will cover your personal belongings even when you’re not home. For example, if someone steals your laptop from your vehicle, you can file a claim if it’s included in your policy.
Requirements For Homeowners
While homeowners’ insurance isn’t mandatory by law in Canada, your lender will likely require proof that your home is insured when you apply for a mortgage. The good news is that you can shop around until you find the ideal insurance coverage. As frustrating as it is to deal with another expense, you may only be able to sign off on your mortgage once you provide proof of insurance.
How Much Does Home Insurance Cost?
Like many goods and services, the cost of home insurance depends on many factors, including:
- Where you live
- The type of home you have (single-family, townhome, condo)
- The age of your property
- Any safety measures you may have implemented (like smoke detectors)
Here’s a breakdown of the average home insurance cost in Canada by province, according to data from Ratehub.ca. Your insurance cost may be higher or lower depending on the factors above.
Average Home Insurance Costs by Province
Average Annual Home Insurance Costs in Ontario
The average annual cost of home insurance in Ontario varies from $1,000 to $2,500, depending on where you live. Here are the monthly insurance rates in popular Ontario cities:
Source – Data from August 2024
Average Annual Home Insurance Costs in Alberta
The average annual cost of home insurance in Alberta is $1,800 to $2,000. The average monthly rate for home insurance coverage depends on where you live. Here are the rates in the largest cities in Alberta:
Source – data from August 2024
Average Annual Home Insurance Costs in British Columbia
The average annual cost of home insurance in British Columbia is $2,709. Here are rates for some of the largest cities in British Columbia:
Source – data from January to June 2024
These figures vary depending on personal circumstances and the provider.
How Home Insurance Premiums Are Calculated
Your home insurance premiums are the amount you pay your insurance company monthly or as an annual lump sum to keep your insurance policy in good standing. Insurance companies calculate your home insurance premiums based on many factors, such as your property details and location.
Here are some factors that your insurance company will use to determine your home insurance costs:
- Your claims history
- The type of residence
- The structure of the residence
- Value of your home and your contents
- Local crime rates
- Your deductible amount
- The amount of coverage that you require
- The cost to rebuild your home if it’s declared a total loss
It’s also worth stressing that where you live will impact the cost of home insurance because some areas are more susceptible to certain natural risks, like forest fires or flooding. Your insurance provider will also look at the age and structure of your building, from the plumbing to the electrical wiring. The insurance company will consider the crime rate in the community and how close you are to the fire hydrant or a fire hall.
Your property’s replacement cost is the amount it would cost to rebuild and repair the property in its current state. You will typically choose the replacement cost coverage for your policy, but your insurer will make recommendations. You’ll want to notify your home insurance provider if you upgrade your home.
Comparing Home Insurance Quotes
Sharing average home insurance costs can be challenging, as your insurance company will review many factors when deciding on your premium. Your location, the age and type of unit you live in, the electrical system, your claims history, and the amount of home insurance coverage you want will impact the cost of home insurance. This is why you must shop around for multiple quotes to ensure you pay a fair price for your coverage.
An insurance broker can shop around different insurance companies to find the best option for your home.
What Home Insurance Premiums Cover
Home insurance covers a wide variety of potential damage and loss. That said, it’s essential to understand all aspects of your coverage, including optional coverage, to ensure you have the right insurance policy for your needs.
Personal Property
Your home insurance policy covers the actual dwelling (condo or house) and your contents.
- Dwelling – Your home’s physical structure is likely the most critical aspect of home insurance. This portion of your coverage would repair or replace any property damage caused by a covered loss.
- Personal contents – The contents portion of your home insurance protects your personal belongings. You’ll be reimbursed if any items are damaged or lost due to a covered loss. Personal contents coverage ranges from furniture damaged during a flood to replacing your stolen laptop.
You should take inventory of your possessions to ensure enough coverage. While it may seem like your items hold a low monetary value, you could be surprised by how quickly laptops and jewelry will add up. Some insurance policies will replace your items, while others will give you the actual cash value.
Personal Liability Coverage
You need liability insurance to protect yourself if someone gets hurt on your property or if you cause damage to someone else’s property.
It’s generally recommended that you have a million dollars in liability coverage because one lawsuit can be financially crippling. For example, if someone slips on your property, your home insurance would cover the costs, ranging from medical bills to legal expenses (lawyer fees and any possible awarded damages) if the person decides to sue you.
Additional Living Expenses
Additional living expenses coverage will pay the costs of temporary living accommodations if your home is uninhabitable due to a covered loss. Your insurer will determine the reasonable expenses you can incur until a specific limit based on your policy.
For example, if the unit above you floods your condo, your home insurance will pay you to stay somewhere during the repairs. Your policy will cover reasonable expenses like hotel stays, meals, and even dry cleaning. What’s deemed reasonable will depend on the situation, but it’s helpful to know that you wouldn’t have to scramble to find a place to stay if your home is damaged due to no fault of your own.
How You Can Save Money on Home Insurance Cost
Home insurance policy costs can vary significantly depending on several factors. A few small changes can lower your insurance costs.
Add Safety Features to Your Home
Since your property type impacts how much you pay for insurance, you can add security measures to help lower your premium.
- Security system – Installing a security alarm and monitoring system will make your home safer in the eyes of the insurer
- Water monitoring – You can help prevent water damage with a centrally monitored water alarm
- Smoke and CO2 detectors – Adding hardwired smoke and CO2 detectors increases the likelihood of discovering a fire before it gets out of control
- Remove safety hazards – Removing hazards like wood-burning fireplaces or oil tanks can make your home less likely to experience a fire or environmental oil leak
Customize Your Coverage
You can customize your home insurance to match your lifestyle and current situation. Here are two simple options:
- Limit your personal contents coverage – You don’t want to over-insure if you don’t need protection for all of your belongings.
- Increase your deductible – This is the dollar amount you cover for your claim before insurance covers the rest.
Look For Additional Discounts
There are some ways to get additional discounts on your insurance, like:
- Combine your home and auto insurance
- Look for group discounts for organizations you’re involved with
- Improve your credit score
- Try not to file claims for minor issues
You should also shop around for quotes, as the average cost of home insurance can vary greatly depending on the insurance company and your relationship with the company.
Bottom Line
While the cost of home insurance could be daunting for a new homeowner with many other expenses, this is one area where you can’t afford to cut corners. The average cost of home insurance will vary based on the type of home you purchase and where you live, so you’ll want to consider these factors before you apply for a mortgage.
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