If you’ve just purchased your first home, you’re likely noticing how quickly the various expenses can add up. While you may be looking for ways to cut back, home insurance coverage is one cost you shouldn’t avoid. Home insurance coverage will protect your largest investment and personal belongings in case of damages, theft, or any covered loss.
Here are examples of what your homeowner insurance coverage could help you with:
- Property damages or loss to your home or any attached structures.
- Damages and loss of personal belongings in your home or outside your residence.
- Accidental damage to someone else’s property caused by you, your spouse, or your child.
- If someone is injured accidentally on your property, insurance could cover expenses such as medical bills and legal fees.
Home insurance coverage provides financial protection for losses due to accidents that could damage your home or your belongings. Even if you feel you’re careful and don’t own enough possessions to require protection, you never know when insurance coverage can bail you out. We will examine what home insurance coverage entails and why you don’t want to overlook this expense.
What Does Home Insurance Cover?
Home insurance protects your home and provides broad coverage for yourself, your property, and your personal belongings For example, your homeowner’s insurance policy covers:
Personal Belongings
Personal property coverage will protect you from any damages or loss to your belongings in your home or car. For example, you can file a home insurance claim if your laptop gets stolen from your vehicle. If your home is burglarized or damaged by accidental fire, your homeowner insurance policy will cover all of your listed items in the event of a covered loss. Therefore you won’t have to worry about replacing your items.
While you may not think that you have that many possessions, the reality is that your home insurance coverage could protect you personally from legal issues if someone were to get injured on your property or if your home were to flood. Your homeowner insurance coverage would provide you with a place to live, replace your personal belongings, and cover the repairs.
Personal liability
Your personal liability is protection against legal liability for any losses arising from a covered issue. Home insurance coverage includes personal liability for injury or property damages accidentally caused to others.
Here are a few common examples of personal liability in home insurance coverage:
- If someone falls on your property and suffers an injury requiring medical attention, this person could sue you, and you could be liable for damages.
- You accidentally damage someone’s property and are responsible for covering the damages.
Damages
What kind of damages are covered by home insurance?
- Fire – If you accidentally leave a lit candle that causes damage, you’ll be covered for the damages caused. However, you want to double-check to ensure that your policy covers wildfires.
- Flooding – A broken pipe or a toilet leak from the higher floor can cause water damage inside your unit.
- Theft – If your home is burglarized while you’re away or your items are stolen from your vehicle in the driveway, your home insurance coverage will help you cover the losses.
We must remind you that home insurance coverage will vary depending on your location, the safety features of your home, and other factors. Therefore, you should confirm that you have adequate coverage based on the geographical and weather conditions where you live.
Your home insurance coverage could offer protection against identity theft. It would reimburse you up to $10,000 for any costs incurred by scammers who steal your personal information. Not all home insurance policies offer identity theft protection, so it’s essential to check your policy and understand if it is available.
Additional Living Expenses
One expense you may not consider until the worst-case scenario is additional living costs when you can’t live in your home due to damages. For example, if your home gets flooded due to a burst pipe, you may be unable to live in it due to safety concerns. Based on your coverage limits, your home insurance policy would cover your living expenses, from rental fees to meals.
Your home insurance coverage will replace your personal belongings based on the coverage structure, pay for possible damage to your unit and other units, cover the replacement costs, and reimburse you for additional living expenses.
Different Types of Home Insurance
Home insurance is not a one-size-fits-all solution. For instance, different types of homes typically require different types of insurance coverage. Below, we’ll cover some of the common types of home insurance.
Homeowners Insurance
This type of insurance is often required if you own a fully detached, semi-detached, or townhouse home. Most of the information in this article pertains to homeowners insurance coverage. Homeowners insurance will cover the property, belongings, and personal liability of the policyholder, their partner, and their children.
Condo Insurance
Even though you live in a condo, you still need home insurance coverage. Your condo corporation will have insurance to cover the common elements and the structure of the building, but you’re responsible for your unit. Condo insurance can also protect you from your responsibility for any common area damages and gaps in your condo corporation’s policy. You also may not be covered for unit improvements you make according to your corporation’s policy, so you’ll have to get your own coverage.
Speaking from personal experience, you could be responsible even if your condo corporation causes damage to your unit. In my case, my condo management was fixing a plumbing issue that flooded my unit. While they were responsible for some of the damages, my home insurance coverage had to cover other damages and expenses. The costs quickly piled up as you can’t live in a flooded home, and many of your items may be thrown out due to damage.
Tenant/Renters Insurance
If you’re a tenant and your landlord has home insurance coverage, you still need your own insurance policy for your personal belongings and liability. While the homeowner’s insurance policy would cover the unit’s structure, you would be responsible for your property or any damages you cause to other units.
Seasonal Property or Cottage Insurance
If you have a seasonal property, you must purchase insurance, even if you’re only there occasionally. Many people add a seasonal home as a secondary location on their existing policy to have “named perils” coverage for common issues like fire, water, and other damages.
It’s worth pointing out that there are multiple levels of coverage when it comes to home insurance:
- All Risk or comprehensive – This is the most extensive coverage, as it will protect your personal belongings and home from all losses, except specific omissions.
- Broad coverage – This generally provides coverage for the more expensive items and the actual structure.
- Basic or named perils – This is the simplest form of coverage and only protects the items you list.
The type of home insurance coverage that you choose will depend on your home and your situation.
How to Purchase Home Insurance
If you’re looking to purchase home insurance coverage, it’s recommended that you shop around.
A few considerations about purchasing home insurance:
- You can bundle your insurance coverage to save money. Many people combine their auto and home insurance into one bundle to get a discount on the premium.
- Customize your coverage. You want your insurance policy to match your current lifestyle.
- You can adjust your deductible based on your comfort level. For example, a higher deductible can save you money on your insurance premium.
How to File Home Insurance Claims
You must gather the information in advance to file a home insurance claim. Every insurance company has a different system for filing claims, depending on your situation and the issue.
Speaking from personal experience, your insurance company can bail you out when you’re stuck in a stressful situation like a flood or are confused about how to proceed. In my case, when the unit was flooded, the insurance company immediately sent an adjuster to help figure out how to proceed based on the damages.
What to think about before filing a claim:
- Does this claim make sense with your deductible? You want to run the numbers based on the possible damages compared to your deductible amount.
- Is this an emergency? If your home is flooded or you were burglarized while away, you should notify your insurance company immediately. You want to ensure your insurance provider has a 24/7 line for assistance.
- Is a police report needed? If your home gets broken into or if someone steals items from your vehicle, you’ll want to file a police report to notify the authorities.
You’re required to pay the deductible for every claim you make. Moreover, the amount you receive from your insurance provider will depend on your coverage. You’ll generally have two options for your claims.
Actual cash Value vs. Replacement Value
Actual cash value coverage will reimburse the amount of the item that needs to be replaced due to a covered loss by comparing its price to its current value and subtracting depreciation. On the other hand, replacement value coverage means receiving the actual cost to replace the item.
Is Home Insurance Mandatory in Canada?
While home insurance isn’t mandatory or legally required in Canada, you may be unable to close on your property if you don’t provide proof of coverage. Many mortgage providers will require you to hold an active insurance policy to qualify for a mortgage.
If you live in a condo, management may ask for insurance proof as you’re responsible for your unit and potential damages to surrounding units. For example, if a toilet leak from your unit damages the property below you, you would be on the hook for the expenses, so the condo corporation will want to ensure that you have adequate coverage.
The Final Word
Home insurance protects your personal property and liability, ensuring that you won’t face financial difficulties due to unexpected events.
Although you may not think you have enough to worry about, once you add up the value of your possessions, you’ll realize that you need home insurance coverage for protection and the peace of mind that comes with knowing that you won’t be financially strapped in the event of an accident.
