Is home insurance required in Canada?

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Is home insurance a legal requirement in Canada?

Rounding it up

  • Canadians aren't required to get homeowner’s insurance if they fully own a home.

  • Homeowner’s insurance is usually required if you’re buying a home with a mortgage.

  • Homeowner’s insurance is a fantastic investment that most Canadians rely upon.

  • There are other types of insurance, such as tenant’s insurance, to keep in mind as well.

7 min read

Ryan Severance
#insurance#home insurance#renter's insurance#tenant insurance

Investing in real estate is one of the only ways to build serious generational wealth in Canada. Nevertheless, many Canadians are scared to purchase their own property because of the financial and legal obligations that ownership entails. Some young Canadians are even backing away from the purchase of their first home because they’re worried about not meeting insurance requirements or have other legal fears.

Is it really illegal to not have home insurance in Canada? What penalties might impact homeowners who ditch insurance altogether? Here’s what you need to know about home insurance across Canada.

Home insurance isn’t legally required

For Canadians who fully own a home, there’s no legal requirement to invest in a certain amount of homeowner’s insurance. This means that homeowners who have already fully paid off their debts and completely own their own property don’t have to worry about violating the law if they’re not currently enjoying home insurance coverage. There is no legal mandate to possess homeowner’s insurance.

That’s still not the end of the story, though. Most people can’t afford to purchase a home by themselves. Millions of Canadians have mortgages to help them afford their homes in the first place and the vast majority of lenders require future homeowners to secure home insurance before dispensing with a loan. Those Canadians who are grappling with the decision between a mortgage and home equity loan will thus almost certainly need to get insurance of some kind.

While auto insurance is mandated for drivers, homeowner’s insurance remains strictly voluntary. Nevertheless, most clever homeowners invest in home insurance because it’s the only safeguard against financial ruin in the wake of a fire, flood, hurricane, or similar disaster. Some home insurance plans even protect the value of personal assets stored within the home. With these things in mind, it’s easy to see why those who care about their financial well-being invest in home insurance.

Some Canadians may be confused about the popularity of homeowner’s insurance if it’s not legally required. Why do homeowners bother investing so much of their hard-earned money into insurance if it’s purely voluntary? The answer has to do with how smart a decision buying home insurance really is.

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Home insurance is often worth it

Not all home insurance coverage plans are the same but it’s always going to be worthwhile to invest in one form of home insurance or another. You spend countless hours each day within the interior of your home, and its exterior is always on display to passersby. Countless Canadians have seen their homes go up in flames or be washed away in floods; just imagine the distress of seeing your own piece of property permanently damaged or entirely destroyed.

According to the Insurance Bureau of Canada, a single incident such as a flooded basement could cost a homeowner up to $43,000 in repairs. Heavier rainfall, more frequent wildfires, and other consequences of global climate change will continue to threaten the wellbeing of Canadian homes for the foreseeable future. According to the IBC, severe weather events alone caused over $1.8 billion in insured damage across Canada in 2018.

Renters and owners who are confused about the popularity of insurance should remember that home insurance is the only surefire bet against these financial calamities. Home insurance also provides other avenues of protection, too, especially when it comes to personal liability. Canadian homeowners also frequently secure coverage for their personal belongings and coverage for living expenses in the event of an unexpected relocation.

The following elements may be covered in a Canadian homeowner’s insurance plan, though the specific details will depend upon your unique arrangement:

  • Damage from fire or lightning

  • Damage from explosions

  • Damage from riots or civil commotions

  • Damage from smoke

  • Losses from theft

Always thoroughly discuss the details of your proposed plan before signing up for home insurance from a private provider. It’s hard to know whether to rent or buy a home but you should always cover as much of your property as possible to avoid financial nightmares in the wake of an accident.

Understanding renter’s insurance

Renter’s insurance and home insurance are very similar to one another, but ultimately there’s a crucial distinction between the two. Renter’s insurance, sometimes referred to as tenant insurance, offers protection for the personal assets you own inside a building belonging to someone else. If you’re renting a house, your landlord almost certainly has homeowner’s insurance, but that insurance will cover the landlord’s property, not your personal belongings.

Renter’s insurance offers protection for your personal belongings if your apartment or rented residence should burn down, wash away in a flood, or suffer some similar catastrophic disaster. While some renters scoff at the idea of insuring their belongings, others appreciate the inherent value of their personal possessions. It could save thousands of dollars in the event of a serious incident that destroys your television, computer, car, and other valuable pieces of property.

Renter’s insurance doesn’t just cover your belongings, either. It can also provide coverage for additional living expenses. This means that your insurance provider will pay for living expenses and moving costs while your rented property is undergoing repairs. If you have to permanently resettle your household to a new piece of property, additional living expenses coverage may offer you some financial protection as you transition to the new residence.

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Securing your home insurance

How do insurance providers determine the costs of home insurance plans? There’s no universal solution to determining the price of home insurance. It usually depends upon the unique factors of a specific situation. Those who work from home could have a different rate from those who work out of offices, for instance, as spending more time at home could impact the risk assessment conducted by your insurance providers to determine prices.

Keep an eye out for these extra features when finding the right home insurance policy for you:

  • Water protection coverage for those living near bodies of water

  • Earthquake coverage for those living near fault lines

  • Home business coverage for those working from home during the pandemic

  • Coverage for property that resides in a third-party storage facility

One of the most important factors in determining the price of your home insurance plan is how expensive it will be to rebuild your home in the event of its total destruction. The price of local materials such as lumber and construction labour could have a huge influence. The style of the house, its size and square footage, and the presence of other structures such as a garage could also impact your home insurance costs.

Pay special attention to your roof when buying a home or repairing an old one; the roof is an incredibly important and expensive part of your home that’s uniquely susceptible to certain perils like wind damage. Your home insurance could be more expensive if your roof is old, leaking, or hasn’t been repaired in many years. Sturdier materials used in construction and more recently made repairs may help homeowners secure better insurance rates for themselves.

Historical homes may be particularly expensive to cover, as they’re likely worth more due to their advanced age. The unique improvements you’ve made since moving in, such as a kitchen or bathroom renovation, may also impact home insurance costs.

Finally, remember that home insurance isn’t necessary, but other insurance plans like auto coverage are required. By bundling your required auto insurance with your voluntary home insurance, you could end up saving big bucks on both packages.

It’s better to be safe than sorry

Canadians aren’t legally required to possess homeowner’s insurance, but most choose to voluntarily purchase it anyway. Your home is likely the most expensive thing you’ll ever own, and most Canadians want to keep such an important asset protected against the dangers of fires, floods, and other hazards. While homeowner’s insurance isn’t legally required, virtually all lenders require the recipients of mortgages to get some form of home insurance.

Even for those who are simply renting property, insurance can prove to be incredibly important. A single incident can end up delivering financial ruin unto an entire household if insurance has been ignored. Now that more people are working from home than ever before, we can expect some interesting changes to arrive across the Canadian insurance industry.

No matter what the future brings with it, Canadian homeowners can only sleep soundly when their residence is adequately protected by home insurance.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our Subscription Plans page for our most up to date account information!

Ryan Severance

Ryan Severance is a professional freelance author and the owner of American Scribe LLC. With degrees in political science and socio-legal studies, he writes about business, politics, and law for clients around the world.

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