Your mortgage lender requires home insurance before you close on your new home — but more importantly, it protects your largest financial asset. Choosing the wrong policy can leave you dangerously underinsured. Here is what you need to know.
What home insurance covers
Standard coverage components
| Component | What It Covers | Typical Limit |
|---|---|---|
| Dwelling coverage | The physical structure of your home (walls, roof, floors, built-in fixtures) | Full replacement cost |
| Personal property | Belongings inside your home (furniture, electronics, clothing) | 50–70% of dwelling coverage |
| Additional living expenses (ALE) | Temporary housing and extra costs if you are displaced by a covered loss | 10–20% of dwelling coverage |
| Personal liability | Legal costs and damages if someone is injured on your property or you damage someone else’s property | $1,000,000–$2,000,000 |
| Medical payments | Immediate medical costs for guests injured on your property (regardless of fault) | $1,000–$5,000 |
| Detached structures | Garage, shed, fence, deck (not attached to home) | 10% of dwelling coverage |
What is NOT covered (standard policy)
| Exclusion | Details | Solution |
|---|---|---|
| Overland flooding | Damage from rivers, lakes, or surface water overflow | Add flood endorsement ($100–$500/year extra) |
| Sewer/drain backup | Water backing up through basement drains | Add sewer backup endorsement ($50–$200/year) |
| Earthquake | Structural damage from seismic activity | Add earthquake endorsement (BC and Ottawa especially) |
| Gradual water damage | Slow leaks over time (not sudden) | Not insurable — maintenance issue |
| Mould | Unless caused by a covered sudden event | Limited coverage in some policies |
| Pests | Termites, rodents, insects | Not insurable — maintenance issue |
| Wear and tear | Normal aging of roof, plumbing, etc. | Not insurable — maintenance |
| Intentional damage | Damage you cause deliberately | Never covered |
| Home-based business | Business equipment and liability | Separate business insurance needed |
| War, nuclear events | Standard industry exclusion | Not available |
Home insurance costs by province
| Province | Average Annual Premium (Detached Home) | Key Risk Factors |
|---|---|---|
| Alberta | $1,500–$3,000 | Hail, wind, flooding (highest average premiums) |
| British Columbia | $1,200–$2,500 | Earthquake risk, wildfire, flood |
| Ontario | $1,000–$2,200 | Windstorm, ice storms, sewer backup |
| Quebec | $800–$1,800 | Ice storms, spring flooding |
| Manitoba | $900–$1,800 | Flooding, winter storms |
| Saskatchewan | $900–$1,800 | Hail, wind |
| Nova Scotia | $800–$1,500 | Hurricane/tropical storms, coastal flooding |
| New Brunswick | $700–$1,400 | Spring flooding, ice storms |
| Newfoundland | $700–$1,400 | Severe weather, coastal storms |
| PEI | $600–$1,200 | Coastal storms, lower property values |
By property type
| Property Type | Annual Premium Range | Monthly Range |
|---|---|---|
| Condo unit | $300–$700 | $25–$60 |
| Townhouse (freehold) | $800–$1,800 | $65–$150 |
| Semi-detached | $900–$2,000 | $75–$165 |
| Detached house (under 25 years) | $1,000–$2,200 | $85–$185 |
| Detached house (25–50 years) | $1,200–$2,800 | $100–$235 |
| Detached house (over 50 years) | $1,500–$3,500 | $125–$290 |
| Luxury/high-value home | $2,500–$5,000+ | $210–$420+ |
Types of home insurance policies
| Policy Type | Coverage | Best For |
|---|---|---|
| Comprehensive (all-risk) | Covers everything except named exclusions — broadest protection | Most homeowners (recommended) |
| Broad form | All-risk on the dwelling, named-peril on contents | Budget-conscious — still good |
| Basic (named peril) | Only covers specifically listed perils (fire, theft, windstorm, etc.) | Minimum coverage — not recommended |
| No-frills | Bare minimum — for properties that do not qualify for standard insurance | Last resort — high-risk properties |
Recommended: comprehensive (all-risk) policy
All-risk means everything is covered unless specifically excluded. This is the gold standard. Named-peril policies only pay if the damage matches a listed cause — leaving gaps.
Replacement cost vs actual cash value
| Feature | Replacement Cost | Actual Cash Value (ACV) |
|---|---|---|
| What it pays | Current cost to rebuild/replace | Depreciated value |
| Roof example (10 years old, $15K replacement) | $15,000 | $7,000–$9,000 (depreciated) |
| TV example (3 years old, $1,500 replacement) | $1,500 | $600–$800 (depreciated) |
| Premium difference | 10–15% higher | Lower premium |
| Recommendation | Always choose this | Avoid if possible |
Guaranteed replacement cost
Some insurers offer guaranteed replacement cost — they pay to rebuild your home even if the cost exceeds your coverage limit. This is the best protection against construction cost inflation. It is typically available at a small additional premium.
Factors that affect your premium
| Factor | Impact on Premium |
|---|---|
| Location (flood zone, wildfire area, urban vs rural) | High impact — #1 rating factor |
| Home age | Older = more expensive (old wiring, plumbing, heating) |
| Construction type | Wood frame costs more than brick or concrete |
| Roof age and type | Old roof = higher premium; metal < shingle |
| Heating system | Oil furnace, wood stove = higher; forced air gas = lower |
| Electrical system (knob and tube, aluminum, breakers) | Old wiring = much higher or uninsurable |
| Claims history | Previous claims = higher premium for 5–7 years |
| Deductible ($500 vs $1,000 vs $2,500) | Higher deductible = lower premium |
| Coverage amount | Higher dwelling limit = higher premium |
| Security features | Alarm, deadbolts, smoke detectors = 5–10% discount |
| Bundle with auto | 5–15% discount |
| Proximity to fire station | Closer = lower premium (especially rural) |
Essential endorsements (add-ons)
| Endorsement | Cost | Who Needs It |
|---|---|---|
| Sewer/drain backup | $50–$200/year | Everyone with a basement (especially older homes) |
| Overland flood | $100–$500/year | Properties near water or in flood-prone areas |
| Earthquake | $100–$500/year | BC homeowners especially; also Ottawa |
| Identity theft | $25–$75/year | Optional — useful if no separate identity protection |
| Home-based business | $50–$200/year | Anyone running a business from home |
| Jewellery/art/collectibles rider | Varies | If high-value items exceed standard limits |
| Service line coverage | $25–$75/year | Covers water/sewer line from house to street |
Minimum recommended endorsements
For most homeowners: sewer backup + overland flood (if available). In BC: add earthquake. These cover the gaps most likely to result in a major uninsured loss.
How to buy home insurance
Timeline for new homebuyers
| When | Action |
|---|---|
| 2–4 weeks before closing | Start getting quotes from multiple insurers |
| 1–2 weeks before closing | Choose insurer, set up policy effective on closing date |
| Before closing | Provide proof of insurance to your lawyer and lender |
| Closing day | Policy is active — you are covered |
Getting quotes
| Method | Pros | Cons |
|---|---|---|
| Insurance broker | Compares multiple companies for you | May have broker fees |
| Direct insurer (Intact, Wawanesa, Aviva, etc.) | Simple, quick | Only their own products |
| Online comparison tools | Fast quotes | Limited insurer selection |
| Bundle through your auto insurer | Discount for bundling | May not be the cheapest overall |
What you need to provide for a quote
| Information | Details |
|---|---|
| Property address | For risk assessment |
| Home age and construction type | Year built, wood/brick/concrete |
| Square footage | Living area |
| Heating type | Gas, oil, electric, wood |
| Electrical system | Breakers, fuses, knob-and-tube |
| Roof age and material | Shingle, metal, flat |
| Claims history | Last 5–7 years |
| Desired coverage | Dwelling value, contents, liability |
| Deductible preference | $500, $1,000, $2,500 |
Condo-specific insurance
| Coverage | What It Covers |
|---|---|
| Unit improvements | Upgrades you made to the unit (kitchen, bathroom, flooring) |
| Personal property | Your belongings inside the unit |
| Personal liability | Injury or damage claims against you |
| Loss assessment | Your share of special assessments from the condo corporation |
| Additional living expenses | Temporary housing if displaced |
The condo corporation’s master policy covers the building structure and common areas. You need your own policy for everything inside your unit and your personal liability. Lenders require proof of condo insurance before closing.
Tips for saving on home insurance
| Strategy | Estimated Savings |
|---|---|
| Bundle home + auto insurance | 5–15% |
| Raise your deductible from $500 to $2,500 | 10–25% |
| Install monitored alarm system | 5–10% |
| Install water leak detectors | Up to 5% |
| Improve electrical, plumbing, or heating systems | May reduce premium in older homes |
| Shop around annually (or every 2–3 years) | 10–30% (loyalty is rarely rewarded) |
| Ask about group rates | Professional associations, alumni groups, employer programs |
| Claim-free discount | Some insurers reward multi-year claim-free history |
| New home discount | Some insurers offer lower rates for homes under 10 years old |