What Does Home Insurance Cover?

If you own a home, home insurance is essential. Home insurance likely covers more than know (like your stuff when you travel) but might also contain gaps leaving you underinsured (we’ll cover how to fill them, though).  

Let’s take a look at what home insurance does and does not cover.

What home insurance covers

The purpose of home insurance is to protect you, your home, and its contents against loss. 

Theft, damage to the interior of your home, and damage to the exterior property are some of the things that immediately come to mind when you think about home insurance. 

There are three principal types of home insurance coverage you require:

• personal property coverage 
• liability coverage
• living expenses following a major claim

Personal property coverage protects you from losses or damages to your home and personal possessions.  Liability coverage kicks in when you are liable for injury to another individual or damage to another individual’s property.

Your home insurance policy covers the following:

• Your home: damage to or loss of your property
• Its contents: theft, damage, or loss of personal possessions
• Outbuildings: damage to or loss of sheds, decks, fences, etc.
• Your car’s contents: a thief takes your laptop? Home insurance will replace
• Liability: injuries or damages to other people who visit you on your property
• Other’s property: damage you inadvertently cause to another individuals property
• Additional living expenses: if an insured peril (something for which you have insurance, like fire) results in your home being uninhabitable, your home insurance helps you with the costs of living in a temporary residence.

Consult with your insurance company to get a clear picture of how coverage works with everyone in your home. Your immediate family, in general, will have coverage, including a student living on campus. However, if a student moves off-campus, they’ll likely need renters insurance. 

TIP: To ensure coverage for all your valuable possessions, take a yearly account of what you own.  A simple way to do this is to film a “walk-through” of your home, highlighting any valuables you have.

A few quick examples of what home insurance covers

• A neighbour visits your house and suffers an unfortunate tumble down your stairs. Your home insurance kicks in if they make a claim against you for loss and damages.
• A tree falls in your yard and causes damage to a neighbour’s house. Your home insurance will cover the damages and losses they experience.
• A thief breaks into your car and steals a computer you were transporting. Your home insurance will cover loss and damages.

DID YOU KNOW: home insurance is different than condominium insurance.  Condominium insurance covers the contents of your unit and storage locker, as well as personal liability. The condominium’s master policy covers the structure of the building and common areas. Similarly, if you rent your home, it’s a good idea to get tenant insurance, which provides comparable protections for renters.

Types of home insurance

When looking for home insurance, shop around for the best rate possible and compare home insurance quotes. That said, you should always consider what type of home insurance best suits your needs.

TIP: Before starting your search for home insurance, create an itemized list of valuables around your home. Also, consider what types of risks and perils are in your neighbourhood. For example, do you live near water or in an area known for crime, expect to pay a little more.

• Basic home insurance: Also known as a named-perils or broad policy, this policy covers only those risks that your insurance provider names.  For instance, if your policy lists fire but not sewer backup, you’ll be covered for the former but not the latter.

• Comprehensive home insurance: As the name suggests, this policy provides the most coverage. Unless noted in the policy’s exclusions list, your home and its contents will be insured against all risks. It’s the standard type for Canadians. 

• No-frills home insurance: The simplest form of home insurance you can get. If your home doesn’t qualify for other insurance, you might still be able to get it covered with a no-frills policy.  Examples include insurance for a vacant house or high-risk due to outdated electrical or plumbing. Pay extra attention to what is and is not covered under your no-frills home insurance policy.

Be aware: only purchase a home insurance policy from a licensed agent, registered insurance broker, agency, or company.

You may have coverage for actual cash value, replacement cost, or guaranteed (extended) replacement cost or value within each type of coverage.

• Actual cash value (ACV) covers the cost of your home and possessions, less depreciation. ACV is the standard. 

• Replacement cost covers the cost of your home and possessions without deducting depreciation but costs more. 

• Guaranteed replacement cost/value covers repairs and replacements even if they’re greater than your policy limit. It helps to repair and rebuild based on current market costs, not just the value of your home.

Note: Replacement value is not the market value but rather the cost rebuild your home. Don’t be overinsured by paying the market value.  

What does home insurance not cover?

Your home insurance covers most unexpected events, also known as perils.  Events like sewer backups, floods, landslides, earthquakes and other “acts of God” aren’t necessarily included in home insurance policies. However, you can purchase add-ons to fill the gaps. These add-ons are also known as riders, extensions or endorsements. Some things not covered by most home insurance policies are:

• Expected events: As a homeowner, it’s your responsibility to maintain upkeep on your home.  For example, if one of your windows leaks due to age and causes damage to your possessions, chances are your policy won’t cover the losses.
• Flooding: Unless your home’s flood originates from a burst pipe or appliance, your home insurance won’t cover you.  However, if you leave the heat off in winter and a pipe bursts, home insurance won’t cover it. Home insurance won’t cover you if the cause of the flood is rainstorms, overland flooding, or flash flooding. If a sewer backs up into your home, standard home insurance won’t cover you. To protect yourself, purchase flood insurance.
• Earthquake: damage caused by earthquakes is generally not covered under home insurance policies. Some policies might cover specific damages to your home if an earthquake occurs, but not others.  Similarly, fires that occur following an earthquake are generally only insured under earthquake insurance. Be sure to speak to your insurance provider to determine if earthquake insurance is a good idea for you.
• Tenants: If you have tenants, make renters insurance a requirement in your lease. Your home insurance does not cover them or their valuables. Renters insurance avoids messy resolutions and time in court. 
• Illegal acts and purposeful destruction: if damage to your property results from you performing an unlawful act on your property or intentionally damaging something, your insurance policy won’t cover the losses. For example, if you hold an illegal bonfire on your property and it causes damage to your home, you may have difficulty making a claim. 
• Vehicles: while home insurance might cover the things within your car or garage (keep your contents insurance up to date), the car itself requires auto insurance. If you intend on driving your vehicle anywhere, be sure to have your vehicle insurance in order.
• Extended liability: The standard liability is $1 million. However, if you have a pool, tenants, or other “higher risk” amenities, consider extending your liability to $2 million. 

The bottom line

Owning a home is exciting. Ensure protection of your investment. When considering home insurance, be sure to take the time to compare policies to find the best rate possible, and speak to an insurance advisor, like RH insurance, to determine what policy best suits your needs. 

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