Home insurance 101

If you own a home, or even vacant land, you’ll want to insure it. Property insurance protects you in the event that your premises and its contents are damaged. It also covers you personally in case someone is injured in your home, or on your property, and you’re deemed liable.

Property insurance works just like other kinds of insurance. You pay premiums to the insurance company in exchange for coverage. Property insurance covers you up to specified amounts for the following:

• Damage, destruction or loss of personal property There are a number of different ways your home could be damaged or destroyed. Common risks that insurance protects against include fire, windstorms, falling objects, vandalism, lightning, explosions, water damage, impact by aircraft or land vehicles, and smoke. A home can also suffer a loss of value due to theft, which is also covered by insurance.
• Liability coverage This aspect of your policy protects you in the event that someone is injured on your property and you’re held legally responsible. An example of this would be if a visitor slipped on your stairs and broke a leg, and sued you as a result. It also covers instances where your negligence damages someone else’s property. For example, if you live in a duplex and cause a fire that affects your neighbour’s unit, your insurance protects you.

When you purchase property insurance, you’re protecting the dwelling itself (your house or condo unit) and your contents within (electronics, jewellery, carpets, etc.). It also protects you from someone pursuing you for damages resulting from an injury that took place on your property.

The main structure is typically insured up to its replacement value. What this means is that if your home is destroyed by something like a fire, the insurance policy will pay for it to be rebuilt. It’s important to note, however, that replacement value refers to the materials and labour required for rebuilding, and not the resale value of your home. A detached shed, gazebo, and deck would also have coverage. 

In Canada, auto insurance is tightly regulated by provincial bodies, but not so with property insurance. There are no standard policies, or terms and conditions, in contracts. Still, most Canadians choose a comprehensive home insurance package that covers the building, its contents, any detached structures, and your liability.

With so many companies offering home insurance, consumers have a dizzying variety of plans to choose from, so buyer beware. Don't assume that one company’s policy will include the same coverage as another.

For example, flood insurance is typically only for burst pipes and not for sewer backup or water seeping through your foundation and permeating into your basement. Earthquake insurance is sometimes mandated by where you live, sometimes it's optional. 

Best to do your homework before signing on the dotted line.

In addition to insuring the home itself, one of the key things house insurance does is protect the value of your contents. For this reason, you should have an inventory of all your valuables. This list plus any relevant documentation (receipts, pictures, etc.) should be kept in a secure place to protect it from fire or flooding.

Having a list of what you need insured will also make the process of applying for insurance easier. You can tell the insurance company what you want to insure and they can suggest the appropriate values and any add-ons you may need for jewellery or other expensive and valuable items.

If something happens to your home, it’s always a relief knowing home insurance will cover you.  But, insurance is not a maintenance plan, and won't cover you in all situations, depending on your coverage. 

Also, the claims process of repairing your home and filing it with your insurer can be tedious and take up a lot of your time and energy. After a successful claim, your premiums may go up as a result. 

In this regard, prevention is key. Keep your home adequately maintained against common risks like floods and fires.

For floods, waterproofing your foundation, upgrading pipes, and installing weeping tile and a sump pump will help. Also, make sure to shovel snow away from your foundation, and ensure your eavestroughs are clear of debris and point away from your home.

For fires, ensure you have active fire alarms, fire extinguishers ready, and leave any electrical work to professionals. 

You’ll be glad you did. You may even save on insurance if the insurer sees how well you’re taking care of your property.