What You Should Know About Home Insurance

What You Should Know About Home Insurance

Silver Maple Mortgages |


When it comes to home insurance, it is very important to make sure your biggest asset is properly protected! Home insurance policies may be tough to read through and understand. Here are 10 things you should know about home insurance!


1. What if my house burns down?

The cost to rebuild your home plays a big role in determining the amount you pay for home insurance. Insurance companies use a formula to figure that out, but since there are several industry approved calculation methods the cost may differ from one insurer to the next. Ask your broker or agent to explain which method they use and the assumptions.


2. Do I have replacement cost coverage?

The number the company comes up with in Step 1 is what it will pay to rebuild your home. The amount increases over time, but there is a possibility it isn’t keeping pace with increases in the cost of labour and materials.

Check with your broker or agent to see if you have guaranteed replacement coverage. This ensures you will receive the amount that it actually costs to replace your home and not the amount on your policy. Not all policies have this coverage and rules vary across insurance companies.


3. Do I have sewer back-up coverage?

It may come as a surprise that not all insurance policies include coverage for damages from sewer back-up into your home. If you are unsure, speak to your broker or agent.


4. Policy special limits

Most policies set a maximum they will pay to cover certain items including jewelry, tools, furs and bicycles. These limits can vary from one insurance company to another. If you have expensive items you wish to protect, make sure the policy has sufficient coverage for your needs. You can also increase the amount of insurance for these items separately, if needed. And if you are shopping around, ensure you include this coverage for an apples-to-apples comparison of rates.


5. What type of policy do I need?

Broadly speaking, there are three types of policy: a Comprehensive Policy, a Broad Policy and a Fire Policy. The first type provides full coverage, the second average coverage and the last provides only basic coverage. The names of these policies offered will vary from one insurance company to another, so be sure to ask to better understand what you are buying. 


6. Ask for discounts

Some insurers offer discounts for such things as being mortgage-free and for being a non-smoking household. There may also be something if you have an alarm system, are claims-free or bring all your insurance policies under one roof. 


7. What happens if I make a claim?

If you were to make a claim you could lose your claims-free discount. For that reason, you want to consider the impact on your rates before proceeding with a claim and better understand how your policy works before you purchase home insurance. Also, be sure to consider your out-pocket costs related to any claim such as your deductible. 


8. I’m a renter. Do I need insurance?

Even if you are only renting your home, you should consider a tenant’s policy. This protects your possessions (TV, computer furniture, sporting goods, jewelry, etc.) and ensures you are covered in the event of damage to your apartment, a neighbour’s, or someone injures themselves while on your property.


9. Older homes

There are a few key areas an insurance company looks at to assess risk before insuring your home including wiring, galvanized or lead pipes, electrical service, heat source, wood stoves, and the age of your roof. Most prefer that you not have knob and tube or aluminum wiring. Galvanized or lead pipes generally indicate the age of the home and most companies prefer that you have this updated to copper or plastic. They also typically prefer that you have breakers instead of fuses with 100-amp service at minimum. 

Improperly maintained wood stoves are a common cause of house fires and your insurance company may request a full inspection should you have one. Generally speaking, insurance companies prefer that your roof has been updated within the last 20 years.


10. Optional coverage

Depending on where your home is located you may want additional coverage. For example, if you live in an earthquake-prone region you may want to consider earthquake coverage, which is not normally included in standard policies. Another example is sewer back-up coverage which may be particularly desirable should your home be located in a low-lying area that is susceptible to sewer back-ups.



This article was prepared for Moneyville's launch. Andrew Wicken was  the general manager of InsuranceHotline.com, a free online insurance rate comparison service. It was taken from the Toronto Star (March 11, 2011).