Get Cheap Home Insurance quotes

How does home insurance work in Canada?

What is home insurance and who needs it?

Owning a home, for most people, is the single most expensive asset they will buy or own in their lifetimes. Protecting it from damage, as well as the contents within it, is a particularly important part of ensuring your investment works for you and potentially grows over time.

Home insurance is a financial product offered by insurance companies, banks, and other financial institutions, to protect you, your family, your house, and its possessions.

In Canada, it is not the law for homeowners to have insurance, but many lenders will not provide financing for a home unless home insurance is taken on the property. It reduces their risk on the investment they’ve made. As well, even if you are mortgage free, home insurance is necessary to protect you in case of loss or lawsuit down the road.

Home insurance is useful not only for houses but also condos, and renters who do not own the property but still face risk of loss or damage to their possessions.

Condo insurance is usually cheaper than home insurance and typically extends coverage to your possessions, even when you are travelling with them, or they are being stored in your condo’s storage locker. Lenders also consider that you are living in a shared building with multiple other people and the unique risks that accompany that.

Finding the cheapest home insurance starts with comparison shopping on sites like InsuranceHotline.com. Join the more than 1 million Canadians who have used our service to save on their home insurance.

How home insurance works:

Home insurance is generally used for a variety of different occurrences on or in your property: interior damage, exterior damage, loss or damage of personal possessions, and injury that occurs while on the property. You pay a premium for that protection, usually in 12 monthly payments. When or if you make a claim on any of these incidents, you will be required to pay a deductible, which is an out-of-pocket cost before payments are made to you.

As a result, you are paid for damage to your home or loss of possessions (or replacement) as well as protected from legal liability should someone be harmed on your property.

How is the cost of home insurance calculated?

Home insurance prices will range and are specific to each homeowner’s needs and situation. For example, newer homes with up-to-date wiring, in good neighbourhoods, near a fire station would be cheaper than older homes in need of upgrades. That’s simply due to risk factors the insurance company is willing to insure and how much it will charge to take on risk.

Every home insurance company assesses risk differently so getting home insurance quotes from a variety of sources will help you achieve the cheapest rates possible. Besides, your home insurance premium depends on the coverage you choose based on your needs and property that needs to be insured.

Home Insurance Rates in Canada (2019 - 2022)

Home insurance has been a steady incline from 2019 until 2022. As the chart below shows, the past three years have seen about a 24% increase in home insurance prices. Why?

As per the Applied Rating Index report, over the course of the past three years interest rates remained relatively low until inflation began to rise and interest rates slowly rose in the second quarter of 2022. Until that time, the housing market was hot and as home ownership climbed so did premiums. Renos grew, re-builds and even climate change had a lot to do with the change in premiums.

For example, catastrophic events in 2021 such as the Barrie tornadoes and the BC flooding cost more than $100 million and $450-million in insured losses, respectively, according to the Insurance Bureau of Canada.

The very minimal dip in average prices from Q1 2020 to Q2 2020 had more to do with COVID fears at the onset of the pandemic, than anything else. However, that dip was short-lived and almost non-existent.

Tips on getting the cheapest home insurance

The cost of home insurance will vary depending on many factors such as new build versus old, location, distance from a fire station and size.

However, there are ways to keep costs down and find the cheapest home insurance in your area.

• Use comparison sites like InsuranceHotline.com to compare rates from the top providers in your area.
• Bundle your home with other insurance products such as auto. Your provider will reward you for your loyalty and the reduction in administrative fees.
• Remain claims free. More claims will appear as risk to your provider and that is when prices will rise. Keeps claim down to keep prices down.
• Install a security system. Maintaining good security and avoiding thefts (and claims) will reduce risk. Many home insurance providers offer discounts for homes with alarm systems.
• Maintain your home. A well-maintained home will prevent breakdown or worse and will reduce the risk of claims being made.
• Take out a higher deductible. This puts less pressure on your home insurance provider and reduces their risk.

10 Factors that can affect your home insurance premium

Insurance companies take a number of factors into consideration when determining your home insurance premium. If the data suggests you are likely to make a claim, you may be deemed high risk and consequently face a higher premium. Conversely, if you are considered low-risk, you will receive a cheaper premium.

To make this determination, insurance companies consider the following:

1. Where you live.

Home insurance providers use detailed local statistics to track the number and severity of insurance claims. If your neighbourhood has a high number of burglaries, vandalism, house fires, or anything else that might potentially lead to a claim, you can expect a higher home insurance premium.

2. Heat source.

How you heat your home can have a big impact on your home insurance rates, as some heat sources are inherently riskier than others.

• Radiators are considered safe by insurers, as they rely on hot water rather than combustible substances to distribute the heat throughout your home.
• Wood stoves are at the other end of the spectrum. If they are not maintained properly, they can cause carbon monoxide poisoning and are a common source of house fires.

3. Type of electrical distribution.

In Canadian homes, especially those built before the 1950s, knob-and-tube wiring is commonplace, but insurance companies are increasingly reluctant to provide coverage to any house that still has it. Over the years, either through tampering or simple deterioration, this technology has become a fire risk.

Most Canadian insurers will give you a few months to remove and replace it with insulated wiring. Once this work is complete and a licensed electrical contractor has approved it, finding an affordable home insurance rate will be much easier.

4. Pipes and plumbing.

As with electrical, the age of your home is a good indicator as to whether or not plumbing will be an issue. Older homes, built before the mid-1950s, used lead piping. This type of plumbing has eroded over time, making it more likely to crack, leak and lead to a home insurance claim. Insurers will reward plastic or copper pipes, more modern and stable technologies, with a lower home insurance rate.

5. Age of roof.

The roof over your head does much more than keep you dry. Modern roofs are surprisingly complex; the angle of the pitch has been perfected to ensure the best possible water run-off, the materials used for tiles is lighter and more durable than ever, and the introduction of fascia and soffits means the roof over your head allows for proper ventilation, decreasing the likelihood of trapped water and mould. Considering this, insurers may provide a cheaper quote to a house with a roof that is less than 20 years old.

6. Primary use of your home.

If you are planning to rent out your basement, allow people to book your spare room on Airbnb, or even use your house as a home office, you must inform your insurance company to ensure you’re covered for these usages. Any peripheral use of your home (aside from normal living), will increase your premium as it increases your coverage.

7. Your claims history.

Past claims are the best predictor of your future insurance needs. If you have a history of making insurance claims, insurance companies will consider you high risk and will set a higher premium. A no claims history, especially if you have had home insurance before, will reassure insurers that you are deserving of a lower rate.

8. Proximity to fire hydrant and fire station.

If a fire does break out in your home, insurers want reassurance that the local fire service will be able to put it out quickly. If you live in a city, your proximity to a fire station is unlikely to make a dramatic difference to your insurance, as all properties should be accessible. However, if you live in a remote area, especially if there is no water source nearby, a fire could do a lot of damage before help arrives, and as a result, you will face a higher insurance premium.

9. Alarm system.

An alarm system, especially one that is monitored by a home security service, will act as a deterrent to thieves and will help lower your home insurance costs. The same is true if you install a monitored security system.

10. Value of your home (replacement cost to rebuild)

The largest home insurance claims come from catastrophic disasters, whereby the whole property has to be rebuilt from scratch.

For this reason, the square footage of your home, and the construction materials used to build it, are hugely influential when it comes to determining your insurance. The larger and more valuable your home, the more it will cost to rebuild, and the higher your premium will be.