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No-frills home insurance in Canada
No-frills home insurance, as the name suggests, offers bare bones coverage for your home. It protects your home against fire damage, and occasionally water damage and theft. Insurance for personal belongings, additional living expenses, and personal liability are excluded.
The Insurance Bureau of Canada describes no-frills property insurance as insurance for properties or homes that don’t meet normal insurance standards. It’s also sometimes used as an interim solution during renovations or repairs (insurance providers might refer to it as ‘extended fire damage coverage’ in that scenario). While it provides a cut-rate option for coverage, cheap no-frills home insurance may not be the best choice for everyone.
Let’s look at what this type of home insurance covers and what it does not, how it’s different from other types of home insurance policies, and whether it’s a good fit for your needs.
Understanding no-frills home insurance coverage
Home insurance is not mandatory in Canada, but most mortgage lenders make it a requirement for borrowers.
At one end of the spectrum, there are home insurance policies that protect against all eligible insurable risks, such as fire, theft, or accidental water damage. On the other hand, no-frills home insurance is the most limited form of insurance you can opt for. Not all insurers offer it, and those that do may only cover fire risks. It might be possible to add additional endorsements for water damage, theft, or vandalism to a no-frills policy.
As a result, the premium for no-frills home insurance is cheaper than that of comprehensive insurance, as well as other types of home insurance (more on that later). But it also means that you won’t be covered for any additional risks or losses.
Insurance brokers consider no-frills property or home insurance to be a niche product that’s suitable for one scenario: when a property or home has major structural defects and does not qualify for standard home insurance coverage. They may also recommend no-frills insurance as an add-on to a comprehensive or broad insurance policy if you’re renovating your home.
Less is not usually more when it comes to home insurance. Most insurance professionals do not recommend no-frills insurance for the average homeowner. In the event of an uninsured loss, you will be left to fork out thousands of dollars out-of-pocket for repairs and replacement items.
Any savings obtained from no-frills coverage are likely not worth the risk.
No-frills vs. other types of property insurance
The three main categories of home insurance are comprehensive, basic, and broad insurance. No-frills home insurance is a specialty product.
Comprehensive or all-perils home insurance protects your home against all risks, including fire, theft, vandalism, and water damage. If a fire breaks out, for example, the insurer will cover the costs of repairing the structure, losses caused to your personal belongings or furniture, and the cost of temporary accommodations and living expenses if your home is uninhabitable.
Comprehensive policies also cover bodily damage and medical expenses. As it covers homeowners against all risks, it is the most expensive type of home insurance policy.
Basic or named perils home insurance protects your home against listed perils in your home insurance policy. It’s cheaper than comprehensive insurance as it provides coverage only for perils specified in your policy.
Broad home insurance falls between comprehensive and basic insurance. It offers comprehensive coverage for the home and basic coverage for contents. In case of a fire, your insurer will pay the cost of rebuilding the home. It will also pay to replace your personal belongings, but only if you requested fire protection in your policy. If it’s not listed, you will need to pay to replace your personal belongings.
Lastly, no-frills home insurance provides coverage for the home's structure against fire damage only and is the cheapest home insurance product out there. Here’s a quick look at the differences between these home insurance policies.
How no-frills insurance stacks up against other coverages
| No-frills | Named perils | Broad | Comprehensive | |
|---|---|---|---|---|
| Main dwelling | Included (but usually only against fire damage) | Included (but only against perils you specify) | Included | Included |
| Contents | Not included | Covered (but only against perils you specify | Named perils only | Included |
| Personal liability | Not included | Included | Included | Included |
| Voluntary medical payments | Not included | Included | Included | Included |
| Additional living expenses | Not included | Included | Included | Included |
What no-frills home insurance doesn’t cover
No-frills home insurance in Canada doesn’t cover the following perils.
Water damage
No-frills home insurance policy won't cover water damage caused by accidental events like faulty or burst pipes. However, a standard home insurance policy will.
Vandalism
Most no-frills insurance policies protect the main dwelling against fire exclusively. But if vandalism (broken windows or damage to the building) is a concern, consider speaking to your insurance provider and including coverage for vandalism as an endorsement.
Theft
No-frills home insurance doesn’t cover theft. The only insured peril in a no-frills policy is fire.
Personal liability
No-frills insurance policies do not cover accidental injuries that happen to visitors to your property, nor does it cover your liability if you cause damage to someone else’s property. Both scenarios are covered by standard insurance.
Storm damage
Damage to your house caused by wind, rain, hail, or lightning is not covered by a no-frills insurance policy.
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Is no-frills home insurance right for you?
Cheaper doesn’t always mean the best.
When determining what type of home insurance policy might be the best fit for your coverage requirements, it’s important to consider:
- What's the condition of your home or property? Is it ineligible for standard home insurance? Does it require major renovations or repairs?
- What is the property being used for? Are you thinking about restoring the property and selling it at a higher price? Or will you be moving in after renovations?
- What are the risks involved? What kind of support will you want if your home is damaged (by, for example, vandals, a strong storm, or a flood)?
What is your budget? Have you spoken with an insurance professional (an agent or a broker) about the right level of coverage based on your circumstance? They can show you options of coverage that balance price and coverage.
It’s always a good idea to consult an insurance broker to find out if a no-frills home insurance policy may be the right fit for your coverage requirements.
Greater coverage means higher premiums. However, forgoing home insurance just to save a few hundred dollars is not a risk you should take. In the event of an unforeseen peril, like a burst pipe, you will be left with thousands of dollars in damages – more than any savings that you might come by from a no-frills policy.
Frequently asked questions about no-frills home insurance in Canada
No-frills home insurance caters to properties that fall outside the norm. We address any lingering questions you may have about this niche product.
How do I find affordable no-frills home insurance in Canada?
InsuranceHotline.com doesn’t provide quotes for no-frills home insurance. However, you can apply for a quote for standard home insurance. Rate comparison websites, like ours, offer an easy way to shop for home insurance. We’ll provide an array of home insurance quotes from Canadian insurance companies in the time it takes to get a quote from one insurance company.
Is this type of home insurance offered by most insurers?
No, it’s not offered by all insurance providers. Those that do have it offer protection against fires only. These insurers may offer additional endorsements to include personal liability, theft, and storm coverage. Speak to an insurance broker to compare policies and the possibility of adding endorsements to a no-frills policy for slightly better coverage.
How much does a no-frills home insurance policy cost?
Home insurance premiums are determined according to the location of your home, its proximity to fire hydrants and emergency services, the amount of coverage provided by the policy, and the cost of repairing the home. No-frills home insurance policy may be the cheapest option amongst all other home insurance policies, but it’s not recommended for most homeowners.
If you’re looking to cut costs, speak with your insurance provider about what other options may be available to either reduce coverage or leverage discounts, like bundling home and car insurance. You may be able to save 20% on home insurance by bundling.
What personal liability coverage is included in a no-frills policy?
No-frills home insurance does not include personal liability coverage. Personal liability coverage protects against bodily damage to you or someone else on your property. Let’s say you’re getting some renovations done, and a construction worker falls and injures himself on your property. A no-frills insurance policy will not cover any medical or legal bills, and you will have to pay for them out-of-pocket.
Accidents can and do happen, which is why getting adequate insurance coverage is so important.
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