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Home Insurance – Your Questions Answered

December 14, 2010

Your home is likely the largest purchase you’ll ever make.  Your home is your refuge, a place to put down roots, entertain your friends and raise your family. Buying proper home insurance coverage protects your home and your belongings from loss due to accidents, damage, and theft. You may have questions about home insurance – and you should have the answers before you find yourself in a difficult situation. Here are the answers to some of the most commonly asked questions about home insurance in Canada.

Q:    What is home insurance?

A:    Home insurance is property insurance that protects a private home from loss or damage. It includes the building, and its contents. It also covers any liabilities you may incur as a result of accidents that occur on your property. Home insurance does not cover the plot of land your home sits on – as it will remain, even in the event of disaster or fire.

Q:    What factors influence my home insurance premiums?

A:    Your home insurance premiums will be affected by the cost to rebuild your home, and replace the contents inside. The age of your home may also be a factor, as newer homes tend to be in better condition and are therefore often cheaper to insure. Additionally, your premiums may be affected by the neighbourhood you live in (and the relative safety). You may reduce your premiums if you take measures to protect your home, such as installing a home alarm system to discourage thieves or putting in sprinkler system in case of fire. Insurers may ask about the uses of your home – for example, if you will be operating a business from your home or renting out areas of the house to tenants, this can affect your premiums and/or eligibility for some insurance plans.

Q:    What kinds of home insurance policies are available?

A:    There are four main types of home insurance available in Canada:

Comprehensive: Covers your home and contents for all risks, other than those which are excluded or uninsurable, such as natural disasters or risks for which you can buy additional insurance.

Basic / Named Perils: A less expensive option than comprehensive, basic insurance that only covers the specific perils (disasters) named in the policy.

Broad: A combination between comprehensive and basic coverage. It normally includes comprehensive coverage on the building itself, and named perils insurance on the contents within.

No Frills: An offering for properties that don’t meet normal insurance standards for one reason or another, often due to problems with the physical structure of the home. This is not offered by all insurance companies.

    Q:    Do I need insurance for my cottage or other vacation property?

    A:    You should insure your vacation property just as you would your home. When determining your premium for a vacation property, insurance companies need to know how you use the property, how much time you spend there, whether you rent it out, and the infrastructure and facilities available at that location. You can set up a separate policy for your vacation property or have it added as a secondary location to your regular home owner’s insurance policy. Insurance for your vacation property will usually fall under the ‘Named Perils’ type of policy, since it is too risky for insurance companies to provide comprehensive insurance for a property that you won’t be residing at for part of the year.

    If you have any questions regarding your own personal home insurance policy or the home insurance premiums that you’re paying, be sure to talk to your broker or provider and make sure you understand the details.  You can look for cheap home insurance by getting a quote online from InsuranceHotline.com.