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• How does home insurance work in Canada?
• Different types of home insurance coverage
• What home insurance typically covers
• Covered home insurance perils
• Optional home insurance coverage and endorsements
• How to get the cheapest home insurance quotes
• How much does home insurance cost?
• Home insurance rates in Canada (2021-2024)
• Why home insurance premium in Canada keeps rising
• Tips on getting the cheapest home insurance
• Frequently asked questions about home insurance in Canada
• 10 factors that can affect your home insurance premium

Different types of home insurance coverage

There are four types of home insurance policies. Their nomenclature may differ, but they typically boil down to the following:

Basic or named perils home insurance: 

Basic or named perils home insurance protects your dwelling, belongings and outbuildings only against the perils listed on the policy. So, if a peril isn’t listed, then it isn’t covered.

This is the cheapest home insurance coverage you can purchase, but it’s incredibly limited, as there tend to be far more exclusions than one may realize. Any peril that doesn’t line up with what’s listed on the policy is unlikely to get covered. It falls on the policyholder to prove that the peril is indeed covered.

As a result, most insurers will not recommend this policy – unless you’re planning to leave your home unoccupied for a long time (30 days or more) either for extensive renovations or a similar purpose.

Broad form home insurance:

Broad form home insurance protects your dwelling and potentially outbuildings against all known perils, aside from those listed as exceptions. Your belongings, however, are protected only against the perils listed in the policy, similarly to the named perils coverage. In other words, your dwelling is fully covered, while your belongings are not.

Because of this, broad form coverage is slightly more expensive than the named perils coverage. We recommend purchasing this one if you don’t own a lot of expensive or hard-to-replace items, as you may have to pay for them with your own money in the event of damage. 

Comprehensive home insurance:

Comprehensive home insurance protects your home, outbuildings and dwelling against all known perils, aside from those listed as exceptions. It’s the best and most expensive coverage you can get. We highly recommend it, if you can afford it.

No-frills home insurance:

No-frills home insurance coverage is even more stripped-down than the basic coverage. It protects your home primarily against fire and is only recommended if your home is too fragile and/or damaged to be covered by regular home insurance – for instance, if it has brittle or leaky pipes or poor structural integrity (i.e., it’s literally falling apart).

Most homeowners will only purchase this coverage so they can procure a mortgage. It should be a temporary measure, however, and you shouldn’t live in a home that isn’t coverable by regular insurance.

What home insurance typically covers

Regardless of your chosen coverage, your home insurance should include the following protections:

• Dwelling: This is the actual structure in which you sleep. Your policy should protect it against covered perils like fire, theft and water damage. However, the amount of coverage will differ from policy to policy.
• Personal belongings: Every home insurance policy should also cover personal property or belongings, such as electronics, furniture, clothes and everything in between. However, insurance can protect them against covered perils only, such as fire, water damage and theft. Maintenance or replacement due to wear and tear are not included.
• Outbuildings: Your outbuildings, such as a detached garage, guest house and shed, should also be protected. That said, this may not be the case with every policy, so check this with your provider.
• Additional living expenses: If your home was deemed unfit to live in or you were denied access into your home by the police or civil authority as a direct result of damage by an insured peril (e.g., fire, smoke, water damage), your home policy offers coverage in the form of ‘additional living expenses.’ Your home insurance policy will reimburse you for the additional living expenses while living away from home.

Liability coverage

Your home can be liability and lead to a lawsuit against you. The same applies you and your loved ones.

Luckily, your home insurance can provide you with the necessary funds. Typical liability coverage encompasses the following:

• Personal liability: Should someone visiting your property get accidentally injured on it and decide to sue you, this coverage can provide $100,000 to $5,000,000 in legal fees, depending on how much you’re willing to pay in premiums.
• Voluntary medical payments: If you unintentionally injure someone visiting your property, this will pay for their medical expenses for up to a year – from the date of the injury (if you choose to cover them). Your coverage can be as low as $1,000 or as high as $10,000.
• Voluntary property damage: If you or someone in your household causes unintentional loss or damage to someone else’s property (such as your neighbour’s), then this will cover the costs. The coverage can range from $500 to $6,000.

Covered home insurance perils

Commonly covered perils include:

• Fire: No matter what causes the fire, your insurance company will cover the costs of replacing, rebuilding or repairing your property and recovering your belongings.
• Lightning: Should lightning strike your property, it could damage the wiring in your walls as well as break your appliances and electronics. This will pay for repairing or replacing whatever ends up damaged.
• Theft and vandalism: If your home happens to get robbed, this will pay for the replacement of the stolen items. The same applies if the home gets vandalized.
• Water damage: This pays for the damage to your property and belongings caused by water leakage from indoor plumbing, heating, air conditioning, sprinklers and similar appliances inside or outside your house. The tricky part is knowing what’s excluded. Most coverages usually exclude sewer back-up and overland water, so be sure to confirm what is and isn’t covered with your insurer.
• Severe weather: Should wind or hail damage your property or belongings in any way, this will pay for them. This includes damage from flying debris as well as falling trees and branches (if caused specifically by hail or wind).
• Falling objects: This protects your property and belongings from falling objects, including space debris and aircraft. There are exceptions, however, such as objects moved by landslides or snowslides. Confirm with your provider what is and isn’t covered.

Optional home insurance coverage and endorsements

Coverage for your home can only go so far. Even after you’ve discussed the plans with your provider and opt for the most comprehensive coverage, you may still want or need more protection.

‘Endorsements’ or ‘amendments’ can be added on to an existing policy to widen the protection you may already have. One of the most common optional home insurance coverages is flood protection. Flooding is a reality in Canada with melting snow, and many lakes and rivers affecting residential neighbourhoods. Home insurance providers often look at flooding in a variety of ways.

To get the maximum coverage you’ll need to add:

• Overland water: This is coverage that protects your home against water that enters the home through foundations of basement flooding. Damage caused by flooding rivers, lakes or other bodies of water (if there has been heavy rain or snow melting) is also protected.
• Sewer back-up: This covers you if a main sewer artery backs up into your home.
• Earthquake: This covers damage caused by earthquakes (as well as landslides and mudslides caused by earthquakes). Though rare, earthquakes do happen in Canada, especially in parts of British Columbia.
• Windstorm: If a windstorm damages the structure of your home, breaks your windows, ruins your belongings or covers your home in debris, this will cover you. Note that water damage due to rain or hail may not be included.
• Valuable items: If you possess expensive items like jewelry and collectibles, this will cover you. However, you do need to give your insurer current appraisals for the items, or you won’t get the right coverage.

Each home insurance company has different policies and wording related to coverage. Speak to your provider or broker about your specific needs and which policy is best suited for you. 

Home insurance rates in Canada (2021-2024)

Home insurance rates in Canada are continuing to steadily increase. According to the chart below (which we based on the Applied Rating Index report), home insurance premiums increased 9.9% between Q2 of 2023 and Q2 of 2024.

Alberta, British Columbia, Ontario, Quebec, the Atlantic Provinces as well as Saskatchewan and Manitoba were all impacted by this, with year-over-year increases of 5.8%, 10.7%, 12.5%, 4.9%, 7.9% and 8.3%, respectively. Compared to Q1 of 2024, the year-over-year percentages for those provinces are lower (or negative in some cases), with premium changes of 0.0%, -5.2%, 2.5%, 1.0%, 0.2% and 1.2%, respectively.

That said, the overall trajectory will remain upward, as home insurance isn’t expected to decrease. Read on to find out why. 

Tips on getting the cheapest home insurance

The cost of home insurance will vary depending on 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. You can try the following:

• Use comparison sites. Use sites like InsuranceHotline.com to compare rates from the top providers in your area.
• Bundle your home insurance. Bundle your policy with other insurance products, such as auto. Your provider will reward you for your loyalty and the reduction in administrative fees.
• Remain claims-free. The more home insurance claims you file, the riskier you appear in the eyes of insurers. Keep your claims down, and your premiums will be down as well.
• Install a security system. Maintaining good security will help you avoid theft and vandalism, reducing the risk of insuring your home. Many insurance providers offer discounts for homes with alarm systems and similar security measures.
• Maintain your home. A well-maintained home will prevent breakdowns, 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. The downside is that you have to pay more out of pocket should something happen to your property.
• Reduce your coverage. Don’t purchase coverage for risks and perils that are highly unlikely to impact your home. For instance, if you live in an area where earthquakes are uncommon or barely make an impact (which is the case for most of Canada), then purchasing earthquake coverage is a waste of money.
• Ask for discounts. Don’t be shy and ask your insurer about discounts, especially if you’re about to renew your policy. The results may surprise you. For instance, if you’ve recently installed an advanced fire detection system or protected your home in some other way, you may secure a lower premium.
• Avoid unnecessary risks. Certain things, such as owning a dangerous pet or having a trampoline, can increase the risk of injury or damage in your home, and in turn, increase your premiums. If possible, avoid purchasing such things in the first place. In addition, be sure to read the ‘Conditions’ section of your policy to find out about exclusions and high-risk designations that could lead to higher premiums. You don’t want any surprises when filing a claim. 

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, severe weather or anything else that might potentially lead to a claim, you can expect a higher home insurance premium.

Your best bet is to either buy a home in a less risky area, if you’re still shopping for one, or to take the necessary steps to reduce some of the risks, such as installing fire, water and/or burglar alarms, sealing your foundation and basement walls and reinforcing your windows.

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. Here are some examples:

• Forced air heating systems use a furnace to generate heat and distribute it through airducts and vents. Furnaces are relatively affordable and safe, which is why they are the most common source of heat in Canadian homes.
• Radiators are also considered safe by insurers, as they rely on hot water rather than combustible substances to distribute the heat throughout your home. However, they are not very common in Canadian homes due to high installation costs.
• 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.
• Radiators and furnaces are some of the safest heat sources available. That said, if you own a typical home in Canada, then you likely also own a furnace.

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. 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.