What Does Home Insurance Cover?
What does home insurance typically cover?
Home insurance typically covers sudden, accidental damage to your home, its structures, and your personal property, along with additional living expenses incurred if your home is temporarily unusable following an insured loss. It also covers your legal liability for injury or property damage, even if it takes place outside of your property.
Home insurance coverage only applies when the damage to or loss of your property is caused by a covered peril.
The five parts of your home insurance policy
All home insurance policies in Canada break down into five basic parts:
- Dwelling coverage: Covers the main structure of your home and any attached structures, home systems, or built-in furniture and appliances.
- Other structures coverage: Covers detached structures like fences, sheds, or detached garages.
- Contents coverage: Covers your personal belongings like furniture, clothing, electronics, hobby equipment, and more.
- Loss of use coverage: Covers the cost of additional living expenses such as hotel stays or food delivery if all or part of your house is uninhabitable following a covered loss.
- Liability coverage: Covers medical bills, repairs, and legal costs if you’re responsible for injury or property damage to someone else on or off your property.
Depending on your insurance provider’s offerings, you may be able to add or extend your home insurance coverage through endorsements, riders, or floaters. Common additional coverage options include:
- Extra coverage for valuables: Extends your personal property coverage limits to cover the full value of high-cost items like jewellery, art, collectibles, and antiques. You might see this called a “scheduled personal articles endorsement,” a “valuable property floater,” or something similar.
- Sewer backup endorsement: Covers water damage due to a sewer backup. This is common because sewer backup is a common exclusion from Canadian home insurance policies.
- Earthquake endorsement: Covers damage to your home caused by ground movement. This is common because earthquakes are not always a covered peril under home insurance in Canada.
- Home business endorsement: Covers property damage and liability for a home-based business. Standard home insurance policies have special exclusions for home businesses, so make sure you understand what is and is not covered without an endorsement.
What is a covered loss?
Home insurance only covers losses caused by covered perils. Depending on the type of coverage you have, your policy might have a short list of covered perils or comprehensive coverage for a wide range of potential perils.
There are four basic levels of home insurance coverage in Canada:
- Comprehensive/all-perils coverage: This type of home insurance covers all perils unless they’re specifically listed as exclusions on your policy.
- Broad-form coverage: Some policies extend comprehensive coverage to your actual dwelling, but only cover personal property on a named-perils basis.
- Named perils/basic coverage: This type of home insurance policy covers only a specific list of perils.
- No-frills coverage: Some homeowners can purchase bare-bones coverage that only protects the structure of your home against a limited number of perils, such as fire.
The perils listed below are commonly covered by most home insurance policies in Canada. Check your policy documents to see which perils are covered or excluded on your personal policy.
- Fire (including wildfires)
- Lightning
- Windstorm
- Hail
- Aircraft or vehicle impact
- Explosion
- Smoke
- Riot
- Falling objects
- Theft
- Vandalism
- Water damage caused by the sudden and accidental escape of water from indoor plumbing
What home insurance doesn’t cover
Home insurance doesn’t cover everything. While every policy is different, most homeowners insurance policies in Canada won’t cover damage caused by:
- Flooding
- Earthquakes, landslides, and other forms of earth movement
- Intentional or fraudulent damage
- Wear and tear
- Neglect
- War and terrorism
- Criminal actions
- Insects, rodents, and other vermin
- Freezing
- The movement of snow or ice
- Anything covered by your car insurance policy
Always read your policy carefully before you purchase property insurance and before you make a claim to determine what is and isn’t covered.
How much does home insurance cover?
Your home insurance coverage is subject to policy limits, deductibles, and coverage levels, all of which impact how much of your costs the policy will actually cover.
Policy limits
Each portion of your home insurance policy is subject to a coverage limit—that is, a cap on the amount the policy will pay out after a covered loss.
The primary coverage limit on your home insurance policy is the dwelling coverage limit. Ideally, your dwelling coverage limit should be high enough to cover 100% of the cost to rebuild your home, and mortgage lenders may require a limit of at least 80% of your rebuild cost.
Other coverage limits may be based on a percentage of your dwelling coverage limit. For instance, contents coverage is often 50–70% of the dwelling coverage limit, while coverage for other structures like fences and sheds is typically 10% of the dwelling coverage limit. For liability coverage, limits usually start around $1 million but can go much higher depending on your assets.
Deductibles
Your home insurance deductible is the amount you agree to pay when you make a home insurance claim. It’s a way to share risk between the policyholder and the insurer, and it helps to prevent homeowners filing lots of small claims for damage they could pay to repair themselves.
Most home insurance policies have a single standard deductible, usually between $500 and $2,000, that applies to the majority of claims; however, you might have separate deductibles for certain perils such as hail, so read your policy documents carefully.
Coverage levels
Insurance companies in Canada use two loss settlement models to determine coverage for home insurance: replacement cost and actual cash value (ACV).
- Replacement cost pays the full cost to repair or replace your property with property or materials of like kind and quality.
- Actual cash value pays the actual cash value of your property at the time of loss—that is, the purchase price minus depreciation.
Replacement cost policies are more expensive, but may make a huge difference in your costs following a major loss such as a home fire. ACV policies, on the other hand, come with lower home insurance premiums and less coverage in the event of theft, fire damage, or other covered losses.
Look for language like “loss settlement,” “replacement cost,” “depreciation,” and “cash value” in your homeowners’ policy to understand what level of coverage you have. Keep in mind that your policy might combine multiple coverage levels; for instance, you might have replacement cost coverage on your dwelling but only ACV coverage for your personal belongings.
How to tell if your home insurance coverage is enough
Not sure how much home insurance coverage you need or if your current policy is enough? Speak with an advisor or look for these potential red flags:
- You don’t know what your policy covers: Even if your coverage happens to be robust and comprehensive, it may not help you when you need it most if you don’t understand what is and isn’t covered. Read through your policy and bring any questions to a licensed advisor so you’re ready to make a claim (or change your coverage selections, if necessary).
- You recently had a claim denied: There’s no bigger sign that your coverage may be wrong than an insurance company denying your claim. Check the details of the denial and bring it to a licensed advisor to understand whether you need additional coverage—or whether you tried to file a claim for something that home insurance never covers.
- You’ve done everything you can to cut insurance costs: Saving money on home insurance is an important goal for many Canadians, but it can also leave you underinsured if you’re not an expert. Sitting down with a licensed advisor can help you make smart, budget-friendly cuts to your policy without leaving you exposed to unnecessary risk.
When you compare home insurance quotes with PolicyMe, we’ll schedule a phone call with a licensed advisor to make sure you’re getting the right coverage at the right price. Your advisor will help you review your specific needs and explore add-ons, discounts, and options that can help you balance savings with peace of mind.
FAQ: What does home insurance cover?
This article is for general information only and is not insurance or legal advice. Examples and any sample quotes or rate ranges are illustrative and do not constitute an offer or guarantee of coverage, price, or eligibility. Actual coverage, discounts, and premiums depend on your individual circumstances and the insurer provider; if there is any discrepancy, your policy and insurer documentation govern. For advice about your situation, speak with one of our licensed insurance professionals.