Home insurance is one of those things many Canadians have but may not fully understand. It provides valuable financial protection for homeowners, yet myths and misconceptions can often lead to misunderstandings or even costly mistakes.
Let’s dive into some of the most common myths about home insurance in Canada—and the reality behind them!
Myth #1: “Home Insurance Covers All Types of Natural Disasters”
Reality: Not All Natural Disasters Are Covered
While many policies cover common natural events like fires, hail, and wind damage, others may not be included. Flooding, especially from rivers or heavy rainfall, often requires an additional policy called overland flood insurance. Earthquake insurance is another optional coverage not included in standard policies. Homeowners in areas prone to these risks should explore adding specific coverage for these events.
Myth #2: “My Home’s Market Value Determines My Insurance Coverage”
Reality: Insurance Is Based on Rebuilding Cost, Not Market Value
home insurance in Canada policy covers the cost to rebuild your home—not what it would sell for in the market. Market value includes land value and other factors unrelated to construction. Insuring your home based on its rebuilding cost ensures you’re adequately covered for repairs or rebuilding after a loss, regardless of the housing market.
Myth #3: “Home Insurance Will Cover Any Damage My Property Sustains”
Reality: Some Types of Damage Aren’t Covered
Insurance doesn’t cover every possible mishap. Typical exclusions include general wear and tear, damage from pests like rodents or insects, and issues due to poor maintenance. Policies are designed to cover sudden and accidental damage—not the results of neglect. To stay covered, keep up with home maintenance and review any exclusions in your policy.
Myth #4: “If I Work from Home, My Insurance Covers My Business Equipment”
Reality: Personal Home Insurance Has Limited Business Coverage
Standard home insurance generally covers personal property, not business-related equipment. If you have expensive work equipment or see clients at home, consider adding a home-based business endorsement or a separate business insurance policy. This additional coverage protects both equipment and liability associated with running a business from home.
Myth #5: “My Personal Belongings Are Covered No Matter Where I Am”
Reality: Some Personal Belongings Are Covered Outside the Home, But Limits Apply
Home insurance may extend limited coverage to personal belongings outside your home, like your laptop or suitcase while traveling. However, home insurance in Canada often capped at a specific limit. High-value items like jewelry or electronics may require additional coverage, known as a rider, to be fully protected.
Myth #6: “All Water Damage Is Covered by My Insurance”
Reality: Only Certain Types of Water Damage Are Covered
Water damage from a burst pipe is typically covered, but damage from a slow, undetected leak usually is not. Sewer backups and overland flooding (water entering from outside due to heavy rains) often require separate add-ons. Check your policy to understand what types of water damage are included and consider extra coverage if your property is at risk.
Myth #7: “I Don’t Need Home Insurance If My Mortgage Is Paid Off”
Reality: Insurance Is Still Essential, Even Without a Mortgage
Once you pay off your mortgage, home insurance isn’t legally required, but it’s still a crucial safety net. Without insurance, any major repair or rebuild costs fall entirely on you. Insurance protects the significant financial investment in your property, ensuring you won’t face huge expenses if an accident, disaster, or theft occurs.
Myth #8: “Claims Make My Premiums Skyrocket”
Reality: One Claim May Not Drastically Raise Your Premiums, But Multiple Claims Can
Insurance premiums may go up after a claim, but it’s not always drastic. Insurers look at factors like the claim’s size and cause, as well as your claim history. Frequent or high-cost claims are more likely to lead to significant premium increases, so it’s wise to evaluate whether it’s worth filing a small claim or handling minor repairs out of pocket.
Myth #9: “I Only Need Home Insurance to Protect the Building”
Reality: Home Insurance Also Protects Your Belongings and Provides Liability Coverage
Home insurance doesn’t just protect the structure of your house; it also covers personal belongings, temporary living expenses, and personal liability if someone is injured on your property. This broader coverage is valuable, especially in unexpected situations like theft, fire, or injury lawsuits.
Myth #10: “Older Homes Are Uninsurable or Extremely Expensive to Insure”
Reality: While Older Homes May Have Higher Premiums, They’re Insurable
Older homes may have higher premiums due to increased risk factors, such as outdated wiring or plumbing. However, insurers often offer policies that work for older homes. Getting an inspection and making necessary updates can help lower premiums and improve insurability, making coverage accessible for heritage and older properties.
Conclusion
Understanding the realities of home insurance can help Canadian homeowners make informed decisions and avoid costly mistakes. By debunking these myths, you’ll be better prepared to select the right coverage for your home and assets. Review your policy regularly, ask your insurance provider questions, and remember that tailored insurance provides the best protection for your unique home and lifestyle.
