Home Insurance in Canada: What Is Covered, What Is Not, and How to Save

Home insurance isn’t legally required in Canada (unlike auto insurance), but try getting a mortgage without it — every lender in the country demands it. Even if you own outright, going without means you’re personally on the hook for rebuilding costs, theft losses, and liability claims. Canada’s average home insurance premium runs $1,200–$1,800 per year, but that figure varies enormously by province, postal code, home age, and coverage level. Here’s how to understand your policy and pay only for what you actually need.

The three pillars of home insurance coverage

Every Canadian home insurance policy covers three things: dwelling coverage (the physical structure and attached structures like a garage), contents coverage (your belongings — furniture, electronics, clothing, appliances), and liability coverage (if someone is injured on your property or you damage someone else’s property).

Dwelling coverage is based on replacement cost — what it would cost to rebuild your home from scratch at today’s construction prices, not the market value or what you paid. In many Canadian cities, replacement cost is actually lower than market value because land accounts for a large portion of the price. Your insurer will estimate replacement cost based on square footage, construction type, finishes, and local building costs.

Contents coverage is typically set at 70% of your dwelling coverage, but you can adjust it. Take a home inventory (photos, serial numbers, receipts) so you can prove what you owned in a claim. Liability coverage starts at $1,000,000 and you can increase to $2,000,000 or $5,000,000 for a modest premium increase — this is one of the best-value upgrades you can make.

What standard home insurance doesn’t cover

This is where most Canadians get surprised. Standard home insurance policies in Canada typically exclude: overland flooding (water entering from outside due to heavy rain, river overflow, or spring snowmelt), sewer backup, earthquakes, landslides, sinkholes, gradual water damage (slow leaks you should have noticed), mould from maintenance neglect, and damage from pests (termites, rodents, bed bugs).

You can add most of these as endorsements (riders) for an additional premium. Overland flood coverage has become widely available since 2015 and costs $100–$400/year depending on your flood risk zone. Sewer backup coverage is essential if you have a basement (costs $50–$150/year). Earthquake coverage is critical in BC and parts of Quebec and Ottawa — premiums vary from $200 to $1,000+/year based on location and home construction.

Another major exclusion: home-based business equipment and liability. If you run a business from home, your standard policy likely won’t cover business property or client injuries. You’ll need a separate home business endorsement or a standalone commercial policy.

Types of home insurance policies

Comprehensive (all-risk/all-perils) is the broadest: it covers everything except what’s specifically excluded. This is what most lenders require and what most homeowners should have. Broad form gives all-risk coverage on the dwelling but named-perils-only on contents (meaning your stuff is only covered for risks specifically listed in the policy). Basic (named perils) is the cheapest but only covers risks explicitly listed — fire, theft, windstorm, hail, etc.

For most Canadian homeowners, comprehensive is the right choice. The premium difference between comprehensive and basic is usually $200–$400/year, but the coverage difference is enormous. With named perils, if your claim doesn’t match a listed peril exactly, the insurer can deny it.

Condo insurance is different. Your condo corporation’s master policy covers the building structure and common areas. Your personal condo policy covers your unit’s interior improvements, your belongings, your personal liability, and — critically — loss assessment (if the condo board levies a special assessment after a claim that exceeds the master policy). Condo insurance is typically cheaper ($300–$800/year) because you’re not insuring the building.

How to lower your home insurance premiums

1. Bundle with auto. Most insurers offer 5–15% multi-policy discounts. 2. Raise your deductible. Moving from $500 to $1,000 or $2,500 can save 10–25%. Only do this if you can comfortably afford the deductible in a claim. 3. Install protective devices. Monitored alarm systems, water leak sensors, smart smoke detectors, and deadbolt locks can earn discounts of 5–15%.

4. Claims-free discount. Many insurers reward 3–5+ claims-free years with 5–10% off. Avoid making small claims that you could absorb out of pocket — the premium increase from a claim often exceeds the payout for claims under $3,000. 5. Update wiring, plumbing, and roof. Homes with knob-and-tube wiring, galvanized steel plumbing, or roofs over 20 years old face higher premiums or may be declined entirely.

6. Shop at renewal. Like auto insurance, loyalty doesn’t always pay. Get 2–3 competing quotes each renewal. 7. Pay annually. Monthly billing typically adds 3–5% in fees. 8. Ask about group rates. Some employers, alumni associations, and professional groups have negotiated home insurance discounts.

CMHC mortgage insurance vs home insurance

These are completely different products. CMHC mortgage insurance (also called mortgage default insurance) protects the lender if you default on your mortgage. It’s required if your down payment is less than 20% of the purchase price. You pay the premium (2.8–4% of the mortgage amount), but the lender is the beneficiary — you get nothing if you default.

Home insurance protects you — your property, your belongings, your liability. It pays you (or your contractor) to repair or rebuild after a covered loss. Every mortgage lender requires home insurance as a condition of the loan, but it’s separate from CMHC insurance.

Don’t confuse either with mortgage life insurance (a declining term life policy that pays off your mortgage if you die, sold by banks). Most financial advisors recommend buying your own term life insurance instead — it’s portable, the benefit doesn’t decline as your mortgage shrinks, and your family can use the payout however they choose.

The bottom line

Home insurance is your financial firewall against the catastrophic cost of rebuilding, replacing everything you own, or a liability lawsuit. Get comprehensive coverage, add flood and sewer backup endorsements, bump liability to $2M, and shop quotes at every renewal. The premium feels painful until you need it — then it’s the best money you ever spent.

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