Home Insurance Canada — First-Time Buyer Guide

Your lender requires home insurance before they release your mortgage. Here's what it covers, what it costs, and how to get the best policy for your first home.

Why Home Insurance Is Required

Your mortgage lender requires proof of home insurance before releasing funds at closing. The lender's interest in the property is protected by the insurance — if the home burns down, the insurance payout pays off the mortgage. As a homeowner, you also need insurance to protect your personal financial investment. Without insurance, a single catastrophic event could leave you with a destroyed home and a full mortgage balance remaining.

What Home Insurance Covers

A standard home insurance policy (also called a homeowner's policy or all-risk policy) typically includes:

• Dwelling coverage: the cost to rebuild your home if it is damaged or destroyed by a covered peril (fire, wind, lightning, smoke, vandalism, some water damage)
• Contents coverage: your personal belongings inside the home — furniture, electronics, clothing, appliances
• Liability coverage: protects you if someone is injured on your property and sues you
• Additional living expenses (ALE): covers hotel and meal costs if you must temporarily live elsewhere while your home is being repaired

What Is Typically NOT Covered

• Overland flooding (requires separate overland water endorsement)
• Sewer backup (available as an add-on in most policies)
• Earthquake (separate endorsement in earthquake-prone areas)
• Normal wear and tear or maintenance issues
• Home businesses or business equipment above a low limit
• High-value items (jewellery, art, collectibles) above standard limits without a floater

Average Home Insurance Costs in Canada

Property Type	Typical Annual Premium
Detached home (average)	$1,500–$2,500/year
Condo unit (standard)	$300–$800/year
Townhouse/semi-detached	$1,200–$2,000/year
Older home (pre-1980)	$2,000–$4,000+/year

Premiums vary based on: location and crime rates, home age and construction type, proximity to fire hydrant and fire hall, claims history, deductible chosen, and coverage limits selected.

Replacement Cost vs. Actual Cash Value

Always choose replacement cost coverage for your dwelling — not actual cash value. Replacement cost coverage pays what it costs to rebuild your home with current materials and labour costs. Actual cash value coverage pays replacement cost minus depreciation, meaning a 20-year-old roof is insured for a fraction of its replacement cost. For contents, replacement cost is also preferable — your 5-year-old laptop insured at actual cash value might only pay $200 when replacing it costs $1,500.

Condo Insurance vs. House Insurance

Condo owners need a different type of policy than freehold homeowners. The condo corporation carries insurance on the building structure and common elements. Your condo policy (called unit owner's insurance) covers: your unit's improvements and betterments, your personal contents, your personal liability, and the deductible on the condo corporation's master policy if the damage originates from your unit. This last point is critical — condo corporation deductibles can be $25,000–$100,000 or more. Your condo policy should cover at least the corporation's deductible amount.

How to Save on Home Insurance

• Bundle with auto insurance — typically 10%–15% discount
• Increase your deductible from $500 to $1,000 or $2,500 — reduces premium by 10%–25%
• Install monitored alarm system — discount of 5%–15%
• Newer construction typically costs less to insure than older homes
• Claims-free discount — stay claims-free for 3+ years for the best rates
• Shop and compare annually — loyalty rarely pays with insurance