In Canada, home insurance is not mandatory (so long as your home has been fully paid for!). Technically, no one is keeping track of whether your owned home is insured, unlike auto insurance. From the first days that home insurance was offered as a product until now, it has been an optional purchase and is not regulated by any official body. Because of this, many homeowners may be tempted to skip out on it. Why spend the money when it isn’t mandatory?
Well, anything can happen. Home insurance, by design, is less about other people and hurting pedestrians than it is about protecting your contents and the physical dwelling. That’s not to say that personal liability isn’t important as well – because it is, and your home insurance covers that too. Your home insurance will also cover you if you cause injury to someone anywhere in the world.
It’s also worth noting that a lender will require proof of home insurance before they agree to issue you a mortgage. As a lender, you’re likely to want to protect your investment, which means you will want some form of fallback should a fire break out or if there is a break-in attempt. While the government isn’t regulating your home insurance, you may not be able to find a lender who will agree to issue you a mortgage without proof of coverage first.
The number one reason: liability.
If you aren’t particularly insurance-savvy, you might not immediately realize that home insurance includes personal liability coverage. Should a visitor to your property injure themselves via a slip and fall, structural collapse, or for another reason that is due to your own actions, they may sue you. A lawsuit can range into the hundreds of thousands of dollars, which can leave you out to dry without proper insurance. Did you also know that home insurance protects you, not just while on your own physical property, but anywhere else in the world? If you are held responsible for someone else’s injury while you were on vacation in Greece, your home insurance still protects you.
You may even wish to extend your personal liability insurance if you own any high-risk features, like a wood-burning fireplace or a pool. These items may increase your insurance premiums due to the risk factor they pose and the consequential lawsuits that could come from an injury or damages due to higher-risk items that could lead to enormous costs.
Damage to your home and personal property.
Home insurance is critical if you don’t have the finances to fix damages or don’t wish to foot the bill for repairs or restoration out-of-pocket. It is designed to protect you from unexpected events causing damage, such as fire and theft. You may even be able to purchase additional coverage for events like floods and earthquakes, depending on the provider.
Maintenance issues causing damages, like wear and tear, infestation, mould, etc. are not covered by home insurance, however. Your home insurance provider expects you to be a good homeowner, i.e taking care of your home as well as possible. Discuss with your home insurance broker if you are unsure about what is covered in your policy.
Making home insurance mandatory
There has been some debate about making home insurance regulated by the government, just like auto insurance. Yet there are two sides to the issue: while mandated home insurance could be helpful in managing rising premiums due to extreme weather patterns, some people may be struggling to make rent and are unable to afford insurance as is. In addition, it can be difficult to purchase affordable insurance without an expert overseeing your circumstances if you live in a “high-risk” area, especially because premiums are largely determined by the area that you live.
As such, for now, home insurance is not mandatory and not regulated by the government, making it a point of hesitance for many homeowners. If there’s a way to save some money – why not skip over? Home insurance is a small cost next to the amount it could take for you to pay directly out-of-pocket in the event of a loss, such as a structural collapse due to a falling tree or even a lawsuit.
Home insurance can be a complicated topic if we’re being frank. Policies can vary depending on the coverage options you choose, the provider you are with, and plainly just the fine-print of your own policy. Current events are impacting home insurance more now than they ever have. Climate change is anticipated to cause a spike in your home insurance premiums if it hasn’t already. Certain areas are seeing larger volumes of weather events, flooding, fires, etc. – and these may be bound to increase in the following years to come.