Home Insurance Questions for First-time Buyers

March 10, 2025

Home insurance is part of the process of buying a home for the first time. Where should you start?

Here are answers to your top questions about home insurance as a first-time buyer.

Get a Home Insurance Quote

What does home insurance cover?

Basic home insurance policies typically cover fire, vandalism, theft, hail, wildfire, windstorm, lightning, smoke, explosion, and third-party liability (such as injuries to a guest at your home or damage to their property).

Do I need extra coverage?

Before purchasing your home insurance policy, it’s important to understand what’s included and what additional coverage you may need.

For example, you may need extra insurance for your home-based business, or you may want to add sewer backup, overland flood insurance, or earthquake coverage if you live in a higher-risk area.

Did you know that damage caused by sewer backup and overland flooding is not typically covered by a standard home insurance policy?

Is home insurance mandatory in Canada?

No. Home insurance is not legally required in Canada, but if you have a mortgage, your lender will almost always require you to carry an active policy.

What is a deductible?

Your deductible is the amount you pay out of pocket when you make a home insurance claim. Your insurer pays the remainder, up to your policy limits.

Choosing a higher deductible can lower your premium, but it’s important to ensure the deductible is affordable if you need to file a claim.

As a homeowner, consider your risk tolerance and financial situation carefully. If you selected the minimum coverage at the lowest price, would you have enough funds to replace everything you own after a major loss?

Should I get the cheapest home insurance?

Price shouldn’t be the only factor when choosing home insurance. If you choose the lowest-cost policy with minimal coverage, you may be underinsured in the event of a fire, flood, or severe weather event.

Is all my personal property covered?

Your home insurance policy covers the structure of your home and includes personal property coverage, but limits apply to certain items.

For high-value items such as jewelry, electronics, or collectibles, you may need a personal articles floater to ensure they are insured for their full value.

What is liability insurance in my home insurance policy?

Home insurance includes personal liability protection if someone is injured on your property or if you accidentally cause damage to someone else’s property.

For example, if a visitor slips on an icy driveway and is injured, your liability coverage can help pay for medical expenses and legal costs if a lawsuit is filed. This coverage is commonly referred to as third-party liability insurance and is included in standard home insurance policies.

How is my home insurance rate determined?

The cost of your home insurance is based on how risky your home is to insure. Factors typically include:

Your location, the age and construction of your home, replacement cost, heating system, electrical wiring, and proximity to fire hydrants and fire services.

How can I reduce my home insurance rate?

Ask your home insurance provider about discounts you may qualify for.

Common discounts include bundling home and auto insurance, installing security systems, remaining claims-free, adding flood-prevention devices, or owning your home outright without a mortgage.

What’s the difference between market value and replacement cost?

Market value is what your home could sell for today, which can fluctuate significantly.

Replacement cost is the amount it would cost to rebuild your home at current prices if it were completely destroyed. This typically includes materials, labour, permits, fees, and taxes.

In most cases, insuring your home based on replacement cost — not market value — is the safer and more reliable option.