10 Common Home Insurance Myths Debunked

Myth 1: You Don’t Need Home Insurance

Need is a strong word. In Canada, home insurance is not mandatory, so in one sense, you don’t technically need home insurance.

For most of our readers, however, that’s not the point. Home insurance is there for when something disastrous happens. Imagine a worst-case scenario: Your house burns to the ground. Do you have hundreds of thousands of dollars to build a new home – hundreds of thousands of dollars that are not earmarked for retirement, education, or other essentials? If not, home insurance is something you should strongly consider.

Many lenders require you to purchase home insurance as a condition for getting a mortgage; if that’s the case for you, then you do literally need home insurance to purchase your home. 

Myth 2: Home Insurance Only Protects Your Property And Belongings

Home insurance protects your property, your belongings, and even some of your family members’ belongings – but it does more than that. Your home insurance policy will also provide you with liability insurance, giving you protection if you or a family member ever damages another person’s property or injures another person by accident. 

Myth 3: Home Insurance Covers All Your Property

There are limits on what your home insurance will cover; your vehicle is one example of a piece of property that isn’t covered by home insurance. Collectibles and jewellery will also commonly have coverage limits, though you may be able to increase those limits with special riders. Equipment or tools related to your business are excluded. Coverage in some cases may be added depending on the business.

Myth 4: Premiums Are Based On Your Home’s Selling Price

Premiums are based on a number of different factors, including the value (not the selling price) of your home, your proximity to fire stations, the age of your home, your claiming history, your deductible, and much more. Talk to your insurance broker to learn more about the factors that affect your insurance premiums! 

Myth 5: Renovations Won’t Affect Your Coverage

Renovations impact the value of your home, and the value of your home impacts the amount of insurance that you should have. After a renovation, if you have not updated your insurance to reflect the new value of your home, the renovations may not be covered. 

Insurance companies require you to alert them if there are any material changes; these are any changes that could substantially alter the risk profile of your insurance policy. Renovations are typically considered material changes, so you should always let your insurance broker know before (and after) you renovate!

Myth 6: Your Policy Covers The Belongings Of Everyone In Your Home

Typically, home insurance will cover you and your family members. This includes:

• Your spouse
• Your dependents under 21
• Your relatives who are living in your home

This means your home insurance policy may not cover any roommates who are not family members; if you are renting your home to another person or even having a friend stay with you, you should alert your insurance broker. 

Myth 7: Your Home Is Always Protected While On Vacation

We don’t want you to stress while you’re on vacation, so you should know that most home insurance policies require someone to do a walkthrough of your home while you’re away – usually every 48 hours.

Some policies may also require you to turn your water off in the winter; if your home is empty and your furnace dies, your pipes can freeze, causing serious (but avoidable) damage. 

Myth 8: Home Insurance Doesn’t Cover Natural Disasters

Some natural disasters, like wildfires or tornadoes, are typically covered under comprehensive home insurance policies. 

You may need to purchase additional coverage to protect yourself from other natural disasters – but that coverage is available for purchase from most home insurers. In other words, you can purchase overland flooding insurance (important for many homes in Winnipeg) or earthquake insurance (far less important). 

Myth 9: Older Or Less Expensive Homes Have Cheaper Insurance

These are two myths rolled into one, so let’s cover them separately:

Older homes actually typically see higher insurance rates than newer homes of equal value in the same area. When a home is older, it’s more likely to have structural problems, outdated electrical, and older appliances – all things that put older homes at a greater risk of damage.

Less expensive homes are typically less expensive to insure when compared to homes of similar construction in similar areas because the insurance company is taking on less risk; if a $250,000 home burns to the ground, the insurer is out a maximum of $250,000, while if a $500,000 home burns down, they’re out twice as much.

You’ll notice there were a lot of caveats; that’s because less valuable homes are often older (which, as we’ve discussed, means higher premiums) and may be located in less desirable neighbourhoods, where vandalism, theft, and even fire might be higher risks. These elevated risks can increase the price of your insurance.  

Myth 10: You Don’t Need Separate Business Insurance For A Home-Based Business

We highly recommend getting a separate insurance policy for your home-based business. Businesses are complex; you may need commercial general liability (CGL) insurance, as well as commercial property insurance to protect the belongings of your business – and that’s just for starters.

Like renovating your home, starting a home-based business can be considered a material change that adds risk to your policy; if you start a home-based business, speak with your insurance broker.

Local Experts Can Help

These are just ten myths – and based on our experience, chances are you believed one or two of them before reading this. Insurance is complicated; fortunately, there’s help.

The brokers at Nation West can help you fully understand your home insurance policy. Contact us today for a free consultation!