Is Home Insurance Mandatory in Ontario, Canada?

compare Home insurance quotes from 30+ companies


  • Home House Architecture

One of the most common questions that arise is home insurance mandatory in Canada? This is because vehicle insurance is, so many assume that home insurance may be.

The short answer is no. There is no law in Canada that states a homeowner has to have home insurance. But, that doesn’t mean that it should be neglected.

Is It Ever Mandatory to Have Home Insurance in Canada?

It may be that there are circumstances where homeowners do have to have home insurance if they want to obtain a mortgage.  This is not law, but mortgage lenders can deny a mortgage application if homeowners insurance is not purchased. They could also call a mortgage due if the homeowner’s insurance is allowed to lapse.

Why Do Mortgage Companies Insist on Homeowner’s Insurance?

When a mortgage company lends money to a home buyer, they can use the home as collateral against the loan. So, if the borrower does not pay the mortgage, then the lender can foreclose on the house and sell it for the money owed. But, if the house becomes damaged or destroyed, then the mortgage lender has nothing to protect their money. Whereas if the home is insured then the lender is protected.

 What Are My Risks For Not Having Home Insurance In Canada?

mortgage payment risk

If you want to know what your risks are, then look at the home insurance in Canada through the eyes of the Insurance Companies. They are all about risks. The higher the risks for them in certain categories of home mishaps, the more they charge for coverage. Take a look at these risks, and they will be a strong indicator of just what risks your home is at.

Destruction of Your Home?

The insurance that applies to the coverage of your home is in the event that your home will need repair or replacement. So what risks is your home exposed to?

Fire

house fire

When most people think of what could destroy their home they do think of fire, But many figure that if they are really careful, this isn’t going to happen to their home.

What Are Common Causes of Home Fires?

  • Cooking
  • Electrical services
  • Heating systems
  • Cigarettes
  • Appliances
  • Candles

And this is not an all-inclusive list

Think About This:

From 2012 to 2016 statists show that 49% of the fires documented took place in residential homes.

During the same period, 73% of structural fire losses were residential occupancies.

  • Cooking caused 18% of the fires
  • Electrical systems caused 9%
  • Heating/Cooling caused 8%
  • Cigarettes cause 7%
  • Candles caused 2%

So out of all these the average home could eliminate two of the risks which are cigarettes and candles. If one adds up the rest the average homeowner is facing a 35% combining the cooking, electrical and heating statistics.

  • Take a look at your home and determine the answers to these questions?
  • Is it constructed of wood or brick and cement?
  • How old is it?

What do you think it would cost today if you had to replace just the structure of your home, not even thinking about the contents or personal belongings?

The conclusion you come to will probably be an eye-opener as to why you need home insurance just for this one category alone.

Catastrophic Events

Buildings Disaster Debris

The next big consideration is catastrophic events. These are normally those that are caused by acts of nature, which includes;

  • Heavy rain
  • Winds
  • Hail
  • Tornadoes
  • Earthquakes

Your argument may be that you live in an area of Canada where you enjoy the mild weather. The risk of a major weather event in your area you consider as being low.

Think About This

These are just a few of several examples;

  • May 2016 Fort McMurray Wildfires costing the Insurance companies $3.58 billion dollars
  • June 2013 Southern Alberta Floods caused by an aggressive thunderstorm costing insurance companies $1.72 billion.
  • June 1998 Quebec, Ontario and New Brunswick ice storm costing $1.49 billion in insurance claims
  • July 2013 Toronto Flood again another massive thunderstorm costing Insurance companies $943 million.
  • 1991 Calgary Hail Storm causing claims in the amount of $343 million

Canada maintains a database on what they consider as disaster events which is a clear indicator that all types of disasters can occur in Canada. Which many of them can have an effect on homeowners. So, the question do you need homeowners insurance is coming down to an emphatic yes. Which now raises the question as what type of coverage do you need and how much?

What Other Perils is the Insurance Company Going to Look at?

Sherlock Holmes Detective

The insurance company is going to look at the specifics pertaining to dwelling damage that come in under these main categories which are;

  • Lightening
  • Explosion
  • Falling Objects
  • The impact from land or air vehicles
  • Water
  • Smoke
  • Glass breakage
  • Collapse due to the weight of snow, ice or sleet

If these risks are not enough as yet to convince you that you need home insurance, then let’s take a look at the next category that home insurance is going to apply to.

Personal Property

Under this category, you need to look at your risks. Many of the claims for personal property are going to come from the perils that affect the home’s structure, but there are additional ones such as,

  • Vandalism
  • Theft

There isn’t anyone that can say that their home is 100% exempt from this potential risk.

Finally, there is a third area of home insurance that is just as important as the rest. Simply because the consequences can create more costs than what perils or property claims may do.

Liability

If someone gets injured or dies as a result of being on your property, or their property is damaged, then you can be held liable. Think about the cost of health care in Canada and you will have a true sense of how medical costs can mount up. Ones that you could be responsible for.

The bottom line is anyone that wants to protect their financial investment in their home and belongings cannot afford to not have home insurance. So although it may not be mandatory by law homeowners have to make it mandatory to protect their interests.

Resources

https://www.mcscs.jus.gov.on.ca/english/FireMarshal/MediaRelationsandResources/FireStatistics/OntarioFires/FireLossesCausesTrendsIssues/stats_causes.html
http://cdd.publicsafety.gc.ca/srchpg-eng.aspx
http://assets.ibc.ca/Documents/Facts%20Book/Facts_Book/2017/Fact-Book-2017.pdf
https://globalnews.ca/news/2810070/top-10-most-costly-disasters-in-canadian-history-for-insurers/
https://www.cooperators.ca/en/insurance/home/home-insurance-basics/whats-covered.aspx

Related