What types of home insurance are available?

Customers usually get quotes from a number of insurance providers before choosing a policy to purchase. Price is a significant factor, but it’s important to remember that the type of policy affects not only the price, but also the quality of protection in the event of a claim.

What are the fundamental types of policies?

Three fundamental types of home insurance policies include:

Named perils

These are the most restrictive policies available; they protect you against only a narrow selection of losses. Typically, this includes fire or lightning, explosion, smoke, falling objects, impact by aircraft or land vehicle, riot, vandalism or malicious acts, some types of water damage, windstorm or hail, and theft or attempted theft. Named perils policies will only cover loss or damage caused by one of these specified perils. If something else causes the loss or damage, your policy will not assist you.

Named perils policies are usually offered for homes in unusual circumstances. For example, remote vacation homes without fire protection, homes under major repair or renovation, or very old homes lacking modern equipment.

Comprehensive

On the other end of the spectrum are comprehensive policies, which are also referred to as all-risk policies. These policies protect you against all types of loss except those specifically excluded. Loss or damage due to wear and tear, snowslide or landslide, acts of terrorism, and war are some examples of the types of loss typically excluded in comprehensive policies. Even with the exclusions, comprehensive policies provide you with the best protection; a loss can only be excluded if it specifically appears in the policy wording.

Comprehensive policies are usually offered to owner-occupied primary residences and represent the industry standard in Canada. Keep in mind that even these comprehensive policies vary widely between insurance providers, and most policies will limit the amount of coverage provided for valuable articles like jewellery or bicycles.

Broad form

Broad form policies fall somewhere in the middle ground, providing comprehensive protection for the home, and named perils protection for personal property. While this may seem like an interesting idea, it’s ineffective in a wide range of potential losses. For example: if you accidentally drop your television, damage to your hardwood floors would be covered, but damage to the TV would not.

Broad form policies are often sold for seasonal dwellings and rental properties, where most people assume that the dwelling itself deserves better protection than the contents that remain inside it. In such circumstances, broad form policies are sometimes slightly less expensive than comprehensive policies. However, they represent much poorer coverage for personal property, so the minor difference in cost is difficult to justify.

What offers the best coverage?

Each of these three types of policies offer protection for different types of losses and some policies restrict the amount of coverage. As a general rule of thumb, comprehensive policies provide better protection and should be your first choice. So, make sure you understand the differences and ask insurance providers what kind of policy they’ve quoted.

Above and beyond these three forms, some insurance providers offer basic coverage for water damage and require you to pay extra to purchase broader coverage. Most providers also charge an additional premium to add protection for earthquakes. Make sure you understand just what types of losses are covered under your specific policy, and contact your insurance provider for detailed information if you can’t be sure. Another of our resource articles provides more detailed information on common exclusions in home insurance policies.

Specialized insurance

Beyond these types of policies, some customers need a specialized approach to home insurance. There are a number of special coverages that may be available, depending on the policy and provider:

Homes under construction or renovation

Sometimes construction or renovation projects need special insurance coverage to protect against unique construction exposures like interruption or delay. Course of construction policies vary widely, especially regarding coverage for water backup, vandalism and theft. Customers needing course of construction insurance shoud look for the most comprehensive policy available to avoid exposure to serious financial exposures in the event that the project falls victim to unexpected losses.

Legal protection coverage

It’s not the type of thing you normally associate with home insurance policies, but legal protection for contract disputes and other legal proceedings is sometimes available.

For example, Square One’s legal protection coverage is an optional add-on to our home insurance policies. There are several packages available which allow you to add coverage to your home insurance policy for things like contract disputes, employment disputes, or pursuing your legal rights relating to your homeownership. This legal protection coverage also includes access to a legal advice hotline.

There’s also landlord legal protection, which similarly helps landlords cover legal costs if they’re involved in a dispute with their tenants.

Short-term rental coverage

If you rent out your home, you need a landlord insurance policy. But, if you rent out your home on a short-term basis, like through Airbnb or VRBO, you’ll need special coverage even beyond the typical landlord policy.

Home insurance providers consider short-term rentals to be one of the riskier occupancy categories, and accordingly may deny coverage to homes that take part in them. Even if short-term rentals are permitted, you will still need to inform your home insurance provider about your plans to do so.

Service line coverage

Did you know that, as a homeowner, you’re responsible for the service lines on your property?

Service lines are the water, wastewater, gas, and telecommunication lines that connect your home to the public supply. Any of those lines that fall within your property boundaries are your responsibility. That means, if a sewer line under your lawn bursts or collapses, you’ll need to pay for the repairs.

Fortunately, some (not all!) home insurance policies offer service line coverage. With this in place, your policy will cover the costs of repairing or replacing these damaged service lines.

Homes with business exposures

Almost all home insurance policies in Canada contain an exclusion that will deny coverage for any losses occurring in a home that is used, in whole or in part, for business purposes.

Homeowners who run small home businesses, like hairdressing or accounting, often don’t realize this; their policy could leave them without any protection if they were to suffer a loss, even if the business had nothing to do with that loss.

Fortunately, insurance providers like Square One can add permission and coverage for home businesses, ensuring that coverage remains in effect should a loss occur.

And what’s more, Square One also offers home business insurance as an optional add-on to regular home insurance policies. With Square One’s customizable business insurance, you can choose which business exposures you want to insure—starting at just $7/month. Coverage options include business property, business interruption, and business liability.

In any case, customers of Square One automatically receive a comprehensive policy form, with the ability to customize their coverage further to meet their precise needs, including renovations, vacation homes and rental properties. Some Square One policies also offer earthquake coverage, and automatically include inland flood coverage for most customers.

Want to learn more? Visit our Home Insurance Basics resource centre for dozens of helpful articles to guide you through the ins and outs of home insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.