The importance of insuring your home
Unlike car insurance, home insurance isn't usually mandatory. But it’s still not a policy to cut corners on. Knowing you're protected if a storm causes property damage, a burglary results in a loss of valuables, or a lawsuit causes significant financial burdens can provide peace of mind. If you're purchasing with a mortgage, as most homebuyers do, a bank or other lenders may require home insurance as a condition to your mortgage contract.
So, what exactly does home insurance do? This article explains four types of protections that a home insurance policy can provide you and your family.
Protect your largest asset from perils
A home is generally a person's or family's largest asset. There are often "freak" accidents or natural disasters that can cause significant damage to your home. For example, an ice storm could knock a tree right into your roof, or an issue with your home's boiler could cause an explosion.
Insuring your home protects you in such tragic events. The proper policy can provide rebuilding costs for the damage or destruction of your home up to your policy's limit.
However, you should understand what exactly your policy entails. Home insurance generally won't cover "predictable events" such as wear and tear or where you haven't provided the proper maintenance to the building.
Suppose it's getting to -20 degrees during winter, and you don't prepare your pipes from bursting. In this case, insurance generally won't provide compensation for the resultant damage because it was predictable and due to a lack of maintenance.
Insurers may split policies into different categories, such as “comprehensive”, “standard”, “no-frills”, or “broad”. Each insurer defines these categories differently. But, for example, a no-frills policy may not cover something like sewage backlog, which is only protected in the broad home insurance category or through additional add-on provisions.
Protect the contents of your home too
Home insurance protects not only the physical building but also the contents of your home. So, if the tree that falls on your building crushes your television and surround-sound speakers, in addition to your roof, your insurance policy can compensate for the roof's cost and the cost of your television and speakers too.
Home insurance is further applicable in cases of burglary. If you go through such a horrible event, home insurance can at least replace the monetary value of the stolen items.
Of course, your policy has a limit on what you can claim for stolen or damaged contents. Jewelry, fine art, business equipment, and other high-value items may require a separate or add-on policy for full coverage.
Compensation for additional living expenses
If your home catches fire or other issues arise that make it unlivable, you may face additional living expenses. For example, you may need to rent a hotel or another form of short-term accommodation until the issues relating to your home are resolved. Certain home insurance policies can reimburse you for these costs, which can easily hit the thousands when you need to bunker down in a substitute living arrangement for months while your home is repaired or rebuilt.
Protect yourself from personal liability
You may have guests or other third parties, such as gardeners or package delivery persons, constantly come to your property. Regardless of whether it's your sister who's over for dinner or the Amazon delivery person, if someone or something is injured or damaged on your home's premises, the person may sue you for bodily injury or property damage.
There are many ways a lawsuit could find you liable. If a court agrees, you could end up paying significant damages and legal fees. However, home insurance generally provides coverage for this too, such that the policy can pay for any legal fees or damage awards if you're found liable.
Home insurance is a critical policy to purchase if you're a homeowner. It can provide peace of mind and protection in case an unfortunate incident occurs. If something does happen, the policy can reimburse you for rebuilding, repurchasing, accommodation, or legal costs.
Information obtained from rew.ca and Apollo