Is Home Insurance Mandatory in Canada?

Is Home Insurance Mandatory in Canada?

Your home is likely the most expensive thing you own, so keeping it and all your stuff safe is extremely important. Home insurance is a great way to do that. It doesn’t matter how sturdy your place is, it’s still at risk from things like fires, vandalism, or other kinds of damage. Whether you’re in a house, an apartment, or a condo, home insurance makes sure you’re protected if something goes wrong. But the big question is, do you absolutely need to have home insurance? And what happens if you don’t have it

In Canada, is home insurance mandatory?

Whether you need home insurance depends on your own situation. But is it mandatory? No. Unlike car insurance, it’s not required by law in Canada.

However, if you’re getting a mortgage, most banks and mortgage lenders will insist you get home insurance coverage and prove you have it. They want to make sure their money is safe, and home insurance is a way to protect it.

Furthermore, if you’re renting a place, your landlord can require proof of renter’s insurance, which is like home insurance for tenants.

So while home insurance is not legally mandatory in Canada, there are still situations where you must have it.

If it’s not mandatory, why do you need it?

Home insurance protects what’s likely your biggest investment—your home—from unexpected events. Here’s why you really need it:

It protects your home

First off, it covers your actual house. If something like a fire, a big storm, or even vandalism damages your place, home insurance helps pay for the repairs or to rebuild it. Without it, you could be stuck paying a massive bill on your own.

It protects your personal property

Second, insurance covers more than just your house—it also protects all the stuff inside, like your TV, clothes, and furniture. If these get stolen or ruined, your insurance can help replace them. It’s a huge relief financially and emotionally if something goes wrong. This also extends to any personal property stolen from within your vehicle (but not the vehicle itself—for that, you’d need auto insurance).

It provides additional living expenses

Then, there are additional living expenses. This part is a lifesaver if your home gets so damaged that you can’t live in it while it’s being repaired. Your insurance can cover the cost of a temporary place to stay, meals, and other necessary expenses during this time.

It covers personal liability

Lastly, your house insurance includes liability coverage. This coverage protects you if someone gets hurt on your property or if you accidentally damage someone else’s stuff. For example, if someone slips on your driveway and gets injured, you might be responsible for their medical expenses. Also, if a fire starts in your home and spreads to your neighbour’s house, it will cover those damages, too. Home insurance can help cover third-party liability and property damage expenses, so you’re not paying out of pocket, and shield you from potential lawsuits.

Why do you need home insurance to get a mortgage?

Here’s the thing: when a lender gives you money to buy a house, they’re not just handing over money, they’re investing in your property. In fact, when you have a mortgage, your bank or mortgage lender will also need to be listed on your insurance policy. They want to protect their investment by making sure your house is fully covered in case anything happens to it. Essentially, your mortgage lender is protecting their money by making sure your home is protected, too.

Why do you need renter’s insurance if your landlord has insurance?

A lot of people think that if something goes wrong with their rental, their landlord’s insurance will cover their belongings. But that’s actually not true. The reality is that while your landlord’s insurance takes care of the building itself, it doesn’t cover any of your personal belongings inside your apartment or home. This is where having renter’s insurance comes in handy. Like home insurance, renter’s or tenant insurance pays to fix or replace your stuff if it is damaged or stolen due to fires, vandalism, theft, or certain kinds of water damage.

Do you need home insurance if you own a condo?

Yes, you still need home insurance (or condo insurance) if you own a condo. Condo insurance is like a combination of home insurance and tenant’s insurance. The condo association will have insurance that covers the building and common areas, but that doesn’t cover what’s inside your condo or your personal belongings. Your own condo insurance will take care of your belongings, the inside of your condo like walls and fixtures, and any liability if someone gets hurt in your place. Plus, if you took out a mortgage to purchase your condo, your mortgage lender will require you to have insurance.

Frequently asked questions

What happens if you have a mortgage and no homeowners insurance in Canada?

Most lenders require you to have home insurance as part of the loan agreement. If you don’t have it, the lender might consider you in breach of the agreement, and they could take legal actions to protect their investment. This could include forcing you to get insurance or, in extreme cases, requiring you to pay back the loan sooner than planned.