What Does Home Insurance Cost?

By Jaswantee Ravi

Making the single biggest purchase of your life is a moment of mixed emotions. On the one hand, you are beginning a brand new chapter that is sure to be full of excitement. On the other, you are now tasked with protecting this massive investment, in addition to all the belongings and people that will be staying inside it. Home inspections and other pre-purchase information can help you be more confident in your decision, but there are still numerous things that can go wrong at the end of the day. That’s where home insurance comes into the picture. 

Although it is not mandatory according to the law in the province of Ontario or across Canada, most lending institutions require that future owners prove they have purchased some sort of coverage before releasing funds. Obtaining home insurance is also widely recommended by lawyers and other real estate stakeholders because it greatly reduces your financial burden in the case of a fire or other devastating event (provided it’s outlined in the policy, of course).  

The category of structure you purchase or lease will ultimately determine the type of homeowner insurance you need. The following are the three main types of home insurance available in Ontario:

1. Homeowners Insurance: These policies cover private residences and are purchased by homeowners to prevent excessive financial loss in the case of fire, burglary, and some weather-related incidents. 

1. Condo Insurance: When you purchase an individual unit within a larger structure, this insurance category allows you to safeguard appliances, personal items, furniture, and the owner’s liability. 

1. Tenant Insurance: When you rent or lease a unit or property that you don’t own, this type of insurance will cover personal items, appliances, and furniture. 

While the latter is not really important for potential buyers, home and condo insurance are crucial to securing funding, maintaining financial stability, and having a contingency for worst-case scenarios. As essential as these policies are, they aren’t handed out for free. If you are considering investing in real estate in the near future and are trying to figure out all the associated costs, having an accurate calculation of your insurance costs is key to keeping your ledger balance. 

Calculating Home Insurance Cost in Ontario

There are multiple factors that go into calculating your total home insurance cost in Ontario. In fact, prices across the province vary drastically due to things like home value, construction type, and any risks associated with living in a certain region. Here are the major factors that go into calculating the home insurance prices: 

• Replacement Value — While many believe the home value to be the most important factor, the financial total of all materials and labour required to rebuild your home is one of the most important factors
• House Value — For obvious reasons, a home that receives a higher valuation is going to garner more expensive insurance premiums
• Construction Quality  — Assessment of the mechanical, electrical, plumbing, and building materials used, in addition to the age of the home, also factor into home insurance costs
• Deductible  — The deductible you pay has an inverse relationship with insurance cost: larger deductibles mean lower costs, while lower deductibles mean the opposite
• Coverage Additions  — Depending on your exact needs, some home insurance providers allow you to expand coverage through additional policies, a process that increases the overall cost.

These are the major factors that go into determining your home insurance cost, and insurance providers use this information to inform their pricing decisions. 

Home Insurance Estimate

When it comes to getting a home insurance estimate, there are a few different routes you can go down. Directly contacting a company that provides home insurance policies is a great place to start, but they will often require that you embark on the journey of joining their service. For example, some providers, like Toronto Dominion Insurance, actually provide online resources that explain how insurance premiums and other related costs are calculated. There are also plenty of third-party companies that have generated their own tools to provide you with a comprehensive home insurance quote. 

According to estimates from some of these third-party experts, the average Ontario homeowner pays just over $1,200 each year in home insurance. For those who choose to live in multi-tenant buildings like condos, the insurance cost drops to nearly $350 per year as the risk is shared between the various tenants. 

Again, these are ballpark numbers due to the high variability of insurance prices depending on the region in which you are looking to purchase your home or condominium. Still, this is helpful because it allows you to begin planning your finances while also giving you insight into what a home insurance policy should cost in the province of Ontario. 

Getting Cheap Home Insurance (Or at Least Reducing the Cost)

At the end of the day, everyone would like to get cheap home insurance while still maintaining a robust level of protection. Unfortunately, this isn’t a realistic goal in the current real estate market. With that said, there are still some actionable steps you can take to reduce your overall home insurance cost, including: 

• Making policy payments annually instead of monthly
• Comparing between multiple insurance provider policies
• Only insuring what is absolutely necessary
• Increasing your deductible
• Only filing claims for significant damages
• Taking steps to improve the security of your home

By following these steps, you can help reduce the amount of money you put towards your home insurance each year without losing out on any important policy aspects. This is a particularly helpful strategy if you’re looking to insure a home in more populous areas of Ontario like Toronto, the GTA, or Ottawa. While it may be difficult to get a home insurance estimate that is 100% accurate, you can be sure that following some or all of these steps will reduce the financial impact of home insurance costs.