A Beginner’s Guide to Home Insurance: An Overview of Coverage

However, home insurance is not just about protecting the belongings inside your home. Different property types have different insurance needs, and some common risks, such as Sewer Backup, Overland Water, and Earthquake, may not be automatically included in a standard policy.

In this guide, we will explore the main types of home insurance coverage, the insurance options available for different property types, and important considerations before purchasing a policy.

1. What Does Home Insurance Typically Cover?

Generally, home insurance covers several key areas.

1. Personal Contents

Personal Contents coverage protects eligible personal belongings, subject to the policy’s terms and conditions. Examples include:

• Furniture and household items
• Computers, mobile phones, and other electronic devices
• Clothing, footwear, and personal belongings
• Certain valuable items, such as jewellery and watches

If your belongings are damaged or stolen as a result of an insured event, your insurer may provide compensation according to the policy terms.

However, not every item or type of loss is necessarily covered. Certain valuable items may have specific coverage limits, while cash, business-related property, and some specialized items may be subject to restrictions.

If you own expensive jewellery, watches, collectibles, or other valuable items, it is worth confirming whether your policy provides adequate coverage before purchasing it.

2. Personal Liability

Personal Liability coverage primarily protects you if you are legally responsible for injury to another person or damage to someone else’s property.

For example:

• A visitor is injured because of an incident for which you are legally responsible.
• Your negligence causes damage to another person’s property, resulting in a claim against you.
• In certain circumstances, you may be held legally responsible for an incident related to your property as an owner or occupant.

If the incident qualifies under your policy, Personal Liability coverage may include compensation for covered claims and legal defence costs handled by the insurer. The actual protection depends on the policy wording.

Important: Personal Liability does not cover every type of accident, nor does it automatically cover all injuries suffered by you or members of your household.

3. Additional Living Expenses (ALE)

If your home becomes uninhabitable due to an insured event, such as a serious fire, your policy may cover reasonable additional accommodation and living expenses.

Examples include hotel accommodation and certain additional living costs incurred because you temporarily cannot use your home.

The amount payable is subject to the policy limits, whether the incident is covered, and other applicable terms and conditions.

4. Dwelling / Unit Coverage

This coverage primarily protects the structure of a property and its qualifying fixtures. It applies to detached homeowners and condo owners, although the insurance arrangements differ between the two.

• Detached homeowners: Coverage generally applies to the building itself, including the roof, walls, floors, and other structural elements and fixtures that meet the policy definition.
• Condo owners: The Strata Corporation typically purchases Strata Insurance for the building. However, this does not mean your individual unit is automatically covered in full. A personal condo policy may cover interior finishes, fixtures, upgrades, and certain losses or liabilities the owner is responsible for under the policy terms.

Whether you own a detached house or a condo, it is important to ensure that the building or unit-related coverage is adequate.

For condo owners in particular, understanding the Strata Insurance coverage and how your personal condo policy works alongside it can help prevent gaps in protection and misunderstandings about what is covered.

5. Condominium Unit Improvements and Betterments

This coverage primarily protects renovations, improvements, or upgrades made by a condo owner or a previous owner, particularly when those improvements exceed the original building standard or the basis on which the Strata Insurance provides coverage.

For example, suppose you purchase a condo and spend $20,000 replacing the original carpeting with premium hardwood flooring and upgrading the kitchen cabinets and countertops.

Several years later, your unit suffers water damage caused by an insured event. If these upgrades are not covered under the Strata Insurance, or if the building policy only covers reinstatement to the original standard, Improvements and Betterments Coverage under your personal condo policy may help cover the resulting loss, subject to the policy terms.

6. Condominium Loss Assessment Coverage

This coverage primarily addresses certain costs or amounts assessed to condo owners by the Strata Corporation following a qualifying loss, subject to the policy terms.

For example, suppose a covered incident causes significant damage to a common area of the building, requiring extensive repairs. When the Strata Insurance claim is handled, the Strata Corporation may be responsible for paying an insurance deductible. Depending on applicable laws and the circumstances, some or all of that cost may subsequently be allocated to individual owners.

If your personal policy includes applicable Loss Assessment Coverage and the assessment meets the policy’s coverage requirements, your insurer may provide compensation up to the applicable limit.

2. Five Common Types of Home Insurance

The intended use of a property and how it is occupied can affect the insurance products available and the insurer’s underwriting requirements.

Insurance Type	Main Coverage and Considerations
Tenant Insurance	Primarily covers a tenant’s personal belongings, personal liability, and eligible additional living expenses.
Owner-Occupied Condo Insurance	Covers personal belongings, personal liability, and eligible unit-related items, additional living expenses, and Strata Deductible-related protection.
Owner-Occupied House Insurance	Generally covers the building, personal belongings, personal liability, and additional living expenses. The building structure and rebuilding cost are also important considerations.
Rented Condo Insurance	Primarily covers the landlord’s rental property, rental income, and related liability. Strata Insurance and the rental arrangement must also be considered.
Rented Dwelling Insurance	Primarily covers a rented house, rental income, eligible related property, and the landlord’s liability. Coverage varies according to the property and rental arrangement.

These are general categories only. Actual coverage varies by insurer and policy.

For example, a rental property generally should not be insured using an owner-occupied policy without confirming that the arrangement is acceptable to the insurer. If you rent out individual rooms, sublet part of your property, or share the home with several unrelated occupants, you should also accurately disclose the actual occupancy and use of the property.

3. Common Additional Home Insurance Coverages: Sewer Backup, Overland Water, and Earthquake

Home insurance policies specify which events are covered and which circumstances are excluded.

Some water-related and earthquake risks may not be included in standard coverage and may require additional protection. Some insurers may also offer these protections through different coverage structures.

Here are three common coverages worth understanding.

1. Sewer Backup

Sewer Backup coverage primarily protects against losses caused when wastewater or water backs up into your home through a sewer or drainage system, subject to the policy terms. Depending on the coverage, this may include damage to interior finishes, flooring, personal belongings, and eligible cleanup and repair costs.

When heavy rainfall overwhelms the public drainage system, pipes become blocked, or wastewater flows back into a property, basements, flooring, and household belongings may be affected.

For detached homeowners with a basement, this coverage is particularly worth considering. Basements are often used for storage, recreation, or even rental purposes, and the cost of repairs following a sewer backup can be substantial.

Condo owners should not overlook this coverage either. Even if the building has Strata Insurance, that does not necessarily mean the owner’s personal belongings, renovations, and related losses are fully covered under the owner’s individual policy.

Responsibility for the loss depends on factors such as the cause of the backup, the building’s insurance policy, the owner’s personal condo policy, and the terms of each policy.

2. Overland Water

Overland Water coverage generally refers to protection against damage caused when water originating outside the home flows over the ground and enters the property. Examples may include flooding caused by heavy rainfall, melting snow, overflowing rivers or lakes, and surface water accumulation, depending on the policy definition.

If you live in a detached house or townhouse, it is worth paying particular attention to the availability of Overland Water coverage.

Condo owners should not assume they have no exposure simply because they live on an upper floor. Storage lockers may be located at ground level or in underground parking areas, where flooding could still damage personal belongings.

It is also worth noting that coverage for water damage depends on the policy’s definition of Overland Water and its exclusions. Some policies distinguish between freshwater flooding and saltwater or seawater, while others may have different limitations. Certain insurers may also decline to offer Overland Water coverage in areas they consider to have an elevated flood risk.

Always confirm the specific wording with your insurer or broker.

3. Earthquake

Earthquakes can cause catastrophic damage to buildings and personal belongings. For this reason, Earthquake coverage can be an important consideration for homeowners, although its cost can also be substantial.

When deciding whether to add this coverage, consider the following:

• The coverage limit and scope of protection
• How the earthquake deductible is calculated, often as a percentage of the insured value
• Any additional restrictions or exclusions

In some higher-risk areas, such as Richmond and Victoria, earthquake deductibles can be very high. Some insurers may also choose not to offer earthquake coverage for certain properties or locations.

Before purchasing the coverage, understand how much you would actually have to pay out of pocket following an earthquake, then weigh that financial exposure against the additional premium.

Detached homeowners should also be aware that certain banks or financial institutions may specifically require earthquake coverage as a condition of mortgage approval or financing arrangements.

When you purchase a property with a mortgage, the property serves as important collateral for the lender. If a major earthquake causes extensive damage or requires substantial repairs, you may still be obligated to repay your mortgage under the loan agreement.

As a result, some lenders may require borrowers to maintain specified property insurance coverage under their lending terms to manage the financial risks associated with property damage. Whether earthquake coverage is required depends on the individual lender and mortgage agreement; not all banks impose the same requirements.

Even if your lender does not require it, earthquake coverage is still worth evaluating based on your own circumstances.

4. Condo Deductible Coverage: If the Building Has Strata Insurance, Why Do You Still Need Your Own Coverage?

This is a particularly important coverage for condo and townhouse owners to understand.

In British Columbia, the Strata Corporation typically purchases Strata Insurance for the building. If an insured loss occurs, the Strata Insurance may cover damage to the building. However, the insurer may also apply a deductible to the claim.

These deductibles can be substantial. In certain circumstances, the Strata Corporation may be legally entitled to recover some or all of the deductible from an owner, depending on the applicable laws, circumstances, and governing documents.

This is where Condo Deductible Coverage under your personal condo policy may become important. It can help protect you against eligible Strata Insurance deductibles that you are legally responsible for, subject to the policy terms and limits.

(At this point, you might be wondering whether this sounds very similar to Loss Assessment Coverage. The two can indeed be confusing because both may involve costs that condo owners have to pay to the Strata Corporation. However, their primary purposes are different.

The simplest distinction is that Condo Deductible Coverage primarily addresses Strata Insurance deductibles, whereas Condominium Loss Assessment Coverage primarily addresses certain qualifying losses or expenses assessed by the Strata Corporation under the policy terms. Loss Assessment Coverage is not necessarily limited to situations in which the Strata Corporation submits an insurance claim.)

How Much Are Strata Insurance Deductibles Typically?

Strata Insurance deductibles vary according to the building type, condition, insurer, claims history, and overall risk assessment. Different types of losses, such as water damage and earthquakes, may also have different deductibles.

Generally, high-rise condos may have higher water damage deductibles, while townhouses may have higher earthquake deductibles. However, the actual amounts depend on each building’s insurance arrangements.

• High-Rise Condos — Water Damage Deductibles
  High-rise residential buildings often have extensive shared water supply and drainage systems serving multiple units and floors. If a pipe bursts or a leak occurs, the damage may spread to other units and common areas, substantially increasing the overall repair costs and claim amount.
  As a result, some high-rise buildings may have water damage deductibles of tens of thousands of dollars or more.
• Townhouses — Earthquake Deductibles
  Townhouses generally do not have as many floors or units within a single building as high-rise developments. However, their earthquake insurance arrangements can still involve substantial deductibles.
  Some Strata Insurance policies calculate earthquake deductibles as a percentage of the insured value of the entire building rather than as a fixed dollar amount. Consequently, the deductible can be considerable following an earthquake.
  Whether a townhouse has a higher earthquake deductible depends on factors such as the building’s structure, insured value, and policy wording. This is not necessarily the case for every townhouse development.

An Example

Suppose you own a condo and a water pipe suddenly bursts inside your unit. The incident damages your flooring and interior finishes, and the water also leaks into several units below, causing damage that requires repairs.

Because the incident involves a Strata Insurance claim, the building has a water damage deductible of $100,000. If you are legally responsible for this deductible under the applicable laws and circumstances, you could face a substantial financial obligation.

If your personal condo insurance includes applicable Condo Deductible Coverage, your insurer may cover the eligible amount according to the policy terms and coverage limit, helping reduce the amount you must pay yourself.

Conversely, if you do not have this coverage or your limit is insufficient, you may have to pay some or even most of the amount out of pocket.

Condo insurance is therefore not just about protecting your personal belongings and renovations. You should also consider the building’s insurance deductibles and the financial responsibilities you could face in certain circumstances.

How Much Condo Deductible Coverage Do You Need?

When selecting a limit for Condo Deductible Coverage, start by finding out how high the deductibles are under your building’s Strata Insurance. Then confirm how much protection your personal condo policy provides.

For example, if your building has a $100,000 water damage deductible but your personal policy provides only $25,000 in Condo Deductible Coverage, there may be a significant gap between the two amounts.

However, actual payment still depends on the applicable laws, the personal policy wording, and whether the incident qualifies for coverage.

Condo owners should regularly review the insurance summary and related documents provided by their Strata Corporation. Check the deductibles for different types of losses, including water damage and earthquakes, and compare them with the limits under your personal policy.

If you identify a potential gap, discuss with your insurance broker whether increasing your coverage limit would be appropriate.

It is also important to remember that Strata Insurance arrangements and deductibles may change at renewal. Even if you selected an appropriate coverage limit when you first purchased condo insurance, review it periodically to ensure your personal coverage remains suitable for the building’s current insurance arrangements.

5. What Else Should You Consider Before Buying Home Insurance?

Whether you are a tenant, condo owner, or detached homeowner, consider the following before purchasing a policy:

• Accurate Property Use: Underwriting requirements may differ for owner-occupied, rented, and partially rented properties.
• Adequate Personal Contents Coverage: Pay particular attention to valuable items and any applicable claim limits.
• Appropriate Liability Limits: Consider the legal responsibilities you may face as an occupant or property owner.
• Water and Earthquake Protection: Do not focus solely on the total premium. Confirm which specific risks are covered.
• Deductibles You Can Afford: A policy with a lower premium may come with higher deductibles or different coverage restrictions.
• Understanding Strata Insurance: Condo owners should pay particular attention to the building’s insurance deductibles and their own potential financial responsibilities.

Conclusion: Choosing the Right Coverage Matters More Than Simply Comparing Premiums

Home insurance may seem straightforward, but the right coverage depends on your property type, living arrangements, and individual needs.

For tenants, personal belongings and liability protection may be key considerations. Condo owners should understand not only their personal property and liability coverage but also the building’s Strata Insurance deductibles. Detached homeowners should pay particular attention to dwelling coverage, rebuilding costs, and the risks associated with their property.

If you are unsure whether your current policy provides adequate protection, start by gathering your property details, existing insurance policy, and relevant Strata documents. You can then compare coverage options and policy terms across insurers.

Insurance is not simply about buying a policy. It is about understanding the risks in advance and choosing the protection you genuinely need.