Home insurance glossary

Replacement cost minus depreciation.

A claim settlement method where the insurer pays you what your damaged property was worth at the time of loss — not what it would cost to replace new. For example, a 10-year-old roof damaged in a storm might only be valued at 30-40% of its replacement cost. ACV policies typically cost less but pay out significantly less in claims.

Pays for hotels, food, and moving costs if your home is uninhabitable after a covered loss.

Also called "Loss of Use." Typically set at 20% of dwelling coverage. Covers reasonable additional expenses (hotel, restaurant meals beyond normal grocery costs, pet boarding, storage). Has time limits (often 12-24 months). Critical after major disasters — without ALE, you may face thousands in unreimbursed costs.

The person from the insurer who assesses your claim.

After you file a claim, an adjuster (employed by your insurer or contracted) visits, documents damage, and determines payout. Their interests align with the insurer, not you. For large claims ($10,000+), consider hiring a Public Adjuster (works for you, fee-based) who typically secures 20-40% higher settlements. Public adjusters are licensed in Canada but less common than in the US.

Common in 1960s-1970s homes, considered higher fire risk than copper.

Less risky than knob-and-tube but still triggers surcharges or refusals from many insurers. Solutions: full rewire ($10,000-$25,000) or "pigtailing" with copper connectors ($2,000-$5,000). Both can unlock insurance discounts.

Combining home + auto insurance with same insurer (typically 10-20% off).

The most common discount in Canadian insurance. Combining home and auto policies typically saves 10-20% on both. Some insurers extend discounts to life insurance, RV, motorcycle. Always compare bundled vs separate — sometimes separate policies from different insurers are cheaper despite no bundle discount.

Premium reduction for consecutive years without claims (typically 5-10%).

Rewards loyal, low-risk customers. Builds over 3-5 years to a maximum discount (typically 10-15%). Resets after a claim. This is why filing small claims (under $1,000-$2,000) often costs more in lost discounts over years than the payout. Calculate the math before filing minor claims.

You must insure to at least 80-90% of replacement cost — or your claim is reduced.

A clause that penalizes underinsurance. Typically requires you to insure to at least 80% (sometimes 90%) of full replacement cost. If you only insure 50% and have a $100,000 claim, the insurer may only pay $62,500 ($100K × 50/80). Critical to keep coverage updated as construction costs rise.

Personal policy for unit owners — different from the building's master policy.

The condo corporation insures the structure and common areas (master policy). YOU must insure your unit's contents, improvements (renovations, upgrades), personal liability, and potentially loss assessments (your share of common-area claims). Typically $400-$900/year. Sub-limits often apply to upgrades — verify yours.

A specific event your policy WILL pay for.

Standard covered perils typically include: fire, lightning, smoke damage, windstorm, hail, weight of ice/snow/sleet, vandalism, theft, vehicle damage, falling objects. NOT typically covered: floods, earthquakes, sewer backup, wear and tear, gradual leaks. Coverage varies — always read your specific policy.

What you pay out of pocket before insurance kicks in.

Standard deductibles range from $500-$2,500. Higher deductibles = lower premiums (raising from $500 to $1,000 typically saves 10-15%). Some perils may have separate, higher deductibles: wind/hail in Alberta (2-5% of insured value), earthquake in BC (5-15%), sewer backup (often separate). Always verify your deductibles by peril.

The amount your insurer will pay to rebuild your home's structure.

The core of your home insurance policy. Covers the physical structure of your home (walls, roof, foundation, attached structures). Should reflect rebuild cost, not market value. In Canada, dwelling coverage typically ranges from $200,000 to $1.5M+ depending on size and location.

Optional coverage for earthquake damage — required in seismic zones.

NOT included in standard Canadian home insurance policies. Costs vary dramatically by region: $30-$80/year in Ottawa-Montreal corridor, $200-$500+/year in BC. Deductibles are typically percentage-based (5-15% of insured value), meaning a $1M home could have a $50,000-$150,000 earthquake deductible. Your mortgage lender may require it in high-risk zones.

What your policy specifically does NOT cover.

Common exclusions: floods, earthquakes, wear and tear, intentional damage, business activities, certain dog breeds (liability), mold (sometimes limited), war/terrorism, nuclear hazards. Some exclusions can be removed via endorsements (flood, earthquake, sewer backup). Read your exclusions section — surprises happen at claim time.

You must own or have financial stake in what you're insuring.

You can only insure things you own or have a financial interest in. You can't insure your neighbor's car or your ex-spouse's home. For joint owners (married couples, partnerships), both names should be on the policy. Common issue: roommates can't insure each other's belongings — each needs their own tenant policy.

Old electrical wiring (pre-1950s) that insurers often surcharge or decline.

Found in many heritage Canadian homes (Toronto Annex, Montreal Plateau, Old Quebec). Considered a fire risk by insurers. Many companies will surcharge by 20-50% or refuse to insure. Upgrading typically costs $8,000-$20,000 but unlocks significant premium discounts.

Expensive insurance your bank buys for you if your coverage lapses.

If you let your home insurance lapse (cancelled, expired, lender not notified of new policy), your mortgage lender will buy expensive coverage and charge you. Often 2-3x more expensive than retail policies and only protects the lender's interest, not yours. Always maintain coverage and inform your lender of any changes.

Protects you if someone is injured on your property or you damage someone else's.

Standard policies include $1M-$2M liability. Toronto and Vancouver lawyers recommend $2M minimum due to litigious environments. Covers legal defence, settlements, and judgments. Includes off-premises liability (you cause damage somewhere else). Essential for pool owners, dog owners, and homeowners with frequent guests.

Covers your share of common-area claims in condos/stratas.

When a condo/strata building has a major claim that exceeds the master policy's coverage, all unit owners share the deficit — sometimes thousands per unit. Loss assessment coverage (typically $25,000-$100,000) protects against this. Critical for older buildings or those with high strata deductibles.

Your record of past insurance claims, tracked across all insurers.

Insurers share claims data through CLUE (Comprehensive Loss Underwriting Exchange) in the US and similar systems in Canada. Past claims (even at previous addresses) affect your premiums for 5-7 years. Some insurers may decline coverage if you've had 2+ claims in 3 years. Sometimes worth paying small claims out-of-pocket to preserve your record.

See "Additional Living Expenses (ALE)".

Same as Additional Living Expenses. Pays for temporary housing, meals, and reasonable additional costs when your home is uninhabitable after a covered loss. Typically 20% of dwelling coverage.

Reduced premium for centrally monitored fire/burglar alarm systems.

Typically saves 5-15%. The alarm must be monitored by a central station (not just self-monitored apps). Costs $20-$50/month to maintain monitoring. Often pays for itself in insurance savings, especially for higher-value homes. Some insurers also discount for smart water leak detectors (Phyn, Moen Flo).

Names your mortgage lender as a payee for major claims.

Your lender is automatically named on your policy. For major claims (typically $5,000+), they may receive checks made jointly to you and them. Required by law for mortgaged properties. If you switch insurers, you must notify your lender. Failure to maintain coverage can trigger lender-placed insurance (much more expensive).

Named = only listed disasters covered. All = everything except exclusions.

Named Perils policies list specific covered events (fire, wind, theft, etc.). All Perils (Comprehensive) policies cover everything not specifically excluded. All Perils is more expensive but provides broader protection. Most modern Canadian policies are All Perils, but always verify — Named Perils often costs less for a reason.

Reduced premiums for newer construction (typically up to 30% in first 5-10 years).

Newer homes have updated electrical, plumbing, roofing — lower claim risk. Most insurers offer steep discounts for homes under 10 years old, declining annually. Document your build date if buying a recently constructed home. Also applies after major renovations (new roof, panel upgrade, plumbing replacement).

Covers water entering your home from outside (rivers, lakes, heavy rain).

NOT included in standard policies. Costs $150-$400/year depending on flood zone. After the 2024 Toronto floods ($990M in damages), this is critical for any home near rivers, low-lying areas, or flood-prone zones. Different from sewer backup. Some properties may be uninsurable for overland flood if previously flooded.

Covers your belongings — clothes, electronics, furniture.

Typically set at 50-70% of your dwelling coverage. Default may be insufficient if you have a finished basement, valuable collections, or significant electronics. Sub-limits often apply to jewelry, watches, art, and collectibles ($1,500-$5,000 per category typically). High-value items may need a separate rider.

Polybutylene plumbing (1978-1995) prone to failure — often excluded from coverage.

Found in homes built between 1978-1995, especially in Western Canada. Known to fail and cause water damage. Many insurers exclude poly-B leaks from coverage. Replacement costs $5,000-$15,000 typically but eliminates the risk and qualifies for better insurance terms.

What you pay annually (or monthly) for insurance coverage.

Determined by dozens of factors: home age, construction, location, claims history, coverage limits, deductibles, credit score (in most provinces), proximity to fire hydrants, age of roof/electrical/plumbing, alarm systems. Canadian premiums have increased 5-9% annually in recent years due to climate-related claims.

The formal document you submit to make a claim — typically within 60 days.

A sworn statement listing damaged/lost items with values. Most insurers require it within 60 days of the loss. Inadequate documentation is the #1 reason claims are reduced or denied. Take photos/videos of your possessions annually and store off-site (cloud storage). Keep receipts for major purchases.

What it costs to rebuild — NOT what your home is worth on the market.

Your dwelling coverage should reflect rebuild cost (materials + labour to construct a similar home), not market value (what you could sell for). Market value includes land and location premium. In Toronto, market value often exceeds rebuild costs, but in older neighbourhoods with heritage details, rebuild can exceed market value. Get a professional estimate every 3-5 years.

Cost to replace with new equivalent, no depreciation.

A claim settlement method where the insurer pays the full cost to replace damaged property with new equivalent items, regardless of age. More expensive than Actual Cash Value but pays out fairly in claims. Most modern policies offer Replacement Cost on dwelling and Actual Cash Value on contents by default — always verify yours.

Extra coverage for specific high-value items (jewelry, art, equipment).

Standard policies have sub-limits on jewelry, watches, art, collectibles ($1,500-$5,000 typically). A rider or floater provides additional or scheduled coverage for items above those limits. Often required for engagement rings, fine art, collections, professional equipment, sporting equipment. Costs vary based on item value.

Optional coverage for water backing up through drains, toilets, and sinks.

Canada's #1 home insurance claim, yet NOT included in standard policies. Costs $60-$150/year. Limits range from $10,000-$50,000. Essential for finished basements. Verify your limit covers the value of basement contents and finishing. Some insurers require sewer backup valves to qualify.

Emerging discount for connected smart home devices (leak detectors, smart locks).

Newer discount category (2020+). Smart water leak detectors (Phyn, Moen Flo, Flo by Moen) can save 5-10% as they prevent the #1 claim type. Smart locks, video doorbells, and connected smoke detectors may also qualify. Varies significantly by insurer — ask explicitly.

Building insurance for condo complexes — does not cover your unit interior.

In BC, strata corporations insure the building structure and common areas. Your personal policy must cover unit contents, improvements (anything you upgraded), and personal liability. After BC's 2019-2020 strata crisis, strata deductibles climbed to $250,000+. Verify your personal policy covers potential strata deductible assessments.

A maximum payout for specific categories (jewelry, electronics, cash).

Standard policies have sub-limits even if your overall personal property coverage is $200,000+. Common sub-limits: jewelry/watches ($1,500-$5,000), cash ($500-$1,000), business equipment ($2,500-$5,000), collectibles ($2,500-$10,000). High-value items need riders or floaters.

Renter's policy — covers your belongings and liability, not the building.

Required in most Canadian leases. Costs $150-$400/year typically. Covers your belongings (furniture, electronics, clothing), personal liability ($1M+ recommended), and additional living expenses if the unit becomes uninhabitable. Does NOT cover the building structure (that's the landlord's responsibility).

Extra liability coverage above your home and auto policies ($1M-$5M+).

If you have significant assets, public exposure, or risk factors (pool, dog, frequent guests), an umbrella policy adds $1M-$5M+ of liability protection beyond your home and auto limits. Costs $150-$400/year for $1M of additional coverage. Cheap insurance against catastrophic lawsuits.

Having less coverage than needed to fully rebuild or replace.

A major risk. If your home's rebuild cost has risen (due to inflation, renovations, or market changes) but your coverage hasn't been updated, you may be 20-40% underinsured without realizing it. Trigger a review every 2-3 years or after any major renovation. Co-insurance clauses can further reduce your payout.

Your coverage may be voided if your home is vacant for 30+ days.

Most Canadian policies have a vacancy clause: if your home is unoccupied for more than 30 days (sometimes 60), certain claims may be denied (especially water damage from frozen pipes). Critical for snowbirds, cottage owners, or extended vacations. Notify your insurer and consider a vacancy endorsement (~$50-$200) for extended absences.

Covered for sudden incidents, but NOT for gradual leaks or maintenance issues.

Canada's most common claim type. Standard coverage includes sudden/accidental events (burst pipe, washing machine overflow). NOT typically covered: gradual leaks, seepage, lack of maintenance, mold from long-term leaks. Sewer backup and overland flood require separate endorsements. Document any water-related issues immediately.