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Summary: Property insurance (also called home or fire insurance) protects your home against risks like fire, paid through an ongoing premium. It is not mandatory by law in Ontario, but mortgage lenders require proof of it before releasing funds, so any financed purchase needs it. Expect to shop around on premium and coverage, include liability coverage, and have your real estate lawyer deliver proof of insurance to your lender before closing.
If you have just bought a home and been told you need property insurance, you may be wondering what it is, why you need it, and how to get it. It is one of those things you only encounter once you are buying, so here is a plain-language walk through what property insurance covers, whether it is required, and how it fits into your closing.
What is property insurance?
Property insurance is a financial product you pay for on an ongoing basis that protects you against risks to your property, such as fire. In exchange for a regular premium, the insurer agrees to compensate you if a covered event occurs. The exact events covered and the dollar value of the protection vary widely based on the home's value, location, and the coverage you choose.
It goes by a few names, including home insurance and fire insurance, but they refer to the same core product: protection for your home and its contents against unexpected damage or loss.
Why do you need property insurance?
No matter how careful you are, something can always happen to your property, and repairs or a rebuild can be very expensive. In an extreme case, a fire could destroy a home and everything in it. Most people do not have tens of thousands of dollars set aside for an unexpected loss like that.
That is what insurance is for. Rather than being personally responsible for the full cost to rebuild, you turn to your insurer, who covers the cost agreed to in your policy. There is a fee for that protection, but paying around $100 a month can be the difference between being able to rebuild your home or not in a serious event.
Is property insurance mandatory in Ontario?
Not by law. Property insurance is not legally required, but almost every mortgage lender requires proof of it before releasing funds. So if you are financing your purchase with a mortgage, you effectively have to have it.
Lenders want to know the asset securing their loan is protected before they advance six or seven figures. Even if you are buying without a mortgage, going without insurance is a risky choice: most buyers can afford a modest monthly premium, but few could absorb a large, unexpected repair bill on their own.
How do you get property insurance?
Start by getting quotes, because both the premium (the price you pay) and the coverage you receive vary widely. Shopping around is the best way to find the right fit, and you have a few options:
Go direct. Reach out to insurance companies for quotes on your own.
Use a broker. A broker shops the market for you and is paid to find the best fit and rate, not to steer you to one company. Search for a local broker, or use an online brokerage such as Insurely.
Bundle. If you already hold another policy, such as car insurance, ask about a discount for bundling it with home insurance.
What does property insurance cover?
Coverage falls into two main parts, and a good policy includes both. Property coverage handles damage to your home and belongings; liability coverage protects you if someone is hurt on your property or you damage someone else's property.
Personal property coverage. Covers your home and its contents against covered risks such as fire.
Liability coverage. As a homeowner, you are liable for injuries to others on your property, such as a slip and fall, and for damage attributable to you or to poor maintenance. Liability coverage protects you if someone is injured and pursues legal action.
This is also where property insurance differs from title insurance: property insurance covers physical damage and liability, while title insurance covers ownership and title risks. Most buyers carry both.
How does property insurance fit into closing?
Property insurance is a closing requirement when you have a mortgage. Your lender will not release funds until it has proof your new home is insured, so you need a policy in place before closing day.
Your real estate lawyer facilitates this by delivering your insurance information to your mortgage provider as part of the closing process. If you are lining up the rest of your purchase, it is worth sorting insurance alongside your mortgage and the other steps in our tips for first-time home buyers.
Frequently asked questions
Is home insurance mandatory in Ontario?
It is not required by law, but mortgage lenders require proof of property insurance before releasing funds. If you are financing your home, you will need a policy in place before closing. Buying without a mortgage, it is still strongly advisable.
How much does property insurance cost?
It varies with the home's value, location, and coverage, but a rough anchor is around $100 a month. Getting several quotes is the only reliable way to know what your specific home will cost to insure.
What is the difference between property and liability coverage?
Property coverage pays to repair or rebuild your home and replace contents after a covered event like fire. Liability coverage protects you if someone is injured on your property or you damage someone else's property. A good policy includes both.
What is the difference between property insurance and title insurance?
Property insurance covers physical damage and liability. Title insurance covers ownership and title-related risks, such as fraud or a defect in title. They protect against different things, and most homebuyers carry both.
Do you need insurance before closing?
If you have a mortgage, yes. Your lender requires proof of insurance before it releases funds, and your real estate lawyer delivers that proof to the lender, so your policy needs to be active by closing day.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus on Ontario real estate law and handle the closing for your purchase, including delivering your proof of insurance to your lender so your mortgage funds can release. You can start your closing online or get in touch with any questions.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
