Do you need home insurance to get a mortgage?

Most mortgage lenders require your property to be fully insured for its total replacement cost, as they want to make sure your home can be rebuilt in the event that it’s totally destroyed.

While most people know you’re legally required to have car insurance before driving a new vehicle, there’s no similar legal requirement for buying a home. But if you’re taking out a mortgage on a property (which most homeowners do), you’ll have to provide the lender with proof of insurance — so yes, you do need home insurance to get a mortgage. We’ve got the answers to your questions about why mortgage lenders require home insurance, how much home insurance coverage you’ll be required to have, and more.

Why do you need proof of insurance to get a mortgage?

When someone lends you money to purchase a property, they count on you being able to pay them back, which means they have an investment in your property. Because they have an investment in it, a mortgage lender wants to make sure your property is fully covered in the event of damage or a catastrophic loss caused by a fire, hurricane, or other peril. By requiring you to have home insurance, the lender is protecting their investment.

The lender also wants to make sure that you’re financially able to continue paying off your mortgage even in the event that your property is destroyed. You likely wouldn’t want to continue paying for a home you can’t even live in, but your mortgage doesn’t just disappear, and you’ll still be required to pay it off. So, while the lender is protecting their investment by requiring you to have property insurance, they’re also protecting you from the financial hardship that would result from defaulting on your mortgage (or failing to pay) if your home is destroyed.

What is the minimum amount of home insurance coverage you need when you have a mortgage?

Most lenders require your property to be fully insured for its total replacement cost, as they want to make sure your home can be rebuilt in the event that it’s totally destroyed. Generally speaking, the coverage recommendation provided by your insurance company will be enough to meet your lender’s requirements.

Some lenders only require you to have insurance coverage for the amount you still owe on your mortgage — but this generally isn’t recommended, as it could leave you without adequate coverage in the event of an emergency.

What types of home insurance coverage are required by mortgage lenders?

Generally speaking, your mortgage lender will require that your home at least be protected against the following perils, which are included in most basic home insurance policies:

  • Theft and vandalism
  • Falling objects
  • Fire and lightning
  • Hail and wind damage
  • Frozen pipes
  • Riots or civil unrest
  • Smoke
  • Explosion
  • Vehicles

Depending on where you live, your lender may also require coverage for other perils, like windstorms, sewer backup, overland water (water entering your home from outside), or earthquakes. When you have an outline of the specific coverages required by your lender, your home insurance broker can help make sure you’ve checked everything off the list.

Should you get more home insurance coverage than what’s required by your mortgage lender?

Yes, you should get enough coverage to protect yourself and your property, regardless of the amount required by the mortgage lender. Since a mortgage lender’s main priority is making sure your property itself is covered, their requirements won’t account for your personal needs. Talk with your insurance broker about your situation to make sure you’re fully covered with adequate coverage for your belongings and a high enough third-party liability limit.

Coverage for your belongings

In addition to making sure you have enough coverage to rebuild your home in the event that it’s totally destroyed, you should also take a detailed home inventory and get enough coverage for all of your belongings. If you have any specialty belongings or valuables like jewelry, artwork, bicycles, collectibles, or antiques, you should get the right coverage for those, too.

Third-party liability coverage

You should also make sure you have enough third-party liability coverage This coverage protects you if you’re responsible for an injury or damage to someone else’s property. It covers things like legal fees, lawsuit settlements, and other related expenses — up to the limit in your policy, of course. Most home insurance companies automatically set your liability limit at $1 million. While this may be enough to cover most liability claims, many claims exceed $1 million, so consider increasing your limit. This is especially important if there’s anything on your property that could increase the chances of someone getting hurt (a swimming pool, a swing set, or pets, for example).

When you’re shopping for a new home, a licensed insurance broker can help make sure your coverage meets your mortgage lender’s insurance requirements. They can also help you compare home insurance quotes and make sure you get the coverage you’ll need in the event of an emergency.


Hail: When the sky falls down.

Ice precipitations in the summer? It’s a much more common natural phenomenon than you would think, particularly in Alberta.

Those who have been in one of the many record hailstorms in recent years can attest to the fact that although they generally only last a few minutes, they can have devastating effects. In addition to the major hail events that made the headlines, there are dozens of hailstorms every year that cause significant damage.

How is hail formed?

Hail forms inside thunderclouds when air currents push water droplets to colder areas at high altitude, where they condense and freeze. When the pieces of ice get too big (hail can be the size of a grapefruit or even a melon!), they fall to the ground with speeds of up to 130 km/h.

Hailstorms occur mainly between May and October across Canada, but are most common in Alberta, the southern Prairies and Ontario. Alberta’s climate is particularly prone to hail because of its elevation and proximity to the Rockies.

Preventing hail

Radar stations monitor hail formation, and airplanes are ready to attack the clouds with an aerosol that can lessen the damage hail can cause. Science fiction? Not at all. This procedure is part of the Hail Suppression Program in Western Canada, thanks to a partnership between Intact Insurance and the Alberta Severe Weather Management Society.

How to prevent damage

Although most hailstorms pose minimal risk, when ice melons fall from the sky, they can cause serious damage to buildings and cars. Here are a few tips:

The essentials

  • Remove dead tree branches that may damage your house due to hailstones or high winds.
  • Store or attach all objects in the yard that may be damaged or swept away by the wind (furniture, BBQ, bicycles, toys, etc.).
  • If possible, park your vehicle in a garage or carport. Otherwise, cover it with a thick blanket or large boxes to minimize damage.
  • Close the curtains, shades and blinds in your house to restrict any flying glass should the windows break.
  • Stay indoors—hail can hurt you.

In case of hail

  • If you’re on the road, park your car away from trees and electrical wires that may fall on you. Stay there until the hail stops.
  • If there’s no safe place to park, cover your car with a thick blanket or put your car mats on the windshield and on the roof.
  • If you’re at home, stay away from windows, glass doors and skylights that could break if hit by hail.

An ounce of prevention…

  • Install impact-resistant shutters on large windows and glass doors.
  • Have your roof checked every year. And if you replace it, opt for the strongest materials.
  • Leave thick covers in your car.
  • Sign up for a weather alert service so you’ll know to prepare when a storm is headed your way.

If your vehicle or property is damaged by a storm, don’t panic. Repair or replacement costs may be covered by your car or home insurance. If you have any questions, don’t hesitate to contact your insurance broker.


Why residential fire frequency is up.

The surge in people working from home has brought an increase in home cooking fires, risk and insurance professionals observe.

“You are seeing a spike in residential fires in condos and rental units because people are at home more and cooking more,” said Jeff McCann, CEO of Apollo Insurance Solutions Ltd., in a recent interview with Canadian Underwriter.

Since COVID-19 was declared a pandemic this past March by the World Health Organization, millions of Canadians who normally work from their office have been working from home.

Some get distracted when they are trying to cook, said Michele Farley, president of FCS Fire Consulting Services Ltd.

“Some people are putting cardboard in ovens and putting items such as metal in the microwave oven that should not be there,” Farley told Canadian Underwriter.

One fire department has advised consumers to take their pizza out of the box before heating it, reported Farley.

In Ontario, fatal home fires are up 65% since January compared to this time frame in 2019.

“Similar increases are being seen across the country. The numbers are alarming. This applies not just to single-family homes, but also to condominium buildings and multi-tenant buildings,” said Farley. “At a time like this, it is critical for brokers to share fire safety reminders.”

In particular, said Farley, brokers could advise clients to:

  • Ensure all occupants know what to do in case of emergency;
  • Have a plan to escape from a fire and a pre-arranged meeting place outside;
  • Always be alert when cooking;
  • Only smoke outdoors; and
  • Always use a safe method of extinguishing cigarette butts – such as putting them in an ashtray and not discarding cigarette buts in a planter.

About 4.7 million Canadians who do not usually work from home did so during the week of March 22 to 28, Statistics Canada reported earlier. When those who usually work from home were included in the statistics, 39.1% of the labour force, which is 6.8 million Canadians, worked from home that week.

The increase in cooking fires could change the way property insurance is underwritten, said McCann. In particular, there could be a shift in the questions brokers and agents ask consumers who are applying for renters’ insurance. For example, there could be less emphasis on the quality of construction and the building’s fire safety systems, and more emphasis on what the rental units are used for and how often the clients are home, McCann suggested.

Recently, LexisNexis Risk Solutions wondered if usage based insurance would be a good idea for homeowners the way drivers use it for auto insurance.

“Every stovetop, water pipe and door hinge is on full tilt when a home is fully occupied all day, every day,” said Dan Davis, director of IoT and emerging markets with LexisNexis Risk Solutions. “So it stands to reason that certain claims will naturally trend higher than others in those times.”

McCann was asked how easy it is for a home insurer to differentiate a good fire risk from a bad fire risk without asking a tenant questions they may not be able to answer.

FCS provides fire safety consulting to managers of more than 1,000 buildings with an average of about 100 people a building.

Apollo is an insurtech whose technology is intended to cut down the amount of time it takes a broker to process an application. Apollo Exchange offers Canada’s brokers access to multiple insurance providers, with over 500 classes of insurance.