Home Insurance vs Building Insurance

Your standard home insurance policy contains three main pieces: building insurance, contents insurance and liability insurance. While liability covers you for lawsuits, you may wonder: what is building and contents insurance?

Essentially, building (or dwelling) insurance covers the structure you live in, and contents (or personal property) insurance covers your stuff.

Is building insurance the same as home insurance?

Home insurance is a policy containing the coverage you need to protect all aspects of your home. Building insurance is one of those coverages. It’s also found in condo insurance and landlord policies.

Building insurance is critical if you own the building or unit you live in. It protects you by covering the cost of repairing or replacing your home or any attached structures, like a backyard deck.

The damage is insured if it was caused by a named peril. These typically include:

• Fire
• Smoke
• Electricity
• Wind
• Explosion
• Vandalism
• Vehicle Impact

You may notice this list is shorter than what’s on many home insurance policies. That’s because building insurance is the basic coverage – perils like water damage, natural disasters and sewage backup, while fairly common, aren’t listed in building insurance and must be added as optional endorsements. However, most comprehensive home insurance policies will often include some add-ons for your convenience.

As part of a policy, building insurance is often the most valuable. The idea of paying out of pocket to rebuild even part of your home after a fire is enough to keep anyone up at night. That’s why it’s also generally the most expensive part of home insurance.

How much building insurance do you need?

When you buy a policy, the insurance company will determine how much building coverage you need based on the cost to completely rebuild your home.

They’ll look at the price of construction in your neighbourhood, the size of your home, the number of stories, its age and style.

These determinations are important because they’ll help decide the cost of the other parts of your policy. For example, your contents coverage is usually valued at about 50% of the building coverage.

For this reason, you should have your building re-appraised whenever you make a major change; like if you decide to finally do that major renovation you’ve always dreamed of and it rightfully raises the value of your property, or you add an extension to your house, increasing your square footage. Suddenly, the cost to rebuild your house is higher than when you first purchased home insurance, and your building insurance coverage may no longer pay for a complete reconstruction.

What is builders risk insurance?

Regular building insurance won’t protect your home during construction or renovation. Many contractors will actually require builders risk insurance before starting a project.

This coverage will protect the building, any on-site construction materials and personal liability. It kicks in as soon as the job starts and is the property owner’s responsibility. Keep in mind that it won’t cover water damage, mechanical problems or faulty construction.

But when does builder’s risk insurance end? Coverage only applies as long as construction or renovation is in progress. Once the project has wrapped, so does your insurance.

Do you need building insurance on a leasehold property?

Your insurance needs when leasing depend on your contract. Are you considered a tenant or an owner?

People often ask about building insurance for rental property. It’s simple – if you don’t own the building, you don’t need building coverage. But in cases like condos, where you own your living space is within someone else’s building, you still need building insurance to protect the part of the structure that belongs to you.

If a heavy storm hits your building and damages both your home and the area around it, your dwelling coverage will cover the costs to repair your unit. You don’t need to worry about the hallway or elevator because it legally belongs to someone else.

Can you insure a building you don’t own?

As a tenant, you might be worried that your building owner doesn’t have insurance. Are you protected? Luckily, this responsibility doesn’t fall on you. You can protect your possessions with renter’s insurance, but the building must be insured by the property owner.

What kind of home insurance do you need in the GTA?

Officially, home, condo and tenant insurance aren’t mandatory in Ontario, but you’ll often need coverage to rent from a landlord or take out a mortgage. And the financial protection doesn’t hurt either.

It all depends on where you live. If you own a home, basic home insurance will pay for repairs to your house, compensate you for personal possessions when stolen or destroyed, and protect you legally if someone’s injured on your property.

Similarly, condo insurance will provide the necessary coverage on a smaller scale when you live in a unit, and tenant insurance will protect your belongings within a rented space.