You've likely heard the saying, "the home is where the heart is," and it's true. Homes are where families are formed, memories are made, and futures are created. However, the average home also has a substantial amount of monetary value. Aside from the fact that the average Canadian home costs hundreds of thousands of dollars, many families also own expensive electronics, valuables and heirlooms.
That's why the majority of Canadian homeowners have home insurance. Home insurance gives you peace of mind and guarantees that you and your family are financially covered if a devastating risk or peril damages your property. However, before receiving any reimbursement, you need to pay your home insurance deductible.
If you're currently asking yourself questions like, "is my home insurance deductible too high?" or "what is the home insurance deductible average in Canada?" you're in luck.
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Continue reading to learn more about home insurance deductibles in Canada.
What is a home insurance deductible?
First things first — what exactly is a home insurance deductible?
Simply put, an insurance deductible is a fee that you pay after submitting a claim. You need to pay a deductible when you file any claim; however, we'll be focusing on home insurance deductibles in this article.
On a similar note, if you're currently looking for home insurance for your new home, you should reach out to an insurance advisor online. Insurance advisors can help you find dozens of personalized home insurance quotes in a matter of minutes. Before long, you'll be able to find a policy that meets, or even exceeds, your expectations.
Why do homeowners need to pay a deductible?
Initially, insurance providers created deductibles to discourage homeowners from filing frivolous claims (or too many claims).
In the past, homeowners submitted claims for a wide variety of reasons; many of the reasons were minute and cost very little to repair or replace. These small claims created a copious amount of work for insurance companies and caused home insurance rates to skyrocket over time.
Nowadays, homeowners think twice before filing a home insurance claim, as they know that they'll have to pay a pretty penny before receiving money from their insurance provider. In some cases, the deductible may be more than the cost of the damage, making it simply not worth the time or energy to file a frivolous claim.
How do deductibles influence insurance rates in Canada?
As you may know, the size of your deductible significantly influences the price of your home insurance rates.
Generally, you pay less for home insurance each month (or year) if you have a large deductible. On the other hand, if you have a small deductible, you'll likely have to pay more for home insurance each month (or year).
This payment system stems from the reason insurance companies introduced deductibles in the first place — insurance companies feel that homeowners with small deductibles are more inclined to file claims. Because of this factor, insurance companies generally charge these homeowners more for general home coverage.
What is the price of the average home insurance deductible in Canada?
In Canada, the average cost of a home insurance deductible is approximately $1,000. However, it's important to note that you, as the homeowner, have the power to pick the price of your deductible. Most home insurance providers offer deductible options ranging from $500 to $2,000 (with additional options in between offered in $500 increments).
Although this may seem like a lot of money to pay each time you file a claim, it's generally a tiny drop in the bucket. $2,000 is minuscule in comparison to the cost of a major roof repair or unexpected basement renovation.
Recommended price for a home insurance deductible in Canada
If you're not sure what the ideal deductible price is for your home insurance, we suggest that you start at $1,000 or $1,500. This is a happy medium that many Canadians can cover comfortably (when needed). Not to mention, this price point won't inflate your home insurance rates. With this in mind, you can see why our team considers these options to be a win-win.
Can you reduce your deductible without inflating your home insurance rate?
What a fantastic question! However, the answer isn't as straightforward as you'd assume.
Yes, there is a way that you can reduce your deductible without inflating your home insurance rates — by using an add-on referred to as a vanishing deductible.
A vanishing deductible is a unique add-on that reduces your deductible over time. Generally, for each year you go without making a claim, your insurance company reduces your deductible by 20%. This continues each year until your home insurance deductible percentage eventually reaches zero.
Homeowners should keep in mind that, like other home insurance add-ons, vanishing home insurance deductibles can cost a pretty penny.
Unfortunately, not all homeowners in Canada are eligible for this outstanding add-on. If you're not sure if you qualify for this add-on, be sure to reach out to your insurance provider. Your insurance provider will help you better understand the subtle details of your policy and help you figure out if (or when) you're eligible for a vanishing home insurance deductible.
However, if you ever get the opportunity to obtain a vanishing home insurance deductible, we highly recommend that you take advantage of the offer. We have found that most homeowners in Canada can go five to ten years without submitting a claim. If you can go this long without filing a claim, your first deductible will cost you nothing. This means that you won't have to make any upfront payments during the claim process.
Can you waive a home insurance deductible in Canada?
Yes, there are some situations in which insurance companies will waive the deductible. If this happens, you won't have to pay the deductible after making a claim.
This generally happens when a large, unexpected natural disaster strikes a specific area.
However, homeowners need to remember that not all insurance providers will waive a deductible. Be sure to reach out to your insurance provider for more information.
