Is Home Insurance Required by Law?
Home insurance and the law
Home insurance is not legally required by law in Ontario, but it is highly recommended as it can provide financial protection for your home and personal property.
While it is not mandatory by law, most mortgage companies will require you to have home insurance in place as a condition of the mortgage loan. That is because, if the property is damaged or destroyed and there is no insurance in place, the lender may not be able to recover the remaining mortgage amount from the borrower. So, even though it is not required by law, it is a good idea to have home insurance in place to protect your property and personal belongings.
Some possible scenarios:
Your lender will be notified of a lapse in insurance.
Your home insurance provider will notify your lender that the policy has been cancelled. Your lender may choose to find a new insurer for you (this is called “lender-placed” or “force-placed insurance”), and the premium may be higher than what you paid with your previous policy. It may also fail to cover everything that matters to you, such as your personal belongings, as the loss of these items does not affect the mortgage lender. Your mortgage lender could also send your loan into default. From there, you risk losing the property altogether to foreclosure. Your credit will also take a major hit.
Someone gets hurt on your property and decides to sue
This one may be every homeowner’s worst nightmare.
No matter the details, when something bad happens to someone else on your property, the injured party may decide to sue you for everything you’re worth (and then some). And that includes your house.
With homeowners insurance, you’ll have basic liability coverage, which should protect you from litigation fees and medical bills. The amount you’re covered for depends on your policy, but it typically begins at $1,000,000. Depending on your net worth, additional liability coverage can be a wise choice.
The same advice goes for pool owners. You’ll want to make sure your liability coverage reflects the additional risk of having a pool on your property.
By now, you’ve most likely come to the conclusion that cancelling your homeowners insurance or allowing it to lapse it probably no the best idea.
