Thinking of Skipping Home Insurance in B.C.? Your Lender Won’t Let You

If you’re buying a home in British Columbia, you may be wondering: is home insurance required by law in Canada? The short answer is no — but if you need a mortgage, your lender will almost always require it.

Here’s everything you need to know about home insurance and mortgages in B.C., and why your lender insists on it before releasing the funds.

Is Home Insurance Mandatory in B.C.?

Not legally required: Unlike car insurance, there’s no law in Canada or B.C. that forces you to insure your home.
Required by lenders: If you’re taking out a mortgage, the bank or credit union will demand proof of home insurance as a condition of funding.

Without insurance, your home (the lender’s collateral) isn’t protected. If the property is destroyed, the lender risks losing the money they loaned you.

Who Is Named on the Home Insurance Policy?

Policyholder: You, the homeowner.
Mortgagee (Loss Payee): Your lender.

The policy is always in your name, but your lender must be listed as the first loss payee. This ensures that if your house is destroyed, the insurance company pays the lender first to clear your mortgage. Any remaining funds then go to you.

What Happens if You Cancel Home Insurance?

If your home insurance lapses or you cancel your policy:

Your insurer notifies the lender.
The lender demands proof of new coverage.
If you don’t provide it, they can purchase “force-placed insurance.”

⚠️ Force-placed insurance is expensive and only protects the lender’s interest — not your belongings, liability, or additional living expenses.

What Does Home Insurance in B.C. Cover?

A standard homeowners policy usually includes:

🏠 Dwelling coverage (the structure itself)
📦 Personal property (furniture, clothing, electronics)
⚖️ Liability (injuries or damage on your property)
🚪 Additional living expenses (if you need to live elsewhere temporarily)

Optional Add-Ons in B.C.

Because of unique risks, many homeowners also add coverage for:

Earthquakes
Floods and sewer backup
Wildfires
Service line failures

Don’t Confuse Home Insurance with Mortgage Insurance

Home insurance protects your house and belongings.
Mortgage default insurance (CMHC, Sagen, Canada Guaranty) is required if your down payment is under 20%. It protects the lender, not the homeowner.
Mortgage protection insurance is optional coverage that helps pay your mortgage in case of death, disability, or job loss.

Why Your Mortgage Lender Requires Home Insurance

Your lender has one priority: protecting the money they loaned you. That’s why they:

Require insurance before releasing mortgage funds.
Monitor your policy and get notified of cancellations.
Place their own insurance if you don’t maintain coverage.

Final Word

Home insurance in B.C. isn’t legally required, but it is essential if you have a mortgage. It protects you, your home, and your lender’s financial interest.

👉 Before you close on your new home, make sure you shop around for the right coverage. Compare providers, consider add-ons like earthquake insurance, and double-check your lender is listed as the mortgagee.

✨ Need advice on how home insurance ties into your mortgage approval? Reach out today — I can guide you through what lenders look for and connect you with trusted insurance partners.