What Does Home Insurance Actually Cover? A Guide for Albertans

Mike Hart
May 9
4 min read

One of the biggest questions homeowners ask is: What does home insurance actually cover? Whether you’re shopping for your first policy or reviewing your renewal, understanding what protection you really have is key to making smart choices.

Let’s walk through the different types of home insurance available in Alberta, how personal belongings are covered, and how claims are handled when disaster strikes.

The Three Main Types of Home Insurance Policies

1. Standard Policy (Named Perils)

A Standard Policy insures your home and belongings against specific risks (called “perils”) listed in your policy. Common examples include:

Fire
Theft
Lightning
Windstorm

If a loss isn’t specifically listed, it’s not covered. This is the most basic level of coverage.

2. Broad Policy (Combination Coverage)

A Broad Policy is a mix of both Comprehensive and Named Perils:

Your building (the physical home) is covered on an all-risk basis (everything except what’s specifically excluded).
Your contents (your belongings) are covered only for the listed Named Perils.

This is a middle-of-the-road option offering better protection for the structure but more limited protection for your stuff.

3. Comprehensive Policy (All-Risk)

A Comprehensive Policy provides the broadest coverage:

Both your home and contents are protected against any loss, except for what’s specifically excluded in the policy.

Common exclusions include:

Wear and tear
Mechanical breakdown
Damage from rodents, pests, or insects
Mold, spores, or fungus

While no policy covers everything, this type offers the highest level of protection for the unexpected.

Real-World Example: The Bleach Spill Test

To see how these policies work in practice, let’s use a simple example.

Imagine you come home carrying a bottle of bleach. You trip and spill it all over your carpet and your couch. Here’s how each policy would respond:

Standard Policy: No coverage — accidental spills aren’t a listed peril.
Broad Policy: Flooring (building) would be covered, but your couch (contents) wouldn’t.
Comprehensive Policy: Both your flooring and your couch would be covered (subject to your deductible).

Contents Insurance: How Payouts Work

A lot of people don’t realize there’s more to contents coverage than just the dollar limit on your policy. Most policies include replacement cost coverage, but here’s how that usually works:

When you make a claim, the insurance company will first pay the actual cash value (ACV) — that’s the used value of your damaged or lost item.
Once you replace the item with something of similar make and quality, they’ll pay the difference to bring you up to full replacement cost.

For example:

Your TV is stolen. It was worth $1,500 new, but today it’s worth $400 ACV.
The insurer pays $400 up front.
When you buy a new TV of similar quality, they’ll pay the remaining $1,100 to bring you to full replacement value.

A few things to keep in mind:

If you don’t replace the item, the ACV payout stands.
Some companies waive the requirement to repair or replace in order to get full value, but that’s usually only offered after a certain number of years of coverage or for certain types of claims. Always check your policy wording to confirm.

Why We Recommend a Home Inventory

We strongly recommend taking photos or videos of everything you own and storing them safely (online or in the cloud). It may seem tedious, but it can save you huge headaches in a claim.

Speaking from personal experience: after a theft, it’s surprisingly difficult to remember every single thing you own — or to prove that you had it in the first place.

Think about it:

How many pairs of socks do you have?
How many spatulas, gadgets, or tools are tucked away in drawers?

Photos answer those questions fast — and they remove a lot of doubt from the insurer’s mind when they’re reviewing your claim.

What About Water Damage? A Word of Caution

Water damage is a huge issue in Alberta, and it’s one of the most complicated parts of your policy. Coverage is typically broken down like this:

Sewer Backup: Water backing up through a drain, sump, or sewer line.
Surface Water: Sudden pooling of water from heavy rain or flooding across the surface.
Overland Water: Water from rivers, lakes, or flash floods entering at ground level.
Ground Water: Seepage through the foundation or underground sources.

Here’s where it gets tricky:

These coverages are layered, and only the highest applicable coverage will respond. For example:If you have both Sewer Backup and Overland Flood happening at the same time, only Overland Water coverage will respond — your Sewer Backup coverage won’t kick in.

Also:

Many companies limit water coverage amounts based on your location.
Some areas won’t qualify for certain coverages at all.
You must read your policy limits carefully.

To put it in perspective:

A $50,000 limit for Sewer Backup may sound like a lot, but once you factor in things like drying out walls, replacing a furnace or washer/dryer, and dealing with contaminated materials, it disappears quickly — even in an unfinished basement.

The Bottom Line

Every home is different, and so is every insurance policy. Whether you’re buying Standard, Broad, or Comprehensive coverage, it’s essential to:

Review your exclusions and special limits
Understand how your contents will be valued in a claim
Ask detailed questions about water damage coverage
Sit down with your insurance advisor to customize your policy

Mike Hart & Team, Powered by Switch Insurance, make it easy to understand your coverage and help you find the right protection for your home and family.

Want a no pressure review of your current policy or are you ready for a quote? Visit hartinsurance.ca to get started.