Mortgage companies in Canada require you to buy home insurance to cover the balance of your mortgage should your home need to be replaced or repaired due to fire or other damage. Here's what you need to know to help you find the right home insurance for you and your family.

If you're a first time home buyer, the prospect of choosing a home insurance policy you might be wondering how much coverage you need and what that will cost.

Home insurance is an insurance policy that you purchase to cover the cost of replacing your home and its contents in the case of a fire, damage or theft. It protects you from liability too, in the event that someone's belongings are damaged while they're in your home, or if someone hurts themselves while on your property.

All risks to your home will be protected with a comprehensive home insurance policy; natural disasters are not usually covered by insurance policies though.

Basic home insurance only covers the specific perils that are set out in the policy. This is a cheaper option since it doesn't cover as many possible hazards as a comprehensive policy. Home insurance that is broad blends comprehensive insurance with basic insurance policies.

How much coverage is necessary?

If your home were wiped off the map, your home insurance policy should cover enough to entirely rebuild and furnish your home. Get an estimate, by asking a home builder to walk through your home and tell you what it would take to rebuild; the amount of replacement coverage you'll need is based on that figure. Unique and/or expensive details add to the replacement cost; be sure to point these out. You'll need to know what kind of coverage you want, once you've determined the replacement cost of your home.

Taking an inventory of your personal possessions and the contents of your home will help you to make sure that you are completely covered and reimbursed if you have to file a claim for damages or theft.

Last, liability coverage protects you in case something takes place on your property that would make you financially responsible, such as if someone's belongings were damaged or if they were injured on your property.

What will it cost?

The cost of your home insurance policy varies depending on the amount of coverage required, as well as the deductible you choose, the neighbourhood you live in and other factors. More coverage means more cost, as a general rule.

A deductible is the amount which you are required to pay against the full cost of the damage or repairs. The deductible amount can be chosen at the time you purchase your insurance policy. In general, with a higher deductible, you have lower monthly premiums. Before you buy, it's important to shop around and ask your insurance representative if you have any questions or concerns.