Blog How Does A Heat Pump Affect Your Home Insurance?

Jan 25, 2024

What you need to know before investing in a heat pump

heat pump beside peonies

A heat pump system is worth considering if you're looking for ways to heat and cool your home while reducing energy bills.

Heat pumps are a reliable and well-established technology in Canada that can provide year-round comfort control for your home. They can supply heating during the winter and cooling during the summer and sometimes heat hot water for your home.

Based on the Households and the Environment Survey conducted by Statistics Canada, the proportion of heat pumps installed as the primary heating system in Canadian homes has doubled from three to six percent between 2013 and 2021. Additionally, Statistics Canada has reported that by 2023, seven percent of all Canadian households use a heat pump.

This blog post will explore heat pumps, how they work, insurance considerations, and associated costs.

Three main key takeaways about heat pumps and insurance

  • Heat pumps work by transferring heat between indoor and outdoor environments.
  • They are often set up in homes alongside a secondary heat source.
  • Canadians can get insurance for heat pumps, but not all damages are covered.

Click below to jump to key points:

What is a heat pump?
How do heat pumps work?
Insurance considerations for heat pumps
How much does a heat pump cost to install?
What to consider when comparing heat pumps for your home
Types of heat pumps
Heat pumps and insurance FAQs

What is a heat pump?

Heat pumps are highly efficient heating and cooling systems that transfer heat between indoor and outdoor environments. Unlike conventional heating systems, such as your furnace or fireplace, that generate heat, heat pumps move existing heat from one location to another. They operate on the principle that heat naturally flows from warmer to cooler spaces.

A heat pump is fully reversible, meaning that it can both heat and cool your home, providing year-round comfort.

How do heat pumps work?

Heat pumps heat or cool homes by extracting or adding thermal energy. When energy is extracted from a source, the source's temperature decreases. In cooling mode, a heat pump removes thermal energy from the home, cooling the space. This principle is like what air conditioners and refrigerators use.

There are two primary categories of heat pumps: air-source and ground-source, also known as geothermal. Air-source heat pumps take heat from the outdoor air, while ground-source heat pumps extract heat from the ground. Both types of heat pumps use refrigerant to aid in transferring heat.

  • Heating mode: Heat pumps extract heat from the outside air or ground and transfer it indoors during cold weather. The refrigerant absorbs the heat and compresses it, increasing its temperature. This warm refrigerant is circulated through the indoor unit to release heat into the living space.
  • Cooling mode: In warmer temperatures, the heat pump works in reverse. It takes heat from inside the house and expels it outside. The refrigerant in the system soaks up the heat from inside, and as it expands, it cools down. The chilled refrigerant then circulates through the indoor unit, absorbing heat from the indoor air and sending it outside.

Heat naturally moves from warmer to cooler areas, like when heat from inside a building escapes to the colder outside in winter. A heat pump uses electricity to reverse this process and move heat from a colder area to a warmer one. This way, it pumps energy from a place where it's not useful to one where it's needed.

Insurance considerations for heat pumps

When installing a heat pump, it's important to consider insurance. Certain home insurance providers may offer discounts or other benefits for homeowners with energy-efficient systems, like heat pumps.

Homeowners should also inform their insurance providers about any changes to their HVAC systems to ensure coverage in unexpected incidents.

This CBC article from November 2023 shares some insights into the importance of letting your insurer know if you are installing a heat pump so there are no surprises down the road. Some heat pumps may only regulate temperatures in a portion of a home, depending on their size and placement, which may require an additional heat source. This requires you to inform your provider about any wood stoves or other heating elements.

Turn up the heat on a lower rate for your home

Wondering how your heat source impacts how much you pay for coverage? Compare multiple quotes simultaneously with our team of brokers to find out.

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How much does a heat pump cost to install?

The cost of installing a heat pump varies depending on factors such as the type of heat pump, the complexity of installation, and regional labour costs. In Ontario, installing or replacing a heat pump can range from $6,700 to $12,000.

Here is a list* of cost considerations, depending on the type of heat pump you install compared to gas furnaces and central air:

  • Standard ducted heat pumps cost $5,000 to $9,000 to buy and install and are eligible for a federal Greener Homes Grant of $4,000 (leading to a net cost of $1,000 to $5,000).
  • Cold-climate ducted heat pumps cost $10,000 to $19,000 and are eligible for a Greener Homes Grant of $5,000 (net cost of $5,000 to $14,000).
  • Gas furnaces cost $3,700 to $4,700 or more, depending on home size and HVAC needs.
  • Central air conditioners cost around $5,000.

Consider the long-term benefits, including reduced energy bills and potential government incentives for adopting energy-efficient technologies.

*Source: CBC heat pump savings

What to consider when comparing heat pumps for your home

Heat pumps come in various sizes and types. Choosing the right one depends on your home’s layout, square footage, climate, and power source. If you are looking to install a heat pump, here are some aspects to consider:

  • Type of heat pump: Choose air-source heat pumps for moderate climates and ground-source heat pumps for higher efficiency, provided ground conditions are available.
  • Efficiency ratings: Check the Seasonal Energy Efficiency Ratio (SEER) for cooling and the Heating Seasonal Performance Factor (HSPF) for heating for better energy efficiency. Higher ratings indicate better efficiency.
  • Size and capacity: Ensuring that the heat pump's capacity is appropriate for your home's heating and cooling demands is crucial. An undersized unit may need help maintaining comfort, while an oversized unit could lead to frequent cycling and reduced efficiency.
  • Climate considerations: Your local climate dictates the choice of a heat pump. Opt for higher heating capacity in colder climates and better cooling efficiency in warmer ones. Specific heat pumps function well in extreme temperatures.
  • Ducted or ductless options: When deciding between a ducted system and a ductless mini-split system, consider the flexibility and zoning control offered by ductless systems, especially for smaller spaces or homes without existing ductwork.
  • Installation requirements: Consider the installation requirements and compatibility with your existing HVAC system. Some heat pumps may require modifications to ductwork, while others can be seamlessly integrated.
  • Costs and budget: Evaluate the upfront costs, installation expenses, and potential long-term savings on energy bills. Consider any available rebates, tax credits, or incentives that can help offset the initial investment.
  • Noise level: It is important to pay attention to the noise level of a heat pump, especially if it will be installed near living spaces. Modern models often have noise-reducing technologies, but it is essential to verify the decibel levels.
  • Brand and reliability: Research reputable brands with a history of reliability. Read customer reviews and consider warranty options to ensure long-term satisfaction.
  • Maintenance requirements: It is important to understand your heat pump's maintenance requirements, as regular servicing is crucial for optimal performance and longevity. Check if the unit has easily accessible filters to simplify maintenance.
  • Integration with smart technology: Consider whether the heat pump can be integrated into smart home systems. Some models offer Wi-Fi connectivity, enabling remote monitoring and control, which enhances convenience and energy management.

Taking the time to assess these factors carefully will help you make an informed decision and select a heat pump that best meets your home's heating and cooling requirements.

Types of heat pumps

Heat pumps come in various types and sizes, and choosing the right one depends on factors such as your home's layout, square footage, climate, and the possibility of accommodating a ducted system.

Air-source heat pumps utilize outdoor air as an energy source for heating and releasing energy into the air when cooling your home. Air-to-air heat pumps, whether ducted or ductless, are the most prevalent in Canada.

Ducted air-source heat pumps have the indoor coil in your home's ducts, while ductless counterparts have the indoor coil in a floor or wall unit. Among air-air heat pumps, which primarily regulate the air inside your home, most installations in Canada fall into two categories:

  • Ducted installation: The indoor coil is housed in a duct, where air passes over it, heating or cooling before being distributed through the ductwork to different areas in your home.
  • Ductless installation: The indoor coil is located in an indoor unit, typically on the floor or wall of an occupied space. This unit directly heats or cools the air in that space. Within this category, you may encounter terms like "mini-split" and "multi-split". Mini-split is a single indoor unit that is served by a single outdoor unit located within the home. Multi-split is Multiple indoor units distributed throughout the home and connected to a single outdoor unit.

Air-water heat pumps are a type of heating and cooling system suitable for homes that use hydronic distribution systems, such as low-temperature radiators, radiant floors, or fan coil units. These systems transfer thermal energy to the hydronic system in heating mode and extract thermal energy from the hydronic system in cooling mode, releasing it to the outdoor air. These types of heat pumps are rare in Canada.

Heat pumps and insurance FAQs

You can get home insurance in Ontario if you have a heat pump; just make sure you are clear with your broker if it is a secondary source of heating or not. This may impact how much you pay.

You might be covered depending on the cause of damage to your heat pump. You can check your documents to confirm outline policy limits and causes where you would have coverage. Normal wear and tear is usually not covered, but damage from a flood, extreme weather, or vandalism could be.

Most insurers and specialists recommend having a backup heat source with your heat pump. Depending on your climate, you may need more than a heat pump to heat your home. If you have a ducted heat pump, it may provide a stronger solution as your primary heat source.

Explore the benefits of a heat pump and how it may impact your rate

Heat pumps are revolutionizing how Canadians approach indoor climate control. With their energy-efficient characteristics and potential for cost savings, more homeowners recognize the benefits, and the adoption of heat pumps is expected to rise, contributing to both energy savings.