The Ins and Outs of Home Insurance
Published with permission from the Insurance Bureau of Canada.
Home insurance coverage can vary from one company and policy to another, so it pays to ask questions before you buy. While this list isn’t meant to be exhaustive, it will start you off on the right track. Understand your insurance. Make it your policy.
- What kind of home/tenant/condo/mobile home insurance coverage do I have?
- What’s not covered in my home insurance policy?
- Are there certain risks or potential hazards to my home for which I can’t buy insurance?
- Is optional coverage available for hazards/risks that are not normally included in my homeowner’s policy?
- What things could happen to my property that won’t be covered, unless I make special arrangements?
- What are some belongings that might require additional insurance?
- What is the deductible? Give me the price of my home insurance coverage with some different deductibles.
- Am I entitled to any discounts and/or is there anything I can do to get a discount?
- On what basis are claims going to be paid?
- What kind of liability coverage do I have and how much?
- I’m going on sabbatical for a year and renting out my home. Does my home insurance cover any damage that the tenants may cause? Will my home insurance protect me if they end up stealing my TV, stereo and bedroom furniture? Do I need special insurance?
1. What kind of home/tenant/condo/mobile home insurance coverage do I have?
a) Some policies cover only “named perils” – in other words, if the “peril” (the cause of the damage) isn’t listed on your policy, it isn’t covered. This is generally referred to as a standard policy.
b) Other policies cover named perils on the contents of your home and “all risks” on the building. “All risks” provides insurance for losses due to a wide range of causes. But instead of listing what is covered, an all risks policy lists what is EXCLUDED, or NOT covered. This is generally referred to as a broad form policy.
c) Still other policies cover all risks on both the building and its contents, but are still subject to some exclusions. This is generally referred to as a comprehensive policy.
2. What’s not covered in my home insurance policy?
This is very specific to you. Only your broker or agent will be able to answer this question.
3. Are there certain risks or potential hazards to my home for which I can’t buy insurance?
No policy covers everything that could go wrong. And if it did, the premiums would cost too much to be useful. Insurance is intended for unforeseeable events. Flooding, for example, generally cannot be insured against, that’s usually because such damage is inevitable. After all, a house built in an area which can be flooded … eventually will be flooded. That’s what Mother Nature does on flood plains!
4. Is optional coverage available for hazards/risks that are not normally included in my homeowner’s policy?
Yes, for example, if you live in an earthquake zone, you might want to consider buying earthquake coverage or if you are worried about water damage from a blocked drain, you might want sewer back-up coverage. Discuss which options you may need with your insurance representative.
5. What things could happen to my property that won’t be covered, unless I make special arrangements?
Here’s one example. Damage arising from the freezing of indoor plumbing is seen as preventable. So, if you are away from home for more than four days during the normal heating season, you must drain the plumbing or arrange to have your home checked daily by a competent person to ensure that heat is maintained. If you do not make these arrangements and your pipes burst, you may end up holding the clean-up bill along with a mop and pail. Ask your insurance representative about other conditions that may apply to you.
6. What are some belongings that might require additional insurance?
The dollar limits to replace stolen cash, or garden tractors, watercraft and computer software are relatively small. Coverage limits may apply also if the following are stolen: *bicycles, jewelery, watches and furs, coin, stamp and *card collections. Reasonably priced supplementary insurance is usually available. This supplementary insurance, often called “riders” or “floaters”, provide extended coverage for these specific items. Coverage can be worldwide and there’s usually no deductible. Discuss the items that you may want specifically listed to be insured with your representative.
* There are no limits on bicycles or card collections in policies in Quebec.
7. What is the deductible? Give me the price of my home insurance coverage with some different deductibles.
The higher the deductible (the portion of a claim that you have to pay), the lower the premium. Compare the premium with different deductibles, and then decide whether the lower premium is worth the higher amount you would have to pay out of pocket if you had a claim.
8. Am I entitled to any discounts and/or is there anything I can do to get a discount?
Many insurance companies offer discounts to policyholders who have newer homes, who have installed safety features like smoke detectors and burglar alarms, and who have made no claims for a certain period of time. Some are even giving discounts to non-smokers! So you can quit smoking or install a burglar alarm! Whatever the case, make sure you get all the discounts to which you are entitled.
9. On what basis are claims going to be paid?
Most claims on home policies are paid on a replacement cost basis, meaning that the insurance pays the cost of replacing the damaged or lost belonging with a new one that is as close to the original as possible in functionality and quality. However, some policies may pay only actual cash value, which means replacement cost LESS depreciation. Ask your insurance representative what you have. Of course, you have to actually replace the belonging in order to receive replacement cost for it.
10. What kind of liability coverage do I have and how much?
You are covered for unintentional property damage, bodily injuries for which you are legally responsible anywhere in the world as well as legal costs if you are sued. A minimum limit of $1 million is recommended. Ask your insurance representative about the specific coverage in your policy.
11. I’m going on sabbatical for a year and renting out my home. Does my home insurance cover any damage that the tenants may cause? Will my home insurance protect me if they end up stealing my TV, stereo and bedroom furniture? Do I need special insurance?
First, whenever you have a lifestyle change like this, tell your insurance representative because there will usually be restrictions on such things as theft and damage by tenants. He/she can outline these restrictions so that you can be take precautionary measures. Other lifestyle changes that warrant a phone call to your broker include: home renovations, home exchange programs, running a small business from your home, installing a home security system, purchasing a cottage/boat etc.
For more information about home or tenant insurance in your region, contact us or call the Insurance Bureau of Canada and ask for the booklet:Home Insurance Explained, or visit IBC on the Internet at http://www.ibc.ca. Insurance Bureau of Canada (IBC) represents the private (non-government) insurance companies that protect your car, home, and business. If you want more information about these topics or if you have any questions about insurance besides life insurance please call your regional IBC office.