Home Insurance FAQ
Why Do I Need Insurance?
Your most valuable material possessions are probably your home and its contents. Could you afford to replace them? No? Then you need insurance to protect your belongings and help you meet your potential legal obligations to others. If you have a mortgage for example, your bank will require such insurance coverage.
Are there different levels of insurance?
There’s a policy to suit every wallet.
Standard/Good: This form of home insurance (this explanation is based primarily on this type) provides coverage against specific perils on buildings and contents.
Broad/Better: Another type provides "all-risk*" coverage on buildings, and coverage for specific (often called "named") perils on contents.
Comprehensive/Best: For a somewhat higher premium, you can buy "all-risk" coverage on both buildings and contents.
NOTE: Even though the term "all-risk" is commonly used, there are still some exclusions.
When should i buy home insurance and how much should i get?
Insurance coverage on your home should begin as soon as you become the legal owner, even if it is still under construction. If you are borrowing money to pay for your home, the lender will usually require you to insure the building for the un-depreciated amount that it would cost to replace. Your broker will help you to determine that amount. Remember, however, that land is not insurable. (Many lenders still tend to look for insurance in the amount of the mortgage - which, of course, includes land value - unless the insurer provides information that the dwelling itself is insured to its replacement value, being what it would cost to rebuild the home if it were destroyed.)
Inventory: do you know what you own?
How much insurance you need depends, in part, on contents. An up-to-date inventory is important to record items and their value in order to help your insurer, police and others in the event of a burglary or fire, for example. Some people like to make a drawer-by-drawer, room-by-room video recording of their possessions; some use a regular camera. An audio cassette recorder could be useful for making a spoken list of collections (books, tools, stamps, and so on); this would capture more detail than you could achieve with a camera. Hand-written or typed descriptions are also useful. Keep purchase receipts for major items. Store your inventory records in a safety-deposit box or other secure location. If you would like an inventory please reference our Residential Inventory Checklist.
What are deductibles?
Your insurance policy will require you to pay an agreed amount of certain losses. The higher the deductible, the lower the premium. Deductibles in homeowner policies generally are $500; this means that you pay the first $500 of each claim and the insurer pays the rest. For example, if your policy specifies a $500 deductible and you experience a loss of $2,000, you are responsible for the first $500 and the policy responds to cover the balance of $1,500. Know the deductibles that apply to your policy before you need to make a claim.
What is the difference between replacement and depreciated values?
Suppose that your old TV is stolen. A new one (replacement) may cost ten times more than the depreciated price of a used one. The choice is yours; it can be worthwhile to pay a higher premium in order to replace "used" with "new". Regardless of your policy type, cash settlements are usually based on depreciated value. You must actually buy a new replacement article to receive replacement value from your insurer.
Who is covered under my homeowner's policy?
When the text of an insurance policy uses the words "you" or "your", it’s usually referring to the person(s) who is (are) named on the coverage summary page. The policy also includes, while living in the same household, that person’s spouse, the relatives of either or any person under 21 in their care. Common-law husband-and-wife unions are recognized for insurance purposes if a man and a woman have lived together continuously for three years or for one year if they have a child together. It may be possible for your policy to be expanded to cover property that you are storing temporarily for people who are not members of your household.
What's a "dwelling"?
Your dwelling coverage applies to your home and attached structures such as a garage or carport. Permanently installed outdoor equipment on the premises (a swimming pool and attached equipment, for example) is included. Building materials are also covered.
You may apply up to 10% of the amount of insurance on your dwelling to insure building fixtures and fittings, such as mirrors or air conditioners, which have been temporarily removed for repair or seasonal storage. You may apply up to 5% of your insurance to trees, plants and shrubs; but there’s often a limit for any one item. Lawns aren’t insured. Check your actual policy wording for specific limitations.
What other buildings are covered?
Separate structures and buildings on the same premises as the primary dwelling are also covered for specified amounts, usually up to 10% of the main coverage. This could apply to detached garages, for example, or even to garden sheds. If 10% seems too low, consider buying additional coverage.
About Cottages: If you have a cottage, you may want to insure it separately, or you may wish to have it insured on the same policy as your home insurance. Coverage is usually more limited than with dwellings that are occupied year-round and are close to watermains, police and firefighting services. Burglary can be purchased, but not theft; in other words, for a claim to be considered, there must be signs of forcible entry. Vandalism and malicious acts are not covered either, but can often be purchased separately. In winter, make sure that snow does not accumulate on the roof; a collapse due to the weight of snow would not be covered. Your broker can explain further. With cottage insurance, it’s particularly important to invest whatever time it takes to be certain that you understand the policy’s limits before you agree to coverage. Remember to include outbuildings, fences, and so on when calculating the coverage you need.
Are business premises and vacant buildings "homes"?
No. Loss or damage to a dwelling or its contents is not normally insured if the building has been used for business or farming, or has been vacant for more than a month without your insurer’s prior approval.
What is covered under my homeowner's policy?
You personal property (but not business equipment) is covered. Your homeowner’s policy will cover the contents of your home and other personal property, including clothing, cameras, furniture, etc… that you own, wear or use while on your premises. It may even cover personal property of others that are not related to you, excluding boarders. Your policy will normally cover personal property (up to 10% of the amount of insurance on your personal property) while it is temporarily away from your home anywhere in the world. Personal property not normally kept at home is not covered. Personal property in a warehouse is usually covered against theft.
A note about theft: Some policies cover theft (no signs of forcible entry); most will cover burglary and robbery. "Mysterious disappearance" is not part of a basic policy (example: a wedding ring left by mistake in a blouse pocket is nowhere to be found at the end of the washing machine’s spin-dry cycle).
What are the special limits of insurance?
Business equipment (but not samples and merchandise for sale) is covered only while on your property, usually only up to $1,000.
Relatively small dollar limits apply to negotiable securities, cash, garden tractors, watercraft and computer software; read this section of your policy carefully!
Dollar limits apply also if the following are stolen: jewelry, watches, gems, fur, coin collections, stamps collections, manuscripts, and silverware.
About "floater" policies or wordings: Reasonably priced supplementary insurance is usually available. These policies or riders provide all-risk coverage for specific items - often fragile and/or valuable - subject to certain exclusions. Coverage can be world-wide. There’s usually no deductible and "mysterious disappearance" is covered.
In the case of a claim, what additional living expenses are covered?
If an insured peril (see next question) makes your home unfit to live in, and you have to move out while it is being repaired, your insurer will cover any necessary increase in living expenses, including moving costs, so that your household can maintain its normal standard of living. Payment, usually not exceeding 20% of the building coverage amount, is limited to the reasonable time required to repair or rebuild your home, or for you to settle elsewhere.
Fair rental value: If you lose a tenant because of an insured peril, your policy will cover fair rental value for the reasonable time required for repairs or rebuilding. Rent-related expenses (heating or electricity, for example) that don’t continue during reconstruction aren’t covered, nor is a lease cancellation. The total coverage available under this provision, too, is limited to a percentage of the building coverage amount.
Access denied: If the police or other civil authorities deny you access to your home as a direct result of damage by an insured peril to neighbouring premises (or perhaps because of an event such as a forest fire), you may be reimbursed by your insurer for additional living expenses and/or lost rental income for up to two weeks. Additional coverage is sometimes available in the event of mass-evacuation (following a toxic spill from a train wreck, for example). As this is a relatively new form of coverage, be sure to check your policy wording carefully.
What perils are insured?
Insurable perils can include:
- windstorm or hail (contents are covered only if storm has first created an opening in the building; coverage for this peril does not include outdoor antennas nor damage from melting snow and ice, waves, and floods ).
- explosion (does not include vibrating pipes, known as "water hammer")
- water escape from - or rupture or freezing of - a plumbing, heating, sprinkler or air-conditioning system or domestic appliance
- sudden release of smoke (but not from fireplaces)
- impact by aircraft or vehicle
- vandalism while building is normally occupied
- glass breakage in a building that is normally occupied
- transportation (of personal property while it is temporarily removed from your home; includes building fixtures and fittings being repaired or in seasonal storage)
- falling object (not including objects propelled by snowslide or earth movement)
- earthquake coverage is sometimes available as an extra-cost option
Oil Damage: Contamination of property is not normally covered, but optional coverage is sometimes available for spills of furnace oil.
Water Damage: Water escape is an insured peril that is often misunderstood. It means accidental discharge or overflow of water or steam from within a plumbing, heating, sprinkler or air-conditioning system, appliance, pool (and related equipment) and public water mains. This could be due to freezing, or due to cracking or bursting from a variety of causes (including excess pressure, or lack of water in a furnace). Excluded are floodwater (from an overflowing creek, for instance), water seepage that is repeated or continuous (from a cracked basement wall, perhaps), sewer backup, malfunctioning sump pumps, leaky eaves troughs and downspouts. Coverage for sewer backup may be available for an additional premium.
Freezing Damage: Your policy will not normally cover damage caused by freezing that occurs during the usual heating season if you have been away from your premises more than four days. However, if you had arranged for a competent person to enter your home daily to ensure that heating was being maintained, or if you had shut off the heater supply and had drained all the pipes and appliances, you would still be insured. Damage from freezing outside the home is not covered.
Lack of Maintenance: An insurance policy is not a maintenance contract! Your insurer would not consider a claim for damage if, for example, a wall of your bedroom were to be soaked by water leaking from a rusty outside eaves trough or downspout.
Hot Property: Illegally acquired property is not covered (including stolen goods). Some insurers won’t cover imported items which have not been declared to Canada Customs. Still on the subject of "hot" property, direct damage resulting from the application of heat is not covered. For example, clothing scorched by an iron would not be covered, because the heat was applied intentionally. But if the iron set the clothing on fire and the flames spread to the room and its contents, that damage would be covered. Intentional damage caused by you or damage that results from criminal activity is not covered.
Moving: Discuss your coverage with your insurance broker - and your moving company - before you move. Your regular policy doesn’t include coverage for moving.
What is liability coverage and to what does it apply?
Personal liability insurance is rather like third-party liability car insurance, but for the owners and occupants of buildings. It applies anywhere in the world to bodily injury you may unintentionally inflict on others, or to your accidental damaging of their property. At your home, for example, suppose a visitor or a household employee were to be injured by a falling brick, and you were judged to be legally responsible; there would be no deductible and you would be covered for legal liability arising out of your personal actions. This coverage does not apply to injuries sustained by you, however, nor to members of your immediate household. Also, there’s no coverage for "punitive" damages assessed by a court as punishment for your actions.
Trailers, boats, golf carts: Your liability insurance automatically covers for losses arising from your ownership or non-business use of:
- small boats (see your policy for exact limits and talk to your broker about coverage for larger craft);
- golf carts on a golf course;
- self-propelled lawnmowers, snow blowers, garden tractors (used mainly on your own property);
- motorized wheelchairs. Liability coverage for all-terrain vehicles (ATVs), snowmobiles, and similar vehicles must be purchased separately under an automobile policy.
Business and business property: Home insurance is not business insurance. However, you are insured against claims arising from the occasional rental of your home to others (with certain restrictions pertaining to boarders).
Legal defense and settlement: If someone alleges that you are responsible for injuring him or her - or for damaging his or her property - your insurer will defend you against any resulting suit for compensation, even if the suit is groundless, false or fraudulent. (The suit must be related to your insurance coverage.)
Note: Your insurer has the right to investigate, negotiate and settle any claim or suit as it sees fit. Legal insurance - a product that is unrelated to property and casualty insurance - might be useful in the event that you were to disagree with your insurer’s settling out of court on your behalf.
Voluntary payments: You may not be legally responsible for accidentally injuring someone or damaging someone else’s property, but you may feel morally obliged to make amends. Or you may wish to reimburse others for direct property damage caused, even intentionally, by a child (12 years of age or younger) in your household. That’s where "voluntary payment for damage to property" and "voluntary medical payments" coverage can be useful. (Although this provision can apply to loss or injury experienced by household staff, members of your household are not covered.)
What do i need to know about making a claim?
Most claims are subject to a policy deductible. (Deductibles help make insurance more affordable for everyone by eliminating minor "nuisance" claims.) There is no coverage for losses that result from criminal behaviour by the policy-holder. And you can’t claim for the amount (if any) that exceeds the sum insured.
If you have suffered a loss for which you are insured, inform your insurance broker of the nature of your claim. If there has been a burglary or theft, the police must also be informed. You’ll be required to supply information about the circumstances of the claim as well as reasonable evidence to justify the amount claimed. Your insurer will want an accurate description of items stolen, for example, and will want to know when they were acquired and what they cost at that time.
A claims adjuster may then be appointed - at no cost to you - to look after the details. In liability claims, he or she will attempt to assess responsibility. You should take reasonable steps to protect against additional damage. If a pipe has burst, for example, shut off the water supply. In some instances, your insurer may arrange assistance for temporary repairs, such as covering a damaged roof, or boarding over a broken picture window.
Why is it important to read your policy carefully?
Home insurers are very competitive and there can be many differences from one policy to another. While this makes it easier to shop for the policy that most closely meets your needs, it does mean that you should read the text carefully and ask for clarification if there’s anything that you don’t understand. When you read an insurance policy, you’ll want to know:
- Who is covered?
- What property is covered?
- What "perils" are covered? A peril is an event that can cause damage - an event such as fire, theft or wind. Even riot is a peril!
- What is excluded? Exclusions may apply to the persons who are covered, the property covered, the perils insured against, or the location where coverage applies. Not every circumstance can be covered by an insurance policy. Normal wear-and-tear and deterioration of property is not insurable; you should check your policy for other exclusions.
- What extensions of coverage are available? Often called "riders", "forms" or "endorsements", some policy extensions are automatic, while others are optional and/or conditional.
- What are the conditions of coverage and what do you have to do to make sure that coverage continues?
- What do you do if there’s a loss? How do you make a claim to recover a loss?
What if i don't understand all this?
When you buy home insurance, you buy peace of mind. Insurance is a product that works best when both sellers and buyers are knowledgeable. If you have questions that are not answered that have not been addressed, all you have to do is ask one of our experts. Contact Us!