What you might not know about home insurance

After years of writing every day for Ratehub.ca’s insurance business, I decided to compile a few unknowns, myths, and misconceptions about home insurance I’ve discovered along the way.

Can you own a house without insurance?

House insurance isn’t mandatory in Canada, but since you probably have a mortgage, your lender requires you to have insurance. It’s also true of a condo board, and even most landlords require their tenants to have insurance. That said, It’s a smart idea to have insurance in case you do have a significant incident like a flood or fire. 

What home insurance covers

Home insurance protects your home, valuables, and detached structures (e.g. shed, gazebo). It also covers additional living expenses if you need to live elsewhere while repairs are happening to your house. You’re protected from common incidents like fire, burst pipes, and most things that happen accidentally, not purposefully.

What is not protected by most homeowner’s insurance is less frequent perils like earthquakes and flooding from overland water or backed-up sewers. There are limitations on how much coverage you have, and the hope is this article helps clarify those nuances.

Does contents insurance cover accidental damage?

Contents insurance protects your belongings. Accidental damage is sudden, unexpected, and non-deliberate – like an unintentional one-off incident. For example, your kid topples the TV, draws on your couch, or spills grape juice on your carpet – that’s accidental damage. What you need to know, however, is in the fine print. Read it to understand your coverage (e.g. if you accidentally damage someone else’s property, or how much coverage you have). Few people read the fine print, so it might be easier to call your insurance provider.

For tenants, while you might be able to get away without renters insurance, don’t expect your landlord’s insurance to cover your stuff. If you live in a basement and a pipe bursts, your landlord’s insurance will pay for the unit’s repairs, but not your belongings. For anyone to protect their belongings – from TVs to couches – you need your own insurance. 

Claiming stolen items on insurance

You might not know it, but if someone steals your laptop from your car, it’s not car insurance that will help, it’s your home insurance that will replace the stolen laptop. If someone takes your car from your house, you’ll need comprehensive auto insurance on your policy. Your home insurance won’t cover it. Comprehensive is a common addition but doesn’t come standard. If you own a new car, or can’t afford to replace your current vehicle, make sure you have comprehensive. 

Home, condo, and renter’s insurance typically cover theft outside the home, but again, read your policy.

University students insurance

You don’t need to buy laptop, textbook, or musical instrument insurance for students. As long as your high school grad lives on campus and attends university full time, your insurance will cover it. Still, it’s worth double-checking with your provider to make sure. 

Once they move out of the dorm into their own apartment, they should get renters insurance. A small price to pay ($20-$30) to know their stuff is protected and not worry about it.

ACV vs. replacement

There are limits to any contents you own. Your 5-year-old laptop depreciates in value, so you might only get half of what you paid for it. If you have exceptional jewellery, rare art, or even a fancy bicycle, your home insurance may pay back only 1 or 2 thousand dollars. So, if you need more coverage, call your provider and up the limits.

But, also know that your 5-year-old laptop can be replaced with a brand new laptop if you have a replacement cost policy. Replacement cost policies are more expensive, and you have to specifically request it. A typical home insurance policy comes with what’s called actual cash value. The actual cash value will include depreciation into anything you own, so don’t expect a windfall if you do make a claim. Some online calculators help you figure out how much any of your belongings depreciate, according to insurance adjusters, over time to help you understand.

Of course, without an accurate inventory of your contents and valuables, neither you nor your home insurer knows what anything is worth, and best guesses come into play. So, make sure you do an inventory with the calculated values of your stuff. Even better if you have receipts. Yes, some apps do this for you, like Sortly.

Your home is not insured for market value

On the topic of value, know that your home is not valued at market value, but rather the rebuilding cost. It’s much cheaper for everyone. While your home might allow you to draw equity out to fund renovations, if you insure your house for its full value, home insurance would be a fortune. Instead, it’s better to protect it for what it would cost to rebuild. You don’t need to insure the land it’s on.

Renovation insurance

A home under renovation changes the risks within it, so inform your insurer before you start. Your contractor should have insurance for their workers and liability insurance if something terrible happens while working on your home. If you’ve already renovated and upgraded, be sure to inform your insurer because they need to make sure you’re covered for those upgrades.  Brand new shed, new pool, or even an update to expensive appliances are worth notifying your home insurer.

Will home insurance cover termite damage?

No, home insurance is not a maintenance plan, but there is a caveat. If termites chew through electrical wire and cause a fire, there’s a chance you’re protected. That said, If you suspect termites, call a professional for inspection and removal. There are different types of termites, but most termites in Canada like wet wood, so keep it away from your home and repair leaks as soon as possible.

Does home insurance cover mortgage payments?

No, if you get sick or lose your job, home insurance won’t cover your mortgage payments. For help with mortgage payments, there is long-term disability insurance that your employer sometimes provides, or you can buy your own. It’s often sold together when you purchase life insurance. If you lose your job, you’ll want to lean on that emergency fund you built up (right?). Without an emergency fund, other levers exist, such as pulling from your HELOC to make the payment.

Home liability insurance

Home liability insurance protects you against someone accidentally injuring themselves on your property. Don’t expect your insurer to step in if you punched someone on purpose. Liability also covers you if your pet bites the mail courier if you answered the questions correctly.

Dog bites in the US account for 1/3 of home liability insurance claims with an average cost of $30,000. So, if you’re the proud owner of a dog who may bite someone, get the right insurance. If you have a rottweiler, german shepherd, or a particularly aggressive breed, you’ll likely pay a higher home insurance premium. Some insurers may not want to insure you at all. Don’t lie to your insurer, though, if you do, and need to make a claim, they can deny you for not telling the truth.

Does home insurance cover acts of God?

Acts of God, or sometimes acts of nature insurance, are typically spelled out in your policy. For the most part, lighting, hail, and windstorms are covered, but floods and earthquake need individual riders or add-ons to your coverage. If you’re in a high-risk area, consider adding them to your policy.

Claim disputes with your insurer

It’s vital to understand your policy and how you’re covered. I see people online complaining their insurance company didn’t cover them for a specific claim. There are reasons for it and ways to protect yourself against them, the most important of which is to read your policy.

For example, floods surpass fire as the costliest home insurance claim. Here’s what you might not know about flood insurance.

Your “comprehensive” home insurance policy typically only covers floods from a burst pipe. Unless you add an endorsement, you aren’t usually covered for a sewer backing up into your house or a river overflowing into your basement, or even melting snow getting inside. Those are different types of risks and charge an extra premium. There are other ways of protecting yourself from those risks. You can install a sewer backup valve or weeping tile and waterproofing around your home. But unless you have the endorsements, don’t expect your insurer to pay out the claim.

There are some things they will cover like damage from lightning, hailstorms, and wildfires, but without endorsements, or add-ons, they won’t cover landslides or earthquakes (unless you have earthquake insurance).

Home insurance when on vacation

Travelling the world and away for more than 30 days? Inform your home insurance provider for the proper home insurance coverage while on vacation. If you’re not there, it increases the risks of break-ins, or flood damage going unnoticed, or even a fire breaking out by a faulty appliance. Failure to do so, and they can deny your claim.

Sometimes your provider may levy a premium. Other times they may simply request someone clear your mailbox, mow your lawn, and do a quick walkthrough of the property to ensure everything is in order.

What to know when buying home insurance

Bundling with your car insurance can save you money. Annual payments can save you money.

Installing a monitored burglar alarm can save you money, but no, the doorbell cameras don’t count, at least not yet. Car insurance providers usually check your credit, but not so with home insurers. Allowing your home insurance provider to check your credit may result in cheaper rates.  

Of course, the best way to get cheap home insurance is to compare quotes online. You can do that with us, for free, in 5-10 minutes, even if it’s just to make sure you’re paying the best price.

ALSO READ

• Actual cash value vs. replacement cost
• Renovation insurance
• Do you really need life insurance?