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Home Insurance Basics
THE RISK FACTOR – WHAT IS COVERED? Named-peril policies list only the kinds of risk that are covered; the problem with that is policyholders may not realize what’s missing until then try to file a claim. They may discover, for example, that they are insured for theft but not for damage due to vandalism.
All risk policies are also subject to exclusions, but they will clearly specify anything that is not covered. Keep in mind that a property insurance policy is not a maintenance contract. It is meant to cover sudden and accidental losses, not loss associated with the lack of proper maintenance of a property.
Here are some examples of some of the standard property insurance policy exclusions:
• Loss or damage after your dwelling has been vacant for more than 30 days
• Property illegally imported, acquired, kept, stored, or transported
• Marring or scratching of any property or breakage of any fragile or brittle articles
• Wear and tear, deterioration, defect or mechanical breakdown, rust or corrosion, extremes of temperature, wet or dry rot or mould, and contamination
• War, invasion, act of a foreign enemy, hostilities, civil war, rebellion, revolution, insurrection or military power
• Damage resulting from a criminal act or failure to act by any person insured under the policy or any other person at the direction of any person insured under the policy
• Buildings, units or detached private structures used in whole or in part for business or farming purposes
• Vandalism or malicious acts caused by you or any resident of your household
• Damage arising from the freezing of indoor plumbing is regarded as generally preventable. Therefore, if you are away from your home for more than 4 days during the normal heating season, you must drain the plumbing or arrange for a competent person to check your home daily in order to ensure the heat is on. Otherwise, this type of damage is not covered.
• Earthquake is also excluded, however, this coverage can usually be purchased for an additional premium
• Insurers are now excluding damage caused by mould as well as marijuana operations
As for the contents of the house, there are usually limits on personal-property coverage. Most policies will insure the contents of your home for 50 to 70 percent of the total coverage, but you can buy more.
Most policies also place caps on insuring certain valuables, such as jewellery, cash, and furs. To insure them, you may need additional coverage.
To help document an insurance claim, prepare an inventory of everything in your home and outdoor furniture, appliances, china, silverware, and clothing. Take pictures or a video of the items in each room, opening the doors of cupboards and closets, and be sure to update the photos periodically. Then make a list of the models and serial numbers of appliances and electrical equipment and gather receipts for major purchases. Store the inventory, photos, and related documents in a safe-deposit box or in a secure place away from home. If it’s in your office or a friend’s house, the file won’t be destroyed if the house is damaged.
HOW ARE CLAIMS PAID?
There are three kinds of homeowner’s policies, with three methods for paying claims:
Guaranteed replacement-cost policies are the best. They generally pay whatever it costs to rebuild your home as it was before the fire or other catastrophe. With a guaranteed replacement-cost policy, you won’t have to worry about thing like sudden increases in the cost of plumbing fixtures. But don’t let the word “guaranteed” lull you into a false sense of security. Even guaranteed replacement-cost policies normally do not pay to upgrade a house so that it will comply with building-code changes that were made after it was built, so be sure to ask if there are any limitations on your coverage.
Replacement-cost policies will pay to repair or replace property with materials of similar quality. If a storm tears off your 5-year-old roof, a replacement-cost policy will pay for a new roof.
Cash –value policies, however, will pay only the cash value of the 5-year-old roof at the time of the claim, which can be considerably less than the cost of having it fixed.
How much is enough? It is important to estimate realistically. The amount you paid for the house is just a start: Don’t forget inflation; remember the new deck you built, the storm windows you put in, and all the other changes you have made. Keep in mind what it will cost to clear away the debris before you can start to rebuild.
Your coverage should be re-evaluated from year to year, and if you decide to renovate the kitchen or add a master bathroom, you should upgrade your insurance accordingly. And unless your policy has an inflation-guard clause, you should make sure that your coverage keeps pace with rises in local building costs.
LIABILITY COVERAGE
With so many people now working out of their homes, it’s worth noting that the liability coverage on your homeowner’s policy may not apply if a customer or messenger is injured on your property. And since a standard homeowner’s policy comes with only a limited amount of coverage for business equipment, usually up to $2500, those who work at home should consider supplementing their insurance. If you are working from home, be sure to notify us so that we can ensure you have appropriate coverage in place.
WAYS TO REDUCE PREMIUM COSTS A good way to lower your insurance premium is by taking the highest deductible you can afford. It’s a good idea to pay for small claims yourself, anyway, because insurance companies can raise your rates or refuse to renew your policy if you make too many claims in a certain period of time. You may also want to consider installing a fire and theft alarm. Most insurance companies will offer an additional discount which is usually higher if the alarm is monitored by an outside agency.
***the information provided herein in intended to provide general information and not to replace the professional advice of your insurance broker. Should you have questions pertaining to your specific needs, please contact our office |