Lowdown on home insurance in 2014
In this article you will understand the lowdown on home insurance. Home insurance can be confusing. The following are some of the most common misconceptions about home insurance in Canada to help you weed through what's fact and what's fiction
What is home insurance?
The home insurance policy is usually a term policy-a policy that is in effect for a fixed period of time. The home insurance payment the insured makes to the insurer is called a premium. The insured must pay the insurer the premium for their home insurance each term. Most insurers charge a lower premium for home insurance if it appears less likely the home will be damaged or destroyed: for example, if the house is next to a fire station, or if the house is equipped with alarms and sprinklers.
How does home insurance protect?
Your home insurance usually safeguards you in two ways: financial loss and personal liability.
Financial Loss
Your home insurance will refund you if your home or personal effects are stolen or if any other an unforeseen situation that is specified under your property insurance policy occurs.
If an unforeseen situation, like a fire, does arise, your home and garage will likely need to be restored. You will be reimbursed for the value of items, such as furniture, cameras and computers-or the items themselves will be replaced.
If you cannot live in your home while it is being restored after a loss, your house insurance will pay for some of your extra living expenses, such as accommodations, restaurant meals and storage.
Personal Liability
If someone is injured while visiting your home, they could sue you for damages. If they win and a court awards them a significant settlement, you could be financially ruined. Your wages could be garnished and you could have a hard time getting back on solid ground. Property insurance safeguards against this kind of liability.
Tenant Insurance
If you rent your home, you may think you don't need to bother with property insurance. Unless your landlord is directly responsible for the damage to your belongings or unit improvements such as a new carpet or built-in shelving in the closets that you paid for, his insurance likely won't reimburse you. It also won't protect you if you are sued for negligence.
Condo Insurance
If your condo corporation has insurance, you may wonder why you need to purchase your own coverage. Here's why:
◦Your condo's corporation policy only covers items that are part of the building. You need your own home insurance to protect any upgrades you have made to the unit, such as carpets or an upgraded bathroom or kitchen.
◦You need to insure your personal effects like furniture, computers, and other electronics. You need to protect yourself against personal liability for injuries to visitors to your home, or for damage you accidentally cause to your neighbor’s property.
All homeowner's insurance policies are the same
False
Policies can vary significantly from one provider to another. Carefully review or ask, what's covered, what's not—this is an important one—and the policy limits (i.e. the maximum amount).
Home insurance rates will be the same, regardless of the insurer.
False
Home insurance rates vary considerably from company to company. That's why it is important to shop around and compare home insurance quotes. Not only will you find a policy that provides you with the home insurance coverage you need, but you'll get it at the best available price.
Jewelry is covered under your homeowner's policy
True, with a caution
Most homeowner's insurance policies include coverage for jewelry and other valuables like furs, art and electronics, however there will be a special policy limit for specific categories of contents. Limits vary from company to company. If you have valuables that are worth more than what your policy allows, consider "scheduling" these items into your policy. An item that is scheduled will have its own deductible and insured amount (limit).
A home is insured for its market value
False
A home is insured, not for its market value, but the cost to rebuild it. Market value takes into consideration things like location, land value and "comparable" (how much similar homes sell for in the neighborhood), whereas rebuild value focuses on what it would take to rebuild and duplicate your home; materials, labor, permits etc.
Damage caused by an earthquake will be covered
Maybe
Homeowner's insurance policies do not automatically include earthquake coverage. You can however, have this coverage option added to your policy. If you live in a part of Canada that is prone to earthquakes, like some areas of Quebec and British Columbia, coverage may be more expensive to purchase than other areas. In any case, you will need to speak to your agent or broker to discuss adding this coverage to your policy.
Home insurance covers maintenance to a home
False
Home insurance does not provide coverage for maintenance or upkeep. If your roof is old, and needs to be replaced, your insurance policy will not cover this expense.
If your television is stolen, the money you get back from a claim will cover the cost to replace it
It depends.
If your policy insures your contents for replacement cost, then this is likely true. However, if your policy insures your contents for actual cash value, then depreciation of the item (your TV) will be factored into the amount you get towards replacing it.
Damage caused by insects or rodents will be covered under your home insurance policy
Maybe
Most policies do not provide coverage for damage caused by termites, squirrels, mice, rats and even raccoons, but, like any good rule there are always exceptions. Review your policy to see what exclusions may apply.
Damage to your lawn or garden is covered under your homeowner's policy
It can be, but will depend on your insurer
Shrub and tree coverage is common, but it varies by policy. Additionally, the reason for the damage can affect if there is coverage for a specific loss.
Home businesses are covered through your home insurance policy
Depends
Does your broker or agent know you operate a home-based business? Many people have the mistaken belief that a home-based business is automatically insured under the liability and contents coverage of a home insurance policy. It most likely isn't. You'll want to discuss a home business extension to your current policy, or a separate commercial insurance policy with your broker or agent to make sure your business is adequately protected.
The belongings of a roomer or boarder are covered under your home insurance policy
Not necessarily.
If you have people living with you like a roomer or boarder, do not assume their belongings are automatically covered under your policy. Chances are it is not. Additionally, if you do rent out a room in your house, you'll want to make sure your agent or broker knows; they can ensure you're adequately covered. Just as important, if you don't keep your agent or broker in the loop, you run the risk of having future claims refused.
The cost of installing a home security system will be entirely offset by the discount you'll get on your home insurance
Doubtful
The good news here though is that installing a home security system will likely mean you're eligible for a discount of 5 to 30 per cent. The amount you'll save on your insurance will depend on the type of system you install, level of security, and your insurer.
How home insurance prices are calculated
Calculating how much insurance you need to pay is a bit like completing a big jigsaw puzzle:
Where you live
How much coverage you have
Type of coverage
Another consideration -- if you customize your policy with optional coverage’s, like a bicycle, plan to pay a higher premium.
Proximity to fire hydrant or fire station
Amount of your deductible
Security features
