Home Insurance Q & A with Lacey

2011 has been a big year for hail damage insurance claims in Calgary. This got me thinking about what I am really covered for under my home insurance policy – and if there is anything missing in my coverage. To shed some light on the issue, I have enlisted the help of Lacey Melanson, account executive at Anthony
Clark Insurance Brokers. If you have any further questions or are looking for an insurance change, please contact her at lacey.melanson@acib.ca or 403-697-0795.  Thanks Lacey!

Q: What factors influence the amount your home insurance premium costs?
A: There are a lot of factors that go into calculating the premium for a homeowners policy. – the size of the home, location, year built, type of structure, etc. It also depends on your claims history, whether the basement is finished, whether there is a garage, are there any updates/renovations, and so on.

There isn’t an “average” premium for home policies as it varies from one person to another. For example, someone with the exact same house across the street may be paying less then you or vice versa. This could be due to different discounts bring offered. The four most common discounts are for your age, being claims-free, being mortgage-free and for having an activated alarm system.

Many companies are now rating homes based on postal codes. One postal code could have a higher rating then another postal code so two people that are the same age, have the exact same coverage/limits and same discounts could have two completely different premiums because they have different postal codes. These ratings are based on crime/loss rates. One postal code could have a higher loss ratio than the other.

It is also good to note that your policy could be surcharged if your home is over 20-25 years and if the roof, electrical, plumbing and/or heating have never been updated/replaced.

Q: What is something most people do NOT know about their home insurance policy?
A: The most common misconception about home insurance is thinking that just because you have a water damage endorsement, you assume that all types of water damage are covered. The word that is important to remember is seepage: Seepage from the outside of the home is NOT covered, and unfortunately, there is no existing insurance policy that covers this. If the seepage is from the inside of the home (ie, overflowing tub, plumbing issue, etc), then it is covered as longn as you have a water damage endorsement on your policy (which most people do but good to check!). For example, if there was a flood and water seeped in through the basement windows causing water damage to the home, insurance would not respond.

Q: I’m buying a condo or townhome. What kind of insurance do I need? What does it cover? What’s the price range?
A: Condo/Townhome policies are quite different from a detached dwelling policy. You aren’t insuring as much as you would a detached home as you aren’t insuring the dwelling itself), therefore the premium is significantly cheaper. The price can vary from one company to another depending on the amount in contents, if you are getting any discounts, the location etc., but the price averages around $200-$300/year.

The easiest way to explain how condo coverage works is to think of the inside walls of your condo – everything from the walls inward is your responsibility. The Condo Association has its own policy that covers the building itself. In addition to liability coverage which typically has a $1,000,000 limit, you would also be insuring the contents inside your unit (depending on the insurance company, the minimum limit is usually around $30,000 – $35,000).

Your policy would also cover Loss Assessment. For example, if there was a loss to the building, and the damage ends up being more to repair than what the Condo Associations’ policy limit is, their policy would cover up to the limit, but anything over that would be billed between the unit owners, which is where your Loss Assessment coverage would kick in.

You would also have Betterments and Improvements coverage which replaces any upgrades that might have been done to your specific unit in the event of a loss (whether you did the upgrade or prior owners did). It is always a good idea to find out if there were any upgrades done and take pictures of what has been upgraded as a precaution. Otherwise, if the insurance company has no proof of any upgrades, they will replace everything to what is shown on the blueprints when the condo was originally built.

There are a variety of additional coverages that are also included in the policy which all depends on the company you are insured with.

Q: Is my home protected against any kind of water damage, no matter the source?
A: As mentioned above, if you have a water damage endorsement on your policy, it excludes seepage from the outside. So even if you inadvertently leave the tap on and walk away from the sink and it overflows, you would still be covered. This also applies to accidentally leaving the oven or a curling iron on and causing a fire. However, if you intentionally cause damage, you will not be covered.

Q: What kind of extra riders can you add to your policy?
A: There are several different riders you can add to your policy for an additional price. Most insurance policies will coverage certain items up to a limit and while this limit might be adequate for many, it might not be enough for others. Common examples are jewelry, collector items (stamps, coins), computer items, photography items, art, furs, etc.

Q: What kind of things are NOT included in home insurance?
A: It all depends on the type of policy you get. There are three different policies you can choose from:

Comprehensive Homeowners is the broadest form of coverage and is what most people have. It is based on All Risk coverage, so it only excludes what is indicated in the policy wordings.

You can also get Basic Homeowners which has limited coverage compared to Comprehensive. It is based on Named Perils coverage which means that it ONLY insures what is indicated in the wordings.

Fire and EC (Extended Coverage) Policies have the least coverage. It is mostly used for homes that are vacant or rented out to third parties.

As mentioned, it depends on what type of policy you have, however, here are a few examples of what is not covered in all three of these policies:

  • Dwellings that are used in relation to a business unless it is otherwise indicated to the insurance company so that appropriate coverage can be put in
    place.
  • Wear and tear is not covered
  • Freezing pipes during the normal heating season as a result of being away from the home when precautions were not taken to insure the home is adequately heated
  • Claims arising from war, invasion, act of foreign enemy, etc.

Q: Can I make an insurance claim to get a new furnace or new appliances if mine stop working?
A: Only if it is due to an insured peril (ie, water damage, fire, etc). Insurance doesn’t cover appliances within the home due to mechanical issues or wear and tear.

Q: My home has aluminum wiring. How does this affect my insurance policy?
A: Depending on the insurance company, there may be a surcharge added. It’s usually a 15% surcharge but differs from one company to another. There are some companies that will decline coverage due to aluminum wiring, however most will simply add a surcharge.

Q: If I make an insurance claim, do my premiums go up the next year like car insurance?
A: Yes and just like automobile policies, the more claims you have, the higher the premium will be, as surcharges will start being added. Most insurance companies now have a “claims free” discount that they give insured’s who are claims-free for five or more years. This discount alone can save people hundreds of dollars on their home insurance.

Q: I’m buying a rural property or acreage. How does this affect what kind of coverage I need?
A: Most people think that homes that are in the country are cheaper in insurance which is not the case. A home that is in a rural area is most likely unprotected (no fire hydrants or fire halls nearby) which means that there is a surcharge to the policy. When writing up a new policy, the insurance company can locate the
nearest hydrant or fire hall based on the postal code of the home. Sewer back up coverage is also an endorsement that can be added to a home policy if you have a septic tank.

Q: I’m going out of town for a while. How often do I need to have someone check on my house? What if it’s a condo?
A: If your home is going to be vacant for more than 30 consecutive days, the homeowner must notify the insurance company, as a vacancy permit must be added to the policy at an additional cost. The amount depends on the insurance company and how long the house will be vacant for. They will also need to have someone inspecting both the inside and the outside of the home at least 2-3 times a week (this also depends on the company but 2-3 times/week is what most require). It is also the obligation of the homeowner to make arrangements to have someone make sure the home looks “occupied” (eg. clearing the driveway/sidewalk when it snows). If the property is a condo, a vacancy permit must also be added if gone for more than 30 consecutive days, but the unit only needs to be inspected 1-2 times/week.