BE SURE YOU’RE COVERED
If you’re considering buying a home without also investing in home insurance, you may want to think again. Most homeowners will make at least one insurance claim during their lifetime. Even with adequate coverage, no one wants to go through the process of having to make a claim — or, worse, finding out they’re underinsured following a loss.
Understanding the intricacies of your policy is key to protecting yourself, your belongings, and your peace of mind.
Why does home insurance matter? Well, if a loss occurs, it could be the only thing standing between you and financial ruin.
“If you own your home and choose not to insure it, you risk losing everything you’ve worked for in the event of a major fire or even in the case of major water damage,” said Caroline Phémius, spokesperson for the Insurance Bureau of Canada.
“Furthermore, should the fire extend to the house next door as well, the neighbour could sue the homeowner.
“So, on top of losing his own home and its contents, the homeowner will also have to pay for the damages next door.”
Taking preventive steps in order to avoid this type of situation is crucial for homeowners. The most basic starting point is buying proper insurance coverage, which begins by understanding what your needs are.
“Know what’s important to you with respect to your home, belongings and liability to ensure that you purchase coverage that matches your priorities,” said Jean-François Tremblay, associate vicepresident of underwriting at TD Insurance.
“Do an inventory of your possessions; you might be surprised at the value of your personal belongings.”
It’s also important to update a record of your personal inventory yearly, or whenever the need arises.
“Keep this record in a secure location like a safety deposit box,” Tremblay said.
“A quick way to update this annually is to take a video using your smartphone; remember to open drawers, closets, capture wall, floor and ceiling details, and both inside and outside your home.
“In case of a claim, the inventory
with proof of purchase like receipts or a video can accelerate your claim payment.”
Once you’ve identified the amount of coverage you need, it’s a good time to begin shopping for policies. When comparing quotes, be sure that you’re looking at the details of the policies being offered, and not just the main points of coverage.
“Understand the differences in the policies being offered so you can balance the security and peace of mind that comes with coverage against the premium,” Tremblay said.
Aside from the value of your home and belongings, there are external factors to consider as well when shopping for insurance.
“The location and circumstances surrounding the home and its construction matter hugely when it comes to insurance,” said Daniela Lamorte, real-estate broker with M Immobilier.
“For example, if your house is located in an area susceptible to a certain type of damage like flooding, make it a point to ask about coverage for that. Or if you have aluminum wiring, you may be paying a slightly higher premium to account for the increased risk associated with it.”
Not having adequate coverage can spell disaster for homeowners. That’s why, even when you do purchase insurance, it’s critical to understand exactly what you’re covered for, and explore the option of purchasing extra insurance depending on your situation.
“Certain types of losses may not be covered under the base policy,” Tremblay said. “For instance, some types of water damage are only covered with the purchase of an endorsement, which is optional coverage that can be added to the base policy.”
A typical water damage claim from a washing machine overflow, for example, may be covered under the main policy, but extended coverage for water flowing back into a home from the sewer would have to be purchased through an endorsement, Tremblay explained.
In addition to having the right coverage, homeowners also need to take preventive measures to protect their home in order to avoid being in policy breach when making an insurance claim.
“If your water pipes freeze and burst while you’re away on vacation, most policies will require that the policy holder took steps to ensure heat was maintained while they were away,” Tremblay said. “Failing to take those steps could cause claims to be refused.”
Claims can also be denied due to poor home maintenance.
“Plan on spending five to 10 per cent of your home’s purchase price annually on maintenance,” Tremblay said.
And if you’re in the market for a new home, experts recommend not waiting until the last minute to shop for insurance.
“As soon as all of the conditions have been met on your accepted offer, that’s when you should get your policy finalized,” Lamorte said.
“Don’t wait for a week before you go to the notary to start looking at your options; be proactive and give yourself enough time shop for quotes.”