Myths About Home Insurance
As common as home insurance is, you might be surprised by the number of homeowners who are not clear on what is fact and what is fiction when it comes to their coverage. There are a lot of misconceptions out there, which is why it’s important to consider the services of an insurance broker who can help you understand your coverage and ensure you have the protection you both want and need.
Here are some common issues homeowners may not have the full picture on when it comes to insuring their home
Homeowner’s insurance policies are all the same
False. Homeowners insurance policies can vary significantly from one provider to the next. It makes sense to take the necessary time to review your policy in detail and/or contact your broker for clarification on what your policy covers, what it doesn’t cover, and the limits. Policy limits are the maximum available payout should you need to make a claim.
The size of your mortgage affects your home insurance rate
False. How much you owe on your mortgage does not factor into the premium you pay. It doesn’t matter if you owe $50,000 or $500,000; your home insurance rate will be the same. However, if you’re mortgage-free, you could qualify for a discount that could be as much as 15%. On the flip side, having multiple mortgages on the same property could increase what you pay for
A home is insured for its market value
False. A home is insured not for its market value but what it will cost to rebuild it. Market value considers things like location, land value and ‘comparables’ (how much similar homes sell for in the neighbourhood) – none of which have anything to do with rebuilding a home that has been burned down. On the other hand, rebuild value focuses on what it would take to rebuild and duplicate your home; materials, labour, permits, etc. which makes sense when you consider those earlier factors like location and the value of the vacant land are not an issue in a rebuild in the same location.
If your TV is stolen, your claim payout 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.
Damage to your home caused by insects or rodents will be covered
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. If you’re still not sure after reading your policy, contact your broker.
A home equipped with gas appliances costs more to insure
False. Like stoves and dryers, gas appliances are generally treated no differently from a home insurance standpoint than electric appliances.
Your marital status or age affects your premium
Mostly false. When it comes to home insurance, your marital status or age is typically not a factor. The main exception here is that you may qualify for a discount if you’re older (as in approaching retirement). This discount could be as much as 10%. The availability of this discount may vary by the home insurance provider.
Damage caused by a flood will be covered
Maybe. Flood insurance is not standard, and if you want it, you’ll have to add it to your policy. There are two types of weather-related flooding coverages available in Canada, and they’re both optional:
Overland flooding. This type of coverage has only been available to Canadians since 2015 and will provide financial relief for damages caused by a body of water that overflows its normal boundaries. It may also provide protection from surface water resulting from heavy rainfall, although specifics will vary by insurer.
Sewer backup. This optional add-on to your home insurance policy will protect you from the costs of extensive damages and cleanup if there is a sewer backup into your home.
Jewelry is covered
This is true, but with a caveat. Most homeowner’s insurance policies include coverage for jewelry and other valuables like furs, art, and electronics. However, for high-priced items like these, there will be a special policy limit for specific categories of contents, and those limits will vary between companies. If you have valuables 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.
The activities of a home business are covered
It 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 provider to ensure your business is adequately protected.
Damage to your lawn or garden is covered
It can be, but the final say will depend on your insurer. Shrub and tree coverage is common, but it varies by policy. Additionally, the reason for the damage (e.g., lack of care) can affect if there is coverage for a specific loss.
The belongings of a tenant are covered under your policy
Not necessarily. If you have tenants living with you, do not assume their belongings are covered under your policy. Chances are they are not. Additionally, if you rent out space in your house, keep your agent or broker in the loop because if your provider isn’t aware of the living situation, you risk having a future claim refused.
Home insurance covers maintenance to a home
False. Home insurance does not provide coverage for maintenance or upkeep. For example, if your roof is old and needs to be replaced, your insurance policy will not cover this expense.
Home insurance rates are the same, regardless of the insurer
False. Home insurance rates vary considerably from company to company. That’s why working with a broker who will shop around and compare home insurance quotes can be so beneficial. Not only will a broker help you find a policy that provides you with the home insurance coverage you need, but you’ll get it at the best available price.