How much do you really know about home insurance?
You may have just bought a house and need insurance. Or every year you renew your policy and file it away. In both cases, you may have some misconceptions about home insurance. Let’s take a look at some of the most common:
- MYTH: You must have home insurance.
FACT: Unlike auto insurance, home insurance is not required by law. However, if you’re trying to get a mortgage, it’s a different scenario. If you are the property owner and need a mortgage, your bank or lender will require you to have a home insurance policy that names them on the policy. And, if you are a renter, your landlord may require that you have tenant insurance. - MYTH: If I am a tenant, my landlord’s insurance covers everything.
FACT: No. Your landlord’s insurance does not cover your contents or liability (i.e., if you flood your neighbours).
RELATED READING: These are the things renters insurance covers - MYTH: Condominium corporations provide insurance that covers my condo.
FACT: Condominium corporation insurance covers the building structure, its exterior finishes, roof, windows, and common areas, like elevators and hallways. It doesn’t cover the contents of your condo, its upgrades and third-party liability should you cause damage to other condo units (i.e., flooding). - MYTH: If I have valuables, they are covered.
FACT: A standard home insurance policy covers personal property and most valuables up to a set limit. However sub-limits apply to special property. If you have expensive jewelry, furs, or art collections, for example, you have the option of adding coverage. The insurer will want you to provide proof of value – either an appraisal or receipt.
RELATED READING: 5 common home insurance riders - MYTH: My home insurance protects me against flooding.
FACT: It depends on the type of insurance policy you have. Typically, a home insurance policy protects you against sudden and accidental entry, or release of, water in your home (i.e., burst pipes). A standard policy often would not protect you against “overland flooding,” when water flows over normally dry land and enters your home through doors and windows. Most insurers, however, offer some sort of optional freshwater flood protection. Where you live – such as on a known flood plain – may affect whether it’s available. - MYTH: My home insurance protects me against sewer backup.
FACT:Sewer backup damage occurs when the sanitary and storm sewer systems cannot handle high volumes of water, which causes water to back up into your home through toilets and drains. Most insurers offer some sort of optional sewer backup protection, but it is not usually included on standard insurance policies. Only a few providers include it so be sure to ask.
RELATED READING: Not all water damage created equal - MYTH: If I go away on vacation, my house is covered.
FACT: If you go on a vacation without taking precautions, you are not always covered. For example, if you go away during the heating season you either must shut off the water and empty the pipes OR have someone visit your home on a regular basis to check the heating is working. If you don’t, you may not be protected against water damage if your pipes freeze and burst. Talk to your insurer to find out what length of vacation requires precautions, such as somebody visiting your place on a regular basis. Different policies may require more frequent visits. - MYTH: Home insurance only covers the house.
FACT:Your policy covers the house and its contents. Insurance also covers structures on the property (a shed, detached garage), additional living expenses you may incur if the house is uninhabitable, and personal liability exposures you may face because someone is accidentally or unintentionally injured on your property. For condos, policies also cover unit improvements and some assessments made against you by the condo corporation. - MYTH: Current events don’t affect my premiums.
FACT: It’s possible. When the pandemic started there was a spike in fires and corresponding claims. While it was expected this would affect rates, it did not. However, climate change has and will affect your rates. As certain areas of the country have seen higher risk of extreme weather events, such as flooding or wildfires, premiums are priced according to that increased risk.
RELATED READING: Climate change's impact will affect everyone: Report - MYTH: Home insurance covers the market value of my house.
FACT: Home insurance does not cover market value, only the rebuilding or replacement value of your house. If the house burns down, the purpose of insurance is to cover the costs required to rebuild the house as it was before the loss. Rebuilding value is typically lower than market value because it does not include the land. Your policy may cover costs to clean up the debris. - MYTH: Insurance is cheaper for older, less expensive homes.
FACT: Insurance tends to be more expensive for older houses since there’s a greater chance that something will go wrong, and it will cost the insurer more to fix it. - MYTH: Insurance covers damage caused by termites and other insects.
FACT: Usually not. Be sure you know how your insurance policy treats this and other kinds of damage. - MYTH: Home insurance will cover me for accidents during home renovations.
FACT: Not necessarily. If you’re starting home renovations, call your insurance company and tell them. They will let you know if you’re covered—some policies don’t cover accidents during renovations. If needed, there are additional options you can add to your home policy for minimal cost. Also, confirm your home insurance policy will remain intact during the renovation and after they are done. And remember home insurance is not a substitute for ensuring the contractors have insurance. Remember to update your existing home insurance coverage once the renovations are complete to ensure all new additions are covered. Sometimes upgrades can positively affect your rates. - MYTH: If my dog injures someone, my home insurance will not protect me. I need a special insurance policy.
FACT: As long as you properly answer any questions relating to your pets in the insurance application and investigation process, your policy will cover costs associated with your dog biting and injuring a third party.
RELATED READING:How owning a pet affects your home insurance - MYTH: Damage from natural disasters or Acts of God are excluded by home insurance.
FACT: No. There is no such thing as an Act of God exclusion in home insurance policies. Most policies cover damage from hailstorms, lightning, wildfires, etc. Optional coverage is available from some insurers for certain types of natural disasters. Some, however, like seawater flooding or landslides, are excluded.