Home insurance

Home insurance explained : including tenant and condominum
insurance / Tony Bain, John Mitchell. -- 2nd ed.
Includes index.
ISBN 1-895792-06-1
1. Homeowner's insurance--Canada. I. Mitchell, John, 1932-
II. Insurance Bureau of Canada III. Title.
HG9986.4.C3B33 2004 368'.096'0971 C2004-903018-3
INSURANCE BUREAU OF CANADA
HOME INSURANCE EXPLAINED
Insuring your home
If you are like most people, you will probably never
need to submit an insurance claim. But no one is
immune to bad luck, and it is good to know that
the premiums of many people like you are available
to pay for your mishaps and misfortune, should
they occur. Within limits, home insurance reimburses
you for your financial loss arising from mishaps that
are generally “sudden and accidental” and, therefore,
hard to predict and prevent.
Throughout Canada, private insurance companies
compete for your business either directly through
their own agents, or through independent brokers.
They compete not only on price, but also on service
and coverage. There is no such thing as a standard
home insurance
policy. Because
coverage may vary
from one insurer
to another, it is
important to have
your broker or
agent explain the
policy to you
before you agree
to purchase the
coverage. You
are also welcome to call any of Insurance Bureau
of Canada’s (IBC’s) consumer information centres
listed at the end of this pamphlet.
Do I need to have home insurance?
Most banks or mortgage companies will insist that
you purchase coverage, and will ask for proof of
insurance before lending you money to buy a home.
If you are renting, your landlord will likely require
that you have a certain amount of liability
insurance, to pay for any damage you may
cause to the property.
When to buy home insurance
Insurance coverage on your home should begin
as soon as you become the legal owner or tenant,
even if the home is still under construction.
(Your home insurance policy can also cover related
building materials on or adjacent to your property.)
Before moving, call your broker or agent and go
over any special insurance needs related to the
move (e.g., covering contents in transit, or
simultaneously at both old and new locations, etc.).
Please be advised that theft insurance applies only
when a building is ready for occupancy; vacant
buildings are not normally insured for theft for
more than 30 days (see “Vacant premises,” page 8).
It pays to compare
Not all home insurance policies are created equal,
nor are they priced the same. When buying a new
policy or renewing a current one, you may wish to
obtain quotes from a variety of insurance agents
(who work for one insurer), and independent
brokers (who represent different insurers). When
dealing with independent brokers, it is important
to know which companies they represent and
where they place most of their business.
When comparing quotes and coverage, don’t forget
service! While good service may cost a bit more,
it may well be worth it.
INSURANCE BUREAU OF CANADA 1
HOME INSURANCE EXPLAINED
Note to tenants: If you're
renting your home, you
may wish to skip the grey
sections on pages 11, 12,
13 and 15; these will likely
apply to homeowners only.
Please be sure to read the
special section on tenant
insurance (page 10).
2 INSURANCE BUREAU OF CANADA
HOME INSURANCE EXPLAINED
Know your insurer
You may wish to enlist the aid of a reference library
in researching insurers’ financial ability to meet
their obligations to policyholders. Most insurance
companies buy reinsurance (insurance for insurers)
to enhance their ability to pay claims. Be sure to
talk to your agent or broker about this as well.
But what if...?
In the unlikely event of an insurer’s collapse,
the industry-funded Property and Casualty
Insurance Compensation Corporation (PACICC)
will respond to claims of policyholders under most
policies issued by property and casualty insurance
companies. The maximum recovery from PACICC
will be $250,000 with respect to all unpaid claims
for losses arising from a single occurrence. PACICC
will also refund 70% of the “unearned” (unused)
premium (maximum payout $700) applicable from
the date of the insurer’s collapse until the policy’s
expiry date.
Insurance shopping tips
Discounts
Some insurers offer discounts or other incentives
for policyholders who install sprinkler systems and
monitored intruder alarms. Some reduce premiums
for seniors. Employment by a particular organization,
or membership in an organization such as a credit
union or alumni association may qualify you for an
“affinity” discount. Some insurers offer discounts
to loyal, long-term policyholders – a factor worth
considering if you have been happy with your
insurer’s prices and service. Your insurer may also
be willing to offer you a discount if you choose to
insure both your car and your home with them.
Deductibles
Consider lowering your premiums by opting for
higher deductibles for claims relating to your home
and its contents. A deductible is the self-retained
part of each loss (the part you pay for yourself);
it is not a feature of liability insurance, however.
Don’t under- or overinsure!
Don’t underinsure the contents of your home.
Estimate the value of your possessions and update
your inventory (see page 14) at least once a year.
Remember to include taxes. If the value of your
possessions is greater than the amount of contents
coverage specified in your policy, have it changed
accordingly. Minimum contents coverage for
homeowners is normally a percentage of the
value of the building.
Resist any advice to overinsure the building by
including the market price of the land in the
insured value. Whatever the limits of your policy,
you cannot claim for more than the actual loss to
insured property. “Insured property” does not
include the market value of the underlying land.
Tell your insurer about major changes
If you plan to build a rental apartment into your
home, duplex it, begin operating a business there,
or make any other significant alterations to the
structure or the way it is used, be sure to tell your
insurance representative. For insurance to work
well, full disclosure of risk is required. With
insurance, the best surprise is no surprise at all!
Wood-burning stoves
Caution: Wood stoves are a common source of
fires and carbon-monoxide poisoning, particularly
if they are not properly installed and maintained.
Insurance companies often want to inspect such
installations. Consult your agent or broker before
buying or renting a home with a wood-burning
stove or before installing one.
Home insurance policies
Homeowner insurance policies cover the building
and its contents (contents only for tenants and
condominium owners) for “direct loss” (see page
15) or damage caused by insured perils, which
may be stated individually or merely described as
“all risks” (see page 15).
COMPREHENSIVE*
A “comprehensive” policy covers both the
building and contents for all risks that are NOT
specifically e xcluded. (See “Optional coverages,”
page 5 and “Uninsurable perils,” page 7.)
BASIC/NAMED PERILS*
If you are inclined to save money by carrying
more of the financial risk yourself, you may wish
to consider a “named perils” policy, which covers
only those perils, such as fire or theft, that ARE
specifically in cluded in the policy. (See “Insurable
perils,” page 4.)
BROAD*
If the “comprehensive” policy costs more than
you want to pay, and you find the “named perils”
policy too risky, a mid-price compromise is the
so-called “broad” policy, which provides
“comprehensive” coverage on big-ticket items like
buildings, and “named perils” coverage on contents.
(See “Insurable perils,” page 4; “Optional coverages,”
page 5; and “Uninsurable perils,” page 7.)
NO-FRILLS*
Some insurers offer very basic or “no-frills”
coverage for properties that don’t meet their
normal underwriting standards. Contact your agent
or broker for details. If physical problems with your
home are the only reason it does not meet insurers’
standards, you may save money in the long run by
correcting the deficiencies in order to qualify your
home for better coverage.
INSURANCE BUREAU OF CANADA 3
HOME INSURANCE EXPLAINED
*Policy wordings and coverages may vary within these general policy
categories from one insurer to another; trade names may also be used.
Insurable perils
This section applies mainly to “broad” coverage for
contents, to “named perils” and “basic” coverage for
both building and contents. Insurable perils include:
AIRCRAFT OR VEHICLE IMPACT
ELECTRICAL CURRENT
EXPLOSION
FALLING OBJECT (not including objects propelled
by snowslide or earth movement)
FIRE
LIGHTNING
RIOT
SMOKE (released suddenly from malfunctioning
cooking or heating devices, but not from fireplaces)
THEFT
TRANSPORTATION (of personal property while it
is temporarily away from your home; includes
building fixtures and fittings being repaired or in
seasonal storage)
VANDALISM (while building is normally occupied)
WATER DAMAGE (this is a complex issue;
be sure to discuss it carefully with your
agent or broker)
WIND AND HAIL (applies to the outside of a
building except for antennas, satellite dishes, etc.;
the interior of a building and its contents are
covered only if the storm has first created an
opening)
WINDOW GLASS (breakage in a building
that is normally occupied; not covered
by tenant insurance)
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HOME INSURANCE EXPLAINED
Water damage
Coverage usually includes damage arising from
sudden and accidental escape of water from an
indoor plumbing, heating, sprinkler or air-conditioning
system; or from an indoor or outdoor “domestic
appliance” on your premises; or from a water main.
“Domestic appliance” is defined in the policy and
includes water heaters, water beds and swimming
pools. “Water” may be in liquid form, or it may be
steam or ice. However, coverage for freezing damage
is restricted to property inside your home and there
are special requirements if your home is unoccupied
for more than four consecutive days during the normal
heating season. (Read carefully the comments about
freezing under “Uninsurable perils,” page 7.)
Coverage usually excludes damage arising from
[1] floodwater (see also page 7) such as that from an
overflowing creek; [2] repeated or continuous water
seepage (from a cracked basement wall, for example,
or from an unrepaired pipe); [3] sewer back-up
(see “Optional coverages,” page 5).
Sudden and accidental
escape of water
Optional coverages
Coverages for the following perils, not normally
included in any type of home insurance policy,
may often be purchased separately:
EARTHQUAKE – Particularly worth considering
in quake-prone regions of Quebec and British
Columbia. Cost varies according to location and
type of construction. Your insurer may be able
to advise you of steps you can take to minimize
the risk of earthquake damage to your home.
FURNACE OIL SPILLS – Consider replacing steel
tanks more than 20 years old. Beware of damage
to concealed pipes and tubing. (See also page 9.)
SEWER BACK-UP – Useful in some low-lying
areas, particularly those with combined storm and
sanitary sewers. Your insurer can advise you about
the merits of back-flow prevention devices.
Replacement cost and actual cash value
The calculation of how much money your insurer
will pay to you following an insured loss is
described in your policy, usually under “Basis of
Claim Payment.”
ACTUAL CASH VALUE (ACV)
Insuring property for ACV means that it will be
replaced with something of like kind and quality,
minus an allowance for depreciation due to wear,
condition, age, and obsolescence. So, for example,
if your five-year-old, $1,700 stereo is stolen,
you may get only $300.
REPLACEMENT COST
Insuring property for Replacement Cost means
that it will be replaced with something of like kind
and quality, with no allowance for depreciation.
So in this case, you would get $1,700 for your
five-year-old stereo.
CONTENTS
Unless it is otherwise noted in the policy, claim
settlements for damage or loss to the contents of
your home are for ACV. (See “Replacement cost
endorsement” below.)
BUILDINGS
Home insurance policies usually include
Replacement Cost coverage for building losses.
The settlement can be up to, but not greater than,
the amount of insurance on the building as stated
in the policy. If the replacement cost of the
building has been underestimated, the policy will
not pay more than the cost stated in the policy.
(See “Guaranteed replacement cost endorsement,”
page 6.)
A note about roofs: Some policies will pay only
depreciated values, as low as 25%, for damaged roofs
that are near the end of their designed service life.
Extra coverage you can purchase
REPLACEMENT COST ENDORSEMENT
(FOR CONTENTS): This endorsement removes
the depreciation deduction on loss or damage to
contents. Items are insured for the amount it
would cost to replace them with a brand new item
of like kind and quality.
INSURANCE BUREAU OF CANADA 5
HOME INSURANCE EXPLAINED
GUARANTEED REPLACEMENT COST ENDORSEMENT
(FOR BUILDINGS): This endorsement will make up
a shortfall in the event that the replacement cost of
your home is underestimated.
BY-LAW ENDORSEMENT (FOR BUILDINGS): When
construction codes and zoning bylaws change,
existing buildings are usually exempted. But when
a severely damaged building has to be substantially
rebuilt, the entire building may have to comply
with current standards. The “by-law” endorsement
covers any additional expenses to bring the building
up to standards.
Other considerations
▲A claim for replacement cost on a building
usually requires that reconstruction occur on the
original site.
▲Whether you are insured for ACV or
Replacement Cost, a deductible may apply
(see “Making a claim,” page 13).
▲When you and your insurer agree on cash
settlement of a claim, there are “no strings
attached;” you can spend the money as you
please.
▲If you have Replacement Cost coverage for the
contents of your home, and you suffer a loss or
damage, you may receive actual cash value as a
down payment while an adjuster assesses the
claim further (see “Making a claim,” page 13).
▲Keep in mind that most home insurance policies
have limits on the amount you can claim for cash
and securities, and for other items such as
bicycles, jewellery and boats (see “Personal
property,” page 15).
Additional living expenses
There are three circumstances that may entitle you
to additional living expenses: UNFIT TO LIVE IN,
LOST RENTAL INCOME and DENIED ACCESS (see
details below). Note that this coverage does not
reimburse you for all expenses, only those which
are over and above your normal cost of living.
A single claim limit normally applies to any
combination of the three circumstances. For
homeowners, the limit is usually equal to 20%
of the building coverage; for tenants it is 20% of
contents coverage.
UNFIT TO LIVE IN
If an insured peril makes your home unfit to
live in, and you have to move out while insured
damage is being repaired, your insurer will cover
any necessary increase in living expenses –
including moving costs – so that your household
can maintain its normal standard of living. Payment
is limited to the reasonable time required to repair
or rebuild your home, or for you to settle elsewhere.
LOST RENTAL INCOME
If you have a tenant paying you rent, and he/she
is forced to leave because of insured damage
to your home, your policy will reimburse you FAIR
RENTAL VALUE for the reasonable time required for
repairs or rebuilding. Rent-related expenses, such as
heating or electricity, that don’t continue during
reconstruction, would be deducted. If your tenant
cancels the lease due to the inconvenience, lost
rental income beyond the period of repairs/
rebuilding would not be covered.
6 INSURANCE BUREAU OF CANADA
HOME INSURANCE EXPLAINED
DENIED ACCESS
If you are denied access to your home by the police
or other civil authority as a direct result of damage
by an insured peril to neighbouring premises – such
as when a burning house collapses and breaks a gas
main – you may be reimbursed by your insurer for
additional living expenses and/or lost rental income
for up to two weeks. Additional coverage may be
available in the event of mass-evacuation, for
example, following a toxic spill from a train wreck.
Check your policy.
Uninsurable perils
A home insurance policy is not a maintenance
contract. Home insurance is generally intended
to help policyholders cope with the financial
consequences of unpredictable events that are
“sudden and accidental.” Predictable events,
such as flooding of a home built on a flood plain,
or preventable events, such as frozen indoor pipes,
are not covered.
The following perils are generally uninsurable:
WATER DAMAGE CAUSED BY FLOODWATER –
Certain areas are prone to floods, and so damage
caused in this way is considered predictable. Water
damage arising from a sudden rupture of an indoor
water pipe would be a different story; that damage
would be covered.
DAMAGE ARISING FROM THE FREEZING OF
INDOOR PLUMBING – This is generally regarded
as preventable. If you are away from home for
more than four days during the normal heating
season, you must drain the plumbing or arrange
to have your home checked daily by a competent
person to ensure that heat is maintained. However,
if freezing-related damage were to occur despite
such precautions, it would likely be covered.
DAMAGE FROM FREEZING OUTSIDE THE HOME –
This is not covered; nor is damage from waves,
melting or moving snow and ice, and heaving frost.
DAMAGE BY INSECTS AND RODENTS
(E.G., TERMITES, SQUIRRELS, MICE,
RATS) – This is not insurable,
except for damage to building glass.
Many policies also exclude damage
by raccoons.
DIRECT DAMAGE RESULTING FROM
THE INTENTIONAL APPLICATION OF HEAT
(E.G., CLOTHING SHRUNK BY A CLOTHES DRYER,
BURNED BY AN IRON) – This is not covered.
However, if the dryer were to set the clothing
on fire and the flames spread to the room and its
contents, the resulting collateral damage would
be covered.
DAMAGE BY SNOWSLIDE, LANDSLIDE AND
OTHER FORMS OF EARTH MOVEMENT
(SEE “EARTHQUAKE,” PAGE 5) – This is not
insurable. However, damage from a fire or
explosion caused by earth movement would
be covered.
INSURANCE BUREAU OF CANADA 7
HOME INSURANCE EXPLAINED
What else is not covered?
There are certain items that may be in or around
your home, but which are not covered by a basic
home insurance policy:
BUSINESS PREMISES, EQUIPMENT AT HOME
Loss or damage to buildings or structures is not
normally insured if these are used for business
or commercial farming. Business equipment is
covered only while at your home, typically up to
a $2,000 limit. There is no coverage for samples
and merchandise for sale. If these limits are a
problem, you may wish to consider buying an
insurance policy – or an endorsement to your
home insurance policy – that is designed for
home-based businesses.
VACANT PREMISES
Insurance coverage on dwelling and contents ceases
automatically when the premises have been vacant
for more than 30 consecutive days without the
insurer’s prior approval. Coverage for certain perils
such as vandalism lapses immediately. A “vacant”
building, regardless of the presence of furnishings,
is one that you have moved out of, not intending
to return. Be sure to notify your insurer before you
vacate your home.
YOUR LAWN
Damage to your lawn is not covered by a typical
home insurance policy.
PROPERTY OF ROOMERS OR BOARDERS
If you have roomers or boarders who are not
related to you, their property is not automatically
covered by your contents insurance.
Coverage limits
In addition to overall dollar limits for liability,
contents, etc., there are sub-limits on the amount
you can claim for some items. Check your policy
to be sure, but listed here are some items that are
typically subject to coverage limits:
Many insurers no longer limit coverage of silverware.
Reasonably priced supplementary insurance is
usually available. These “riders” or “floater”
policies provide all-risks coverage for specific
items – often fragile and/or valuable – subject
to certain exclusions. Coverage can be world-wide
and there is usually no deductible.
Your liability to others
(See also “Tenant insurance” and “Condominium insurance.”)
The personal liability portion of home insurance
applies at your home or anywhere in the world to
bodily injury you may unintentionally inflict on
others – often referred to as “third parties” – or
to accidental damage you may do to their property.
For example, suppose a visitor or a household
employee were to be injured by slipping on a wet
floor in your home, and you were judged to be
legally responsible, you would be covered for the
damages you were legally obliged to pay because
of the injury. No deductibles apply.
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HOME INSURANCE EXPLAINED
▲ negotiable securities
▲ cash
▲ garden tractors
▲ watercraft
▲ computer software
▲ bicycles
▲ jewellery and gems
▲ watches
▲ furs
▲ coin, stamp and
card collections
▲ manuscripts
Liability coverage does not apply to injuries
sustained by you or by members of your immediate
household. There is no liability coverage for disease
transmission and physical – including sexual –
abuse. Also, there is no coverage for “punitive”
damages awarded by a court; only “compensatory”
damages are covered.
Sometimes an insurer may not wait for a claim to
occur before taking remedial action, as when a
spill of home heating oil threatens to migrate (see
also page 5) to adjacent property. Regardless of
the insurance coverage for oil spills on your own
property, your insurer may elect to clean up the
mess quickly so as to prevent you from incurring
liability for damaging your neighbour’s property.
YOUR BOATS, GOLF CARTS, TRAILERS...
AND LIABILITY
Your homeowner’s liability insurance automatically
covers losses arising from your ownership or
non-business use of:
▲a trailer, except when it’s attached to a motor
vehicle;
▲boats with outboard motors up to 16hp (inboard
up to 50hp); sailboats up to 26ft long (see your
policy for exact limits);
▲golf carts on a golf course;
▲self-propelled lawnmowers, snowblowers, garden
tractors (25hp maximum, used mainly on your
own property); and
▲motorized wheelchairs or scooters (3 wheels
minimum, designed for disabled persons).
If you own a vehicle that is not included in the list
above, you may need to purchase an endorsement
for that vehicle. Talk to your insurance representative.
LIABILITY ARISING FROM USE OF WATERCRAFT
OR MOTORIZED OFF-ROAD VEHICLES OWNED
BY OTHERS
You are covered for claims arising from your use
of watercraft owned by others (without restriction
as to size or power), so long as the owner has given
consent, and you are not using the craft for racing
or business.
You are also covered for claims arising from your
use of off-road vehicles owned by others (ATVs,
dirt-bikes, etc.), with the same conditions.
Such watercraft and vehicles must not be subject to
registration or licensing, and must not be owned by
you or any person insured by your home insurance
policy. Damage to the actual craft/vehicle is not
covered.
BUSINESS ACTIVITIES
Home insurance is not business insurance. However,
you are insured against liability claims arising from
certain business activities, as follows:
▲Rental of portions of your two- or three-family
dwelling, usually occupied in part by you, as a
private residence, providing that no family unit
includes more than two roomers or boarders.
▲Rental of space in your residence for incidental
office, school or studio occupancy.
▲Rental of up to three garage spaces for cars.
▲Occasional rental of the part of your home that
you normally live in.
▲Temporary or part-time business pursuits – such
as babysitting – of an insured person under 21.
Any other business pursuits require specific
insurance arrangements; check the summary page
of your policy.
INSURANCE BUREAU OF CANADA 9
HOME INSURANCE EXPLAINED
LEGAL DEFENCE AND SETTLEMENT
If someone alleges in a lawsuit that you are
responsible for injuring him or her – or for
damaging his or her property – your insurer
will defend you against any resulting suit for
compensation, even if the suit is groundless,
false or fraudulent. Of course, the suit has to be
related to your insurance coverage. Policy limits
on third-party liability coverage do not include
legal defence costs.
Note: Your insurer has the right to investigate,
negotiate and settle any claim or suit as it sees fit.
This includes choosing a lawyer(s).
VOLUNTARY PAYMENTS
If you or another member of your household
injures someone else or damages his or her
property unintentionally (or even intentionally,
if the injury or damage is caused by a child
12 years of age or younger), you may compensate
that person for the losses, regardless of whether
you are legally liable, and your policy will reimburse
you (check your policy for dollar limits). This is
called “voluntary payment for damage to property”
and “voluntary medical payments” coverage, and
is standard in most homeowner policies.
Note: This provision can apply to loss or injury
experienced by household staff, but members of
your household are not covered. The recipient(s)
of voluntary payments must agree not to sue you.
Limits for this coverage are relatively low.
Tenant insurance
Landlords have relatively few legal obligations to
compensate tenants for damage to or loss of their
tenants’ personal possessions. Tenants, on the
other hand, are responsible for harm they may
cause to any part of the building in which they live
or to others who live or visit there.
THE BASICS
“Basic liability” and “contents” coverage are essential.
A fire ignited by a tenant’s defective toaster, or
flooding caused by a malfunctioning dishwasher,
could cause a great deal of damage not only to
the tenant’s unit, but to the entire apartment
complex, potentially leaving the tenant liable for
hundreds of thousands of dollars in damage.
For this reason, tenant insurance includes liability
coverage comparable to that included in a typical
homeowner policy.
In terms of insuring your own belongings, you may
think you have very little of value, until you have to
replace it all. A few pieces of furniture, no matter
how modest, can easily cost several thousand
dollars to replace. Your clothes, which you have
likely accumulated over several years, would also
cost thousands to replace all at once. If you bought
a CD player on credit and it is destroyed by fire or
stolen, you are stuck paying the balance of your
debt, and will likely want to spend several hundred
dollars more on a replacement. For all the reasons
above, it is recommended that all tenants insure the
contents of their homes.
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HOME INSURANCE EXPLAINED
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HOME INSURANCE EXPLAINED
Tenants and condominium owners
may incur liabilities
OPTIONAL COVERAGES
“Tenant’s improvements” coverage is important
because policies generally have standard limits that
are sometimes not high enough to cover all of the
improvements that you may have made to your
rented home or apartment. Such improvements
could include broadloom (carpet), built-in cabinets
or sound systems. Tenant’s improvements coverage
can be purchased in addition to your standard
policy, and ensures that, in the event of a loss,
you can return your home to the way it was.
Condominium insurance
Condominium owners experience some of the best
aspects of both home ownership and renting. As a
condominium owner, you have title to your own
unit, as well as a share in common areas such as the
lobby, swimming pool, parking garage or garden.
In fact, virtually the whole structure is common
except, perhaps, for the interior paint and wallpaper
and floor covering of your unit. However, you and
your fellow owners can be held personally liable if
things go wrong. A condominium insurance policy
is a low-cost way to remove some of the financial
worries of condominium ownership.
THE BASICS
“Basic liability” and “contents” coverage are as
important for condominium owners as they are
for all homeowners and tenants. (See the many
references under “Liability to others” and
“Contents” in the index.)
OPTIONAL COVERAGES
“Owner’s improvements” coverage is an important
consideration as most policies have standard limits,
which may not be high enough to cover upgrades
(carpet, hardwood, custom counters or light fixtures,
built-in cabinets or sound systems, etc.).
“Supplemental” coverage insures your condominium
unit itself so that you will be protected in the event
that the corporation’s insurance is insufficient. Your
agent or broker can explain in more detail.
“Loss assessment” coverage is an important
feature of condominium insurance because you
share responsibility with others for common
property. The insurer will pay, up to a stipulated
limit, your portion of any special assessment that
is valid under your condominium corporation’s
governing rules:
▲ if it is due to a direct loss that affects a shared
part of the premises (see first paragraph) and
if it has been caused by an insured peril;
▲ if it is due to legal liability arising out of
shared ownership of common areas of the
condominium premises (for example, to
compensate a visitor for injuries incurred by
tripping over a frayed carpet in a corridor);
▲ providing that the assessment has not been
made necessary because of a deductible in
the corporation’s own insurance policy.
Normally, the condominium corporation’s own
insurance coverage will be adequate. Insurancerelated
special loss assessments seldom occur.
Insuring your cottage
If you own a cottage, not on the premises of your
primary dwelling, you may insure it separately or
have it insured on the same policy as your home
insurance. Coverage is usually more limited than
with dwellings that are occupied year-round.
Burglary can be covered, but not theft; in other
words, for a claim to be considered, there must be
signs of forcible entry and/or exit. In winter, make
sure that snow does not accumulate on the roof;
a collapse due to the weight of snow would not be
covered. Your agent or broker can explain further.
Remember to include outbuildings, fences, and so
on when calculating the coverage you need.
Insurance to cover vandalism and malicious acts
is not automatically included but can often be
purchased separately. Although most policies
covering cottages do not specify separate amounts
of insurance for outbuildings, they do allow up to
a specified percentage of the amount of insurance
to be used for this purpose.
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HOME INSURANCE EXPLAINED
A little off the top,
please!
Insuring your mobile home
Mobile (not motor) homes and their contents
can be insured only for “named perils.”
Replacement cost insurance is available for
contents, but usually not for the mobile home
itself. The cost of removing the home from
the path of an endangering peril such as fire
or wind can be covered. To qualify for the
same kind of basic insurance “package” as a
regular home, mobile homes must usually
be “tied-down” to keep them from shifting
during strong winds. Any gaps in the
foundation must be protected by a “skirt”
to keep out animals and debris.
Some so-called “mobile” homes – often
factory-built, “double-wide” assemblies –
properly installed on substantial foundations
and hooked up to water and sewer systems,
may qualify for conventional home insurance.
With cottage insurance, it is particularly important
to invest whatever time it takes to be certain that
you understand the policy’s limits before you agree
to coverage. Also, if your “cottage” is really more
of a “second home” and has many of the features
of a primary dwelling, you may be able to obtain
better insurance coverage. Again, talk to your agent
or broker.
Making a claim
If you have suffered a loss for which you are
insured, inform your insurance agent or broker
of the nature of your claim. If there has been
a burglary or theft, the police must also be
informed. You’ll be required to supply information
about the circumstances of the claim as well as
reasonable evidence to justify the amount claimed.
Your insurer will want to know exactly what was
stolen, when you acquired it, and what you paid for
it. A claims adjuster may then be appointed – at no
cost to you – to look after the details. You should
take reasonable steps to protect against additional
damage. If a pipe has burst, for example, shut off
the water supply. Don’t dispose of damaged goods
without first getting your insurer’s “okay.” In some
instances, your insurer may arrange assistance for
temporary repairs, such as covering a damaged roof,
or boarding over a broken picture window.
If you have replacement cost coverage, some
insurers will assist you by providing the cash
value of the used item immediately, topping up
that amount later when you provide proof of
replacement purchase within 180 days of the loss.
There are exceptions, however, such as when you
have been using an already damaged or obsolete
item for some purpose other than its original one
(e.g., a defunct refrigerator as a bookcase). When
part of a pair or set of items is damaged, the loss
will be calculated as a reasonable proportion of
the whole set.
DEDUCTIBLES
Most insurance claims are subject to a deductible –
the initial amount of every claim that is paid by the
policyholder. Deductibles help make insurance
more affordable for everyone by eliminating minor
“nuisance” claims. Keep the amount of your
deductible in mind when making a claim. If a
policy has a $500 deductible, for example, you
would receive only $100 for a $600 claim.
INSURANCE BUREAU OF CANADA 13
HOME INSURANCE EXPLAINED
Know what you own!
An up-to-date inventory of your possessions and
a record of their value will be helpful to you,
your insurer, police and others in the event of a
burglary or fire. After a loss, it could be difficult
for you to recall the details of things that are now
damaged or missing. Some people like to make a
drawer-by-drawer, room-by-room video recording
of their possessions; some use a regular camera.
An audio cassette recorder could be useful for
making a spoken list of collections – books, tools,
stamps, etc. This would capture more detail than
you could achieve with a camera. Written or typed
descriptions are useful, too; be sure to include
makes, models, serial numbers or other identifying
marks. Keep purchase receipts for major items.
Store your inventory records in a safety-deposit
box or another
secure location
away from your
home.
Insurance fraud,
illegally acquired property
1-877-IBC-TIPS
It is a serious crime to file a false or “inflated”
insurance claim. Insurance fraud hurts honest
policyholders by driving up the cost of insurance
for everyone. Each year, insurance fraud costs
insurers and policyholders in Canada $3 billion.
If you suspect that someone you know is involved
in insurance fraud, call 1-877-IBC-TIPS (422-8477)
or visit www.ibc.ca to submit a confidential tip, and
help keep insurance costs down for all Canadians.
Note: Illegally acquired property is not insurable
and some policies exclude smuggled items which
have not been declared to Canada Customs.
Damage that results from your criminal activity
would not be covered, nor would any intentional
damage by you.
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Keep a record
of your possessions
“Insurance-speak” simplified
There is some language that is specific to the
insurance industry. Other common words can
also be given special meaning in the context of
“insurance-speak.” We hope you find this glossary
helpful; your comments and suggestions for future
editions are welcome.
“ALL RISKS” OR “ALL PERILS”
The term “all risks,” or “all perils,” describes
insurance for losses due to a wide range of causes.
Instead of listing each insured peril, such as fire,
lightning and so on, the policy covers all loss or
damage to insured property that is the result of
any “risk” that is not specifically excluded.
“All risks” is a confusing insurance term and does,
in fact, incorporate numerous listed exclusions,
allowing coverage to be priced more fairly. Perhaps
a better description would be “all common risks.”
A “risk,” or “peril,” is a chance event that is
unexpected and accidental as far as the policyholder
is concerned. For example, if a dog’s tail sweeps an
ornament off a table and onto the floor where it
breaks, that is due to a “risk”; the ornament would
not otherwise have broken. The gradual wearing
out of clothes, however, or the rotting of fruit, are
quite natural and expected, and therefore are not
insurable “risks.”
“DIRECT LOSS”
A “direct loss” arises when insured property or
goods are damaged or lost. The term does not
include other losses or expenses incurred as an
indirect result of the damage, such as having to
rent a video camera if your own is destroyed by
fire shortly before you leave on a vacation trip.
“PERSONAL PROPERTY”
Your home insurance policy will cover the contents
of your home and other personal property that
you own, wear or use (including clothing, cameras,
furniture, etc.) while on your premises. It may even
cover uninsured personal property of others,
excluding roomers or boarders who are not related
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HOME INSURANCE EXPLAINED
“DWELLING”
Your “dwelling” coverage applies to your home
and “attached structures” such as a garage or
carport. Permanently installed outdoor equipment
on the premises, such as a swimming pool and the
equipment attached to it, is included. Building
materials for use in construction, alteration or
repair of the insured dwelling or related structures
on the premises are covered, too, if they are on the
site or adjacent to it. Theft and vandalism losses
during construction are usually not covered.
You may apply up to 10% of the amount of
insurance on your dwelling to insure building
fixtures and fittings, such as mirrors or air
conditioners that may have been removed
temporarily for repair or seasonal storage.
You may apply up to 5% of your insurance to
trees, plants and shrubs (weather damage excluded);
but there is often a limit for any one item.
Separate structures and buildings on the same
premises as the primary dwelling are also covered
for specified amounts, usually up to 10% of the
main coverage. This could apply to detached
garages, tool sheds, retaining walls, and even
landscaping. If 10% seems too low, consider
buying additional coverage.
Your right to privacy
The nature of insurance requires consumers and
claimants to supply some relevant personal
information to insurance companies. Without such
disclosure, insurers would find it difficult to assess
premiums and pay claims fairly. Collection, use
and disclosure of your personal information are
governed by the Privacy Commissioner of Canada,
under the Personal Information Protection and
Electronic Documents Act (PIPEDA). PIPEDA
requires insurers, agents and brokers wishing to
collect, use or disclose your personal information to
state all purposes for which the information will be
used, and to obtain your consent for such collection,
use and disclosure. If you have any questions or
concerns regarding how your information is used,
it is your right to have them addressed before you
apply for coverage or submit a claim. For more
information on PIPEDA (a.k.a. PIPED Act), visit
www.privcom.gc.ca.
Questions? Concerns? Just ask!
When you buy home insurance, you buy peace
of mind. Insurance is a product like any other,
and it works better when both sellers and buyers
are knowledgeable. If you have questions that
are not answered in this pamphlet, all you have
to do is ask!
For more information:
▲ Talk to your agent/broker.
▲ Look under “Insurance, Homeowners” in your
local library for up-to-date, comprehensive
books on insurance written expressly for
consumers.
▲ Call IBC’s consumer information centre in your
region (contact information on the back page of
this brochure), and talk to a knowledgeable and
experienced information officer.
to you. Your policy will normally cover personal
property while it is temporarily away from your
home anywhere in the world. Personal property not
normally kept at home is not covered. Personal
property in a warehouse is usually covered against
theft without time limit; but other perils may not
be covered, or may be covered only up to 30 days,
so be sure to consult your agent or broker.
“SUBROGATION”
Your insurer may try to recover some or all of its
costs in settling your claim by suing others responsible
for the loss. The effect is roughly the same as if you
yourself were to sue the responsible party, except
that you are compensated more quickly by your own
insurer, often on a replacement-cost basis.
“YOU” AND “YOUR”
When the text of an insurance policy uses the words
“you” or “your,” it refers to insured person(s) named
on the coverage summary page. The policy also
includes, while living in the same household, a named
insured person’s legal – and sometimes common-law –
spouse, the relatives of either, or any person under 21
in their care.
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