Your home is your castle, and chances are you have home insurance to protect it. However, as common as home insurance is, homeowners are not always clear on what is fact and what is fiction when it comes to their coverage.
1. Homeowner’s insurance policies are all the same
False. Policies can vary significantly from one provider to another. Carefully review or ask your provider what your policy covers, what it doesn’t cover, and the policy’s limits. Policy limits are the maximum available payout should you need to make a claim.
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2. A home is insured for its market value
False. A home is insured, not for its market value but the cost to rebuild it. Market value considers things like location, land value and ‘comparables’ (how much similar homes sell for in the neighbourhood), whereas rebuild value focuses on what it would take to rebuild and duplicate your home; materials, labour, permits, etc.
3. Damage caused by an earthquake will be covered
Maybe. A home insurance policy does not automatically include earthquake coverage, although this option can be added. If you live in an area prone to earthquakes, like some regions of British Columbia, Ontario, and Quebec, it may be worth a chat with your provider to see if it makes sense to have given where you live.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. Jewellery is covered
True, with a caveat. Most homeowner’s insurance policies include coverage for jewellery 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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 coverage.
15. Home insurance rates are the same, regardless of the insurer
False. Home insurance rates vary considerably from company to company. That’s why it is important to shop around and compare home insurance quotes. Not only will you find a policy that provides you with the home insurance coverage you need, but you’ll get it at the best available price. And, if you bundle it with your auto insurance, you could save 5-15% off your combined premiums.