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What Every Canadian Should Know About Home Insurance Policies

December 14, 2010

Home insurance policies can vary widely in many ways, including what losses are covered, how much the deductible is, and the coverage limitations. Understanding your home insurance policy thoroughly can help you decide which policy is the best to protect your property and your family. Here are the basic components that make up most home insurance policies:

Dwelling

This part of your home insurance policy covers the structure (your house), as well as attached structures and fixtures. This could include decks, porches, garages, etc. You need to ensure that this part of your policy remains up to date – as the value of your home can change annually, and if you add any items that increase the value of your home (decks, air conditioning, dishwasher, etc.) then you may need to adjust your coverage.

Additional Structures

This portion of your policy covers any structures on your property that are detached from your home, such as garages, patios, fences, and storage sheds. However, outbuildings that are used to house a business or are used for business purposes won’t necessarily be covered under your typical home insurance policy.

Personal Property

One of the most vital parts of your home insurance policy is coverage for your personal items. It is important to take note of whether your policy covers your property for replacement cost or actual cash value. In the case of a claim, replacement cost will allot you the total cost to replace the items affected, whereas actual cash value policy will only pay out the value of your item, pro-rated for age, use and condition. If you have items in your home that are out of the ordinary and particularly valuable (i.e. art, electronics, jewelery, bikes, etc) you’ll want to ensure that your policy covers these items. If they are valued beyond the limits outlined in your policy, most insurance providers will allow you to add additional coverage for these specialty items.

Loss of Use

If your home is uninhabitable after a claim, then loss of use insurance will help your family manage while your home is being rebuilt or repaired. Hotel expenses, meals, and incidental expenses are covered by this portion of your home insurance policy, typically for a specified period of time or to a maximum dollar amount.

Endorsements

These are individual additions to your policy and can provide extra coverage. Common endorsements include:

-    Guaranteed Replacement Cost: Provides the policy holder with the full replacement cost of their home. Home owners can also choose endorsements that provide 20% or more additional funds in case there are extra costs for the new/replacement construction.

-    Inflation Protection: Matches the payout of your insurance policy to appropriate inflation.

-    Scheduled Items: Allows you to declare particular items of value that may not normally be covered under a regular policy, or increases coverage of these items. Can include possessions such as art, rare collections, firearms, and computers.

-    Secondary Residence Insurance: Covers another home, cottage, or residence that your family regularly uses.

-    Additional Theft Coverage & Forgery Protection: Gives the homeowner added protection from theft of items in an automobile, trailer, or other personal vehicle, and protects from forgery and credit card theft.

Choosing Perils Coverage

Most standard policies are referred to as comprehensive – meaning they cover all perils except those which are specifically excluded. Many times you can have additional perils covered for a cost. However, if you are looking to save money on home insurance, then considering a basic or named perils policy might help you to do that by allowing you to name which risks you would like covered – like fire or theft, while excluding all other risks.

Once you fully understand the components of home insurance, you’re in a prime position to examine your own home insurance policy and make an informed decision. You can adjust your coverage to better meet your needs, or look for cheap home insurance by getting quotes from different providers. Either way, you’ll be able to rest easy, making sure that you have the coverage you need, and feeling confident that you’re paying an appropriate premium for the protection you have.