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What to Ask for when Shopping for Home Insurance

March 29, 2011

In a worst case scenario, when an accident happens and you actually need to make a claim on your home insurance, are you confident that you will get the kind of coverage you really need?

Given the huge assortment of different coverage options that are offered by Canadian insurance companies, it is no surprise that most consumers are often thoroughly confused as to what their policy actually covers.   In the event of a disaster, is your coverage sufficient to provide the peace of mind you need?   In order to put yourself at ease and be confident in the knowledge that you are covered for anything that can go wrong, you should consider asking the following key questions before you purchase your policy.   Any reputable home insurance company will be more than willing to answer the following questions for you.

What is the replacement value of my home?

Many Canadian home insurance providers will decide from a selection of the different construction industry approved value calculating methods in order to determine the rebuilding cost of your home.   These methods vary from one another quite a bit, and so often it’s the case that when you go asking around for insurance quotes at different providers, you will see a big difference in the rebuilding costs that are quoted.   Make sure that you ask any potential home insurance provider exactly what the calculation method is that they are using, and ask them exactly what it covers.   The rebuilding cost of your home is a significant factor used in order to determine the premiums that you will pay.   Therefore, you may find that it is extremely worthwhile to shop around to compare premiums and coverage from different providers.   Shopping online for insurance quotes makes this a quick and easy process.

Is the replacement cost coverage guaranteed?

The value of the structure that is stated on your policy is the figure that your home insurance company will pay out in order to reconstruct your home in the case of a loss resulting in a claim.   Although we hope it never comes to this, the replacement cost is an important number to watch.   Most home insurance providers increase this amount each year when your policy is renewed, as a way of covering the labor and materials costs that will inevitably rise each year.   However, there is no guarantee that this figure, even when increased annually, will be enough to cover the true replacement cost of your home – which could mean that you find your home is under-insured within a few years of acquiring your policy.   A guaranteed replacement clause in your policy can help you to avoid this problem.   This clause ensures that the costs to rebuild your home are fully covered, irrespective of what the stated amount is in your policy.   Not every home insurance policy will include this clause, and for each provider the rules that govern it may be different.   You should check the details of this coverage with your insurance broker or agent before purchasing your policy.

Does my policy include sewer back-up coverage?

You might be surprised to learn that not every home insurance policy will cover you for damages resulting from sewer back-up.   In order to get this kind of coverage, you may have to purchase an additional “endorsement”, often known as a Water Damage Extension or Sewer Back Up coverage.

Even then, there is a possibility that you might not be fully covered!   Not all of these endorsements are the same, and some may only offer limited coverage.   Also, the kind of coverage and the costs involved can vary widely from company to company.   There are cases when an insurance provider may charge $150 for their endorsement, yet the coverage they offer is actually less than a company that offering the endorsement for just $100.   Bear in mind that some companies may limit the coverage they offer too, and before you secure an expensive policy endorsement for damage that could occur as a result of sewer back up, consider the state of your basement.   Finished basements and unfinished basements will vary drastically as to the cost of making repairs after a sewer issue, and being over-insured won’t mean that you’ll reap a bigger benefit in the event of a disaster.   Choosing the right amount of coverage is key!

What are the policy’s special limits?

A lot of home insurance providers will set special limits (maximum amounts) regarding the costs they are prepared to pay for certain items in your home, such as tools, electrical goods, jewelry, furs, machinery and so on.   As with everything else in the insurance world, these special limits can differ quite considerably from company to company.   You may decide that the insurance coverage for certain items is particularly important to you, and you will need to choose a policy that will provide a sufficient amount of coverage for those items.   Some home insurance providers will allow you to choose the amount you insure each item for if you think it’s necessary.   While you are shopping around, don’t forget to ask about these types of limits to make sure you can get the coverage you need.

Are all home insurance policies the same?

A lot of home insurance providers will offer you various policies that have different levels of protection.   For instance, a provider may offer three kinds of home insurance to you: Comprehensive, Broad and Fire policies.   They are completely different!   A comprehensive policy, as the name suggests, provides blanket coverage for everything in your home.   Meanwhile, a broad policy will only provide medium level coverage, with the fire policy only offering very basic coverage.   Different companies may use different names for each kind of policy, or offer polices under the same name with different coverage levels.   It’s important to remember this while you are shopping around with different providers and policies.

Does the provider operate a 24/7 claims service?

You might not consider this important, but believe us when we tell you it is a necessary question.   A large portion of home insurance providers don’t actually work weekends!   Therefore, if you are unfortunate enough to suffer devastating damage to your home on a Friday night, you could be facing a long and painful 48 hour wait before you can get anyone out to come and help you.   In order to avoid this, make sure you ask any potential home insurance provider about their claims service.