How to tell if your home insurance settlement is fair
How much does home insurance pay out? Hereâs how to assess if your settlement is fair, plus tips on making a claim.
How much does home insurance pay out? Hereâs how to assess if your settlement is fair, plus tips on making a claim.
âIs my claim settlement fair?â If you’ve had to make an insurance claim at any point, you’ve probably asked yourself (or your friends) this burning question.
The truth is there are a lot of questions you might have about home insurance. (âHow much is home insurance?â âHow much does home insurance pay?â and âHow much does average home insurance cost?â are a few that come to mind.) Consider that insurance premiums are on the rise, and insurers and consumers are feeling the crunch. Severe weather conditions, caused by increasing temperatures in Canada, mean that weâre more likely to see snowstorms, hail, floods, droughts, wildfires and extreme heat events, which can all damage property. In fact, between 2009 and 2020, Canadian insurers spent an average of $2 billion a year on losses related to natural events. Even condo insurance has gone up as a result of extreme weather, with condo insurance increasing from 25% to 240% per year.
So, insurers and consumers alike are paying more for coverage. Should you have to use it, youâll want to be certain your settlement is fair, and the extra money youâve been forking over hasnât been for naught. So, most of us could use a little unbiased advice when it comes to insuranceâa simple way to assess whether or not weâre getting value (the settlement) for what we pay for (home insurance coverage).
It’s important to understand that insurance settlements are not windfalls. Itâs not a way to make money or a way to upgrade your home. Nor should claims be used to cover expenses for repairs or to replace maintenance costs associated with owning a property. The fact is: If you own a home, or condo or another type of residential real estate, part of that ownership includes paying for its upkeep. And that sometimes includes expensive and unexpected costs.
But if you find yourself in an unexpected and expensive situationâsuch as a basement full of water or a hole in your roof from a fallen treeâthen making a claim is often the way to go. Itâs what we get in return for paying the cost of home insurance, right?
Once youâve made the claim and the adjuster has done their due diligence, you should be looking at a proposed insurance settlementâa sum of money your insurance provider is willing to pay to fix the unexpected problem. To determine if the proposed settlement is fair, we first need to understand how claims are processed. Letâs use this example: A tree has fallen on the roof of Patâs home over the holidays, and she wants to know if her insurance providerâwho was offering $14,000 in compensation for the damageâhad made a fair offer.
Whatâs the impact of the home insurance claim on your premium? In essence, your home insurance policy is your âget out of debtâ cardâto be used only when the impact of a repair cost would be catastrophic (or at least a hardship) on your finances. It means you need to be judicious about making a claim. Hereâs how to decide on when to make a claim:
The biggest reason is that youâll end up increasing your home insurance rates (because you made a claim) and youâll end up paying for the repairs because you first need to pay the deductible. So, if your deductible is $1,000 and the repairs are $3,000, your provider will only pay $2,000.
If the fence is rotting away, and you know that one big windstorm will blow it over, budget the household finances for a new fence. Thereâs a plus to this too: Better-maintained homes get better premiums.
Not everything will be covered with a basic home insurance policy, so check before making any claim. As a homeowner, you may assume that your flooded basement will be covered, but thatâs not always the case. Traditional home insurance policies donât cover flood damage, unless itâs from a burst pipe (in winter, make sure your heat is on) or leaky appliance. For overland water or sewer backup, you need to purchase extra insuranceâknown as a rider.
And donât be too surprised if your insurance provider refuses to offer this extra coverage. For instance, homeowners in certain Hamilton, Ont., neighbourhoods and in certain parts of Manitoba will find it impossible to get flood insurance, as they live in designated âflood zones.â
In Windsor and its surrounding areas, homeowners pay some of the highest home insurance rates due to their proximity to water. Now back to that claim: If you make a claim and youâre not covered, you wonât see any money. Worse, your claim is now on record, which is used to assess the premiums you pay. The more claims you make, the higher your premiums.
Remember: The more often you make a claim, the higher your premium will be. That said, itâs statistically not unusual for a homeowner to file up to two claims in a 10-year period. But any more than two and alarm bells will go off (even as they are increasing your rates).
With files from Courtney Reilly-Larke
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What buyout dollars should be expected from a 200k tear down and replace cottage cost when one has both unlimited and enhanced coverage?