17 home insurance myths to stop believing now
We've sorted the misinformation from the truth when it comes to home insurance in Canada.
We've sorted the misinformation from the truth when it comes to home insurance in Canada.
Home insurance can be a tricky topic, and if you’re not reading the fine print, you could be relying on widely-held insurance myths to inform your coverage decisions. Let’s take a look at the home insurance myths and get the facts straight.
FACT: Is home insurance required by law? Unlike auto insurance, home insurance has not been made mandatory by the government. However, if you’re asking “Is home insurance required for a mortgage?” you’ll get a different answer. If you own the property and have a mortgage on it, often, your bank or lender will require that you hold an active home insurance policy and name them on that policy. If you do not own the property but are renting it, your landlord may require that you have renter’s insurance.Watch: Is tenant insurance mandatory?
FACT: If you simply leave for vacation without taking precautions, you are not always covered. Thus, if you go away during the “usual heating season” then you usually need to either:
FACT: A standard home insurance policy covers your personal property and most valuables up to the selected limit of insurance. It’s important to note that sub-limits often apply to specialty property, like jewellery or furs. For these items, you have the option of adding coverage to your policy. Often, you will need to provide proof of value (e.g. an appraisal or a receipt).
FACT: They can. For instance, when the first COVID lockdowns occurred, there was a spike in fires and corresponding claims. There was an expectation that we’d see a rise in the cost of home insurance coverage because of this, however, it didn’t seem to happen (luckily). However, climate change has and will affect your home insurance rate. As certain areas of the country have seen higher risk of extreme weather events caused by climate change (like flooding and fires), premiums are priced according to that rising risk.
FACT: Sewer backup damage occurs when the sanitary and storm sewer systems cannot handle high volumes of water, which causes water to back up into your home through toilets and drains. As is the case with freshwater flood protection, most providers offer some sort of optional sewer backup protection, but it is not usually included on default standard insurance policies. Just a few providers include it in their standard home insurance policies. (If you have more questions about home insurance sewer backup, read this article about what home insurance does—and doesn’t—cover.)
FACT: Is flooding covered by home insurance? It depends on the type of insurance policy you have. Typically, a home insurance policy protects you against sudden and accidental entry, or release of, water in your home (e.g. burst pipes).
A standard home insurance policy often would not protect you against “overland flooding,” when water flows over normally dry land and enters your home through doors and windows, such as due to a river overflowing its banks or snow melting.
Here’s an interesting fact: It wasn’t until 2015 that Canadians had access to flood insurance. Instead, homeowners and renters had to rely on the disaster financial assistance programs offered by the government. Today, most home insurance providers offer some sort of freshwater flood optional protection. (To find out if you need flood insurance, read this article.)
FACT: Home insurance policies cover your house and its contents. Insurance also covers any structures on the property (your shed, detached garage), additional living expenses you may incur if the house is uninhabitable, and personal liability exposures you may face.
For condos, policies also cover unit owner improvements and some assessments made against you by the condo corporation. Make sure that you have a thorough understanding of what it covers. To learn more about what condo insurance covers, read the MoneySense overview of condo insurance.
FACT: Home insurance does not cover market value, only the rebuilding or replacement value of your house. If your house burns down, the purpose of home insurance is to cover the costs required to rebuild the house as it was before the loss. Rebuilding value is typically lower than market value because it does not include the value of the land. Back to the example of your house burning down, the land is still there so your insurance does not need to “replace” the land. An insurance policy can often include costs to clean up the debris, such as after a fire.
FACT: Your home insurance covers earthquake damage only is you purchased an “earthquake rider” on your policy. These are most meaningful in British Columbia and Quebec. Some providers, like Square One Insurance, automatically include earthquake protection in their policy.
FACT: Insurance tends to be more expensive for older houses. There is a higher chance that something will go wrong, and it will cost more for the insurer to fix it. Also, the elements of many older houses, such as plumbing, are more likely to fail than those of new homes with upgraded pipes and materials.
FACT: Usually not. Make sure that you know how your insurance policy treats this and other kinds of damage.
FACT: Condominium corporation insurance will cover the overall building structure, its exterior finishes, roof, windows and common areas, like elevators and hallways. It does not cover the contents of your personal condo, its upgrades and third-party liability should you cause damage to other condo units (i.e. via flooding).
FACT: No. Landlord’s insurance does not cover your liability (i.e. if you flood your neighbours) nor your contents (if something is stolen from your unit).
FACT: No, there is no such thing as an Act of God exclusion in home insurance policies. In fact, most policies cover damage from hailstorms, lightning, wildfires, etc. Optional coverage is available for certain types of natural disasters, like earthquakes. So, does home insurance cover natural disasters? Not all do. Other types of natural disasters, like seawater flooding or landslides, are excluded.
FACT: No, the personal liability protection included in your policy only covers accidental and unintentional injury of others or damage to the property of others. So, if you intentionally injure someone, you’re on your own.
FACT: Does home insurance cover dog bites? As long as you properly answer any questions relating to your pets in the application and investigation process, then your policy will cover costs associated with your dog biting and injuring a third party.
FACT: Not true. Between 2009 and 2020, Canadian insurers spend an average of $2 billion annually on losses related to natural catastrophic events—more than four times what was paid out annually from 1983 to 2008, according to the Insurance Bureau of Canada (IBC). Extreme weather events caused by climate change (like precipitation, snowstorms, hail, floods, wildfires and extreme heat) will mean more damage to infrastructure, businesses and homes. The corresponding rise in insurance claims means prices could climb, depending on your location.
FACT: Not necessarily. If you’re starting home renovations, be sure to call your insurance company to share your plans. Your insurer can let you know if you’re covered—some policies don’t cover accidents during renovations. If needed, there are additional options you can add to your home policy for minimal cost. Also, get confirmation that your home insurance policy will remain intact during the renovation period and after the renovations have been made. For example, vacating your home during renovations could leave you uninsured, since no one is at home. And remember that home insurance coverage is not a substitute for ensuring the contractors who are doing your renovation have insurance. (To learn more about home insurance during renovations and what contractors should provide in terms of insurance, read this article.) Finally, it’s a good idea to update your existing home insurance coverage once the renovations are complete. You will want to ensure that all new additions are covered. And sometimes upgrades can have a positive effect on your premiums, since you’re lowering the likelihood something may break and will need to be replaced soon.
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