Home insurance is an expensive purchase for many Canadians, but a very affordable way of protecting their largest single investment. Van Helden Agencies wants to provide information to help make decisions that can improve the value you receive for your home insurance dollars.
Although home insurance is not required by law, your home mortgage lender requires you to keep insurance on your home.
We’re going to give you an overview of the package of coverages found in a homeowners’ policy. It does not address the more limited offerings of fire and extended coverages, or those of very special needs. Homeowners’ typical coverage is contained in a package of liability and property insurance.
Frequently Asked Questions
How Much Home Insurance Do I Need
- Property Protection: Enough coverage to preserve the financial position your had prior to a disaster.
- Self Protection: Keep enough liability coverage to protect yourself from lawsuits resulting from your negligence.
- Lender Requirements: Your lender may require you to cover the house for at least the amount of the mortgage, which is often not enough, considering contents replacement. You do not have to purchase insurance from the insurer recommended by your lender.
- Policy Requirements: Insurers often impose some coverage requirements for replacement cost protection.
What Affects Home Insurance Prices?
- Type of Construction: Wood frame houses usually cost more to insure than fire resitvive stuctures.
- Age of House: New homes may qualify for discounts. Some insurance companies may not insure very old homes, or offer a limited form of coverage.
- Local Fire Protection: Your home’s distance from a fire hydrant and the quality of your local fire department determine your fire protection class. This is an important issue for those living in the country or on acreages.
- Amount of Coverage: The total amount of coverage you buy for your house, contents and personal liability will affect the price you pay.
- Deductible Amount: Your choice of a higher deductible will reduce the price for home insurance. The higher deductible is offset by the money you save on insurance premiums.
- Discounts: Insurers offer lower prices for such things as installing alarm systems (fire and/or burglar), sump pump, back-flow preventer, low temperature monitoring, cellular backup on monitoring systems, being mortgage-free, reaching the age of 45 years, being a non-smoker, and having had no prior insurance claims.
- Credit Score Many insurance companies have experienced a lower insurance risk when credit scores are excellent
What Deductible Should I Choose?
- The deductible applies only to coverage on your house and personal property. This is the amount you have to pay out-of-pocket with each claim or incident.
- A policy with $500 deductible will cost more than one with $1000 deductible. Higher deductibles may provide you insurance coverage at a reduced price.
How Might I qualify for a Discount?
- Some Insurers offer lower prices for such things as installing alarm systems (fire and/or burglar), sump pump, back-flow preventer, low temperature monitoring, cellular backup on monitoring systems, being mortgage-free, reaching the age of 45 years, being a non-smoker, and having had no prior insurance claims, and having an excellent credit scores
Basic Coverages Available
Whether you own or rent, different packages of home insurance can protect your home and your belongings. Each package protects against specified perils.” Perils” are events that cause damage to property. Three examples are fire, windstorm (including hail and tornados) and theft.
Most package policies usually include additional types of coverage for property damage, additional living expenses, personal liability and medical payments. Home insurance policies apply to most owner-occupied single-family homes and are modified slightly for apartments and condominiums.
The deductible applies only to coverage on your house and personal property. This is the amount you have to pay out-of-pocket with each claim or incident.
A policy with $500 deductible will cost more than one with $1000 deductible. Higher deductibles may provide you insurance coverage at a reduced price
Property damage coverage helps to pay for damage to your home and your personal property. Usually other structures on the property are also covered, including tool sheds, and detached garages. Van Helden Agencies can help you to determine if the amount of coverage on other structures is sufficient.
Personal property is the contents of your home and other personal belongings owned by you or family members who live with you. Make sure you have their replacement value properly evaluated when purchasing insurance.
Home insurance policies may provide limited coverage for small boats; however, insurance policies do not cover motorized vehicles unless they are not required to be licenced and used only at your home. Van Helden Agencies can help you find appropriate coverage for your boat, snowmobile or other recreational equipment.
Some forms of personal property, such as silverware, expensive antiques, fine art, jewellery, furs, computers, guns, and money, have limited coverage under your homeowner’s policy and may therefore need additional insurance. This coverage can be added to your policy as an “endorsement”.
Replacement Cost or Actual Cash Value?
Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality adjusting for inflation, but without deducting for depreciation.Depreciation is the decrease in home or property value since the time it was built or purchased because of age or wear and tear. This can occur even if the market value of your property has increased over time.
Typically, insurers require homeowners to insure their homes for 100% of the replacement cost. If the homeowner fails to insure for at least 80% of the replacement cost, a penalty is applied to partial losses. For example, if it would cost $1,000,000 to replace your home and it is insured for $800,000 (80% of its replacement value), and a fire causes $500,000 worth of damage, then your insurance company will pay the full $500,000.
On the other hand, if your $1,000,000 home is insured for $600,000 (which is less than 60% of its replacement value), and you suffer a $500,000 loss, your company would pay for only a proportionate part of the loss. You would have to pay the balance out of pocket. Your company would pay for damages based upon the following formula:
| Amount of Insurance Carried
Amount of Insurance Necessary
= 6/10 or 60%
Using these figures, your company will only pay for 60% of your $500,000 loss. Hence, 3/4 x $500,000 loss = $300,000 paid by the company. You would have to pay the balance: $200,000.
Obviously, insuring your home for at least 80% of its replacement cost is very important. Check with Van Helden Agencies to find out what is required. You may also consider insuring at 100% of replacement cost so you have total coverage in the event of a complete loss.
Cash settlements (when property is not replaced or repaired) are calculated on an actual cash value basis. Actual cash value is the amount it would take to repair or replace damage to your home after depreciation. For example, if your roof has a 20-year warranty and is 17 years old, there would be a depreciation adjustment for the age and condition of the roof, considering it would have needed replacement in 3 years anyway (at your total cost).
Additional Living Expenses
Most home insurance policies provide additional living expenses if your home is damaged by an insured event. If you cannot live there while repairs are being made, or if you are denied access to your home by government order. Coverage typically includes limited motel, restaurant and warehouse storage expenses.
This coverage protects you against a claim or lawsuit resulting from non-business bodily injury or property damage to others caused by your negligence. This coverage applies to you and all dependent family members who live with you. You should check with Van Helden Agencies to determine if the amount of personal liability coverage is sufficient. If you have a home business or a home office, you should consider additional business insurance coverage.
Regardless of who is at fault, this coverage pays medical expenses for persons accidentally injured on your property by a member of your family or by your pets. Medical payments do not apply to your injuries or those of family members living with you or to activities involving your at-home business. Some companies may not cover incidents related to certain species or breeds of pets.
Tenant and Condominium Coverage
If you rent an apartment or a house, you need insurance coverage for liability and for insuring your personal possessions. Liability coverage protects tenants the same as it would protect a homeowner. The owner of the property is responsible for insuring the building and for obtaining his or her own liability coverage.
Your condominium association should purchase a policy that covers the commonly-owned property and liability associated with common property. Condominium association members have a right to examine the association’s policy.
To protect your contents and interior improvements, you may purchase Condominium Unit Owners’ coverage. Unit owners are usually required to insure their own unit improvements as well as previous owners’ improvements. Condominium Associations generally insure their interest only. Condominium unit owners are responsible for insuring upgrades from the unit’s first owner to present.
This covers a unit-owner who wishes to insure his or her property or to cover any items not insured by the association’s policy. A unit-owner policy pays for property damage to personal belongings, wall, floor and ceiling covers, and any accessories not originally installed in the unit, and also provides personal liability protection.
Optional Coverages You May Wish to Consider
Scheduled Personal Property Endorsement
This endorsement is sometimes called a “personal article floater” A personal article floater covers special possessions that may exceed normal limits in your regular home insurance policy, such as jewelry, furs, stamps, coins, guns, computers, antiques and other high-value or high-risk items. A personal article floater itemizes each article, with a description of the article insured and lists any excluded perils. This floater often provides coverage that is broader than the coverage given in the home insurance policy. There is typically no deductible applied to this coverage.
Secondary Residence Premises Endorsement
Homeowner’s coverage under this endorsement applies to a secondary residence (example: summer home). Remember that these secondary residences are not automatically covered by the home insurance policy on your primary or principal residence, since they are not on the same street address.
This endorsement broadens personal liability and medical payments coverage on small sailboats, personal watercraft, and outboard motor boats.
Earthquake insurance is available through most insurance companies at an additional cost. It is normally issued as an endorsement and attached to your home insurance policy.