Homeowner Insurance - Protect your Investment
Homeowner Insurance - Protect your Investment
Home insurance, commonly known as homeowner’s insurance, is a type of insurance policy covering a private residence. If you are thinking about purchasing a new home, you will need to understand precisely how home insurance works. Understanding your home insurance will, without a doubt, avoid making mistakes when choosing what is the best right coverage for you. We are here to help you get the best insurance deal for your new home.
Most homeowner insurance in the Canadian market is a combination of the following insurance types:
- Liability Insurance
- The buildings
- loss of use (additional living expenses)
- or loss of other personal possessions
Most importantly, the homeowner insurance provides some financial relief against disasters.
Overview of Homeowner Insurance
Homeowner Insurance Coverage
As above, homeowner insurance is a multiple-line insurance policy that includes property insurance and liability coverage. It comes as an indivisible premium; that insured only pays a single premium for all that is declared on the insurance policy.
-Homeowner insurance covers Liability, damage to property caused by the owner or members of his/her family to other people, and damage caused by household pets. (see homeowner with dogs)
-The cost of insurance policy or premium often depends on what it would cost to replace the house, known as replacement cost, additional endorsements, and riders attached to the policy.
-The insurance policy is a form of agreement between the insurance company and the homeowner (known as insured). This contract indemnifies and returns the insured back to the financial state before the loss.
-Home insurance policy, like most insurance policies, will have exclusion, including floods or war, including a nuclear explosion from any source—this exclusion, amongst other standard exclusions (like termites). In exceptional cases such as floods, separately and additional insurance can be purchased. Insurance price varies to reflect the cost of replacement, usually upon applying an inflation factor or a cost index.
Liability Insurance Coverage
You might wonder why you need liability insurance in your home and why does your home insurance includes liability insurance under the policy? Liability insurance offers you protection against lawsuits and any fines when either you, your family, or the pets hurt or cause damage to someone else or another property. For instance, when a visitor falls down the stairs breaking his hip in your house and you are found responsible for his/her injuries, the insurance company can pay his or her medical bills or any other incurred damage. This coverage could also include the legal fees that you will incur when dealing with these types of claims. Please note that liability insurance only covers accidents happening to people visiting you or damage to other's property but not you, your family or your property. Your own property is protected under the property insurance section of your homeowner's insurance. In order to verify exactly what liability coverages and limits are offered under your type of policy, you will need to consult with your specific insurance provider.
The building coverage protects both the primary and detached structures. It may include garages, sheds, and back houses on the property up to a limit. Always ensure the property is covered sufficiently with replacement costs. Different insurers may not cover particular structures such as boundary walls, fences, gates, paths, drives or swimming pools, so it is essential to check the specific policy wording.
Exterior Building Coverages
As you might already be thinking, if you have comprehensive insurance, it is more than likely that you will be offered protection for most structures that form part of your home. This might include storage sheds, garages, porches, and gazebo areas. You will only need to consult with your specific insurance to know if any of these might be excluded from your coverage. However, since insurance policies vary among insurance providers, it will be wise to consult with your specific insurance whether your broad or standard home insurance can also cover any of these structures. These might be able to cover some of them, but there might be several exceptions.
Contents insurance covers personal belongings, such as furniture, clothes, electronics, etc. Most insurance will limit the amount of money paid out for each category of items. Each policy may vary in the amount of coverage provided. The option to schedule your personal property can be purchased separately.
Some homeowners insurance policies will have exclusions on liability coverage. The most common exclusions are:
- Depreciation or wear-and-tear maintenance. (see)
- Faulty workmanship of builder or contractors
- Mechanical or electrical breakdown
- Amount over the limits of the policy
- Vacant or empty home, or if it is rented out to tenants
Homeowner Insurance Covered Perils
Most buildings and content insurance offer on a "named perils" and "open perils" types. A "named perils" policy provides coverage for a loss specifically listed on the policy. If it's not listed, it's not covered.
"All Perils" policy is broader in the sense that it will provide coverage for losses on everything except exclusions on the insurance policy. Detailed breakdown of these packages follows:
There are various types of content coverage on homeowner insurance. The Named Peril is a type that describes how insurance protects against perils in a loss claim. It covers only the list of risks found in the insurance policy. This type of policy mostly protects vacant or unoccupied buildings.
Depending on the insurance policy, the wording may cover the following perils (always check your insurance policy):
Another special form of coverage, and it is the most inclusive. The difference with "named peril" policies is that they provide coverage to all losses unless specifically excluded. Insured will be covered on a peril that is not on the exclusion lists. If something happens to your home, and unfortunately, the event is listed on the exclusions list, it will not provide coverage.
Exclusions list of homeowner insurance:
- bylaw or Ordinance of law
- Movement of earth or Earthquake
- Power failure
- Nuclear hazard
- Intentional acts
So, in short,
- i) Named peril will cover only on the list
- ii) All Peril will not cover if it is on the list (of exclusion)
Homeowner insurance package
As you might have already learned, most home insurance packages offer both liability protection for homeowners and property protection which also covers personal contents. Moreover, Most insurance companies like to differentiate their insurance package offer with names like Comprehensive, Broad or standard. Except for features such as additional living, claim free protection, cyber and more others, the major differences are the building and content. Take a look at the comparison matrix:
Comprehensive homeowner insurance will cover every risk (peril) unless a risk is
directly stated as not covered under your policy. Hence the name comprehensive, this
insurance has the most complete coverage for both your property and contents in case
of unexpected incidents.
Standard home insurance is, as the name suggests, basic when it comes to coverage.
This insurance will only cover damages caused by the risks, also known as perils, that
are declared under your insurance policy.
The broad coverage sits in between comprehensive and standard insurance when it
comes to the level of coverage. Like comprehensive insurance, broad insurance will
cover your property against all risks unless some are stated as excluded under your
policy. Like standard insurance, broad insurance will only cover contents from the risk
which are directly stated under your policy.
More About Home Insurance
Insurance Deductible Meaning
An insurance deductible can be referred to as the money you are required to pay to carry out a claim. It is usually a set amount, but it can also just be a percentage of your insurance policy's overall amount of coverage. A deductible ensures both you and the insurance company share responsibility for the risk on your property.
If the damages caused to your property are less than your deductible, the insurance company will not play a role in paying for losses. In this case, it will only be your responsibility to pay the amount due because the damage is part of the amount of loss you agreed you would be responsible for in case of an incident. For instance, if the damages are only $1000 but your deductible amount is $2000, then your insurance will have no responsibility to pay. Now let's say if your deductible is worth $2000, and the extent of the damage is worth $2300. If You claim in such scenario, the insurance company will only pay $300; then, you will need to pay the rest. Deciding whether to claim in such a case depends entirely on you. But have in mind that the insurance company will only pay their part after you pay for your deductible when you make a claim. So you might ask yourself whether it is worth claiming when the damage only goes a couple extra hundred dollars on top of your deductible. A claim is a claim, so it might end up increasing your premium in the end.
Larger deductible decreases insurance
When you have a low deductible, you will pay less out of pocket when accidents occur. However, this also means you will have to pay more insurance premiums to balance out the coverage. On the other hand, having a larger deductible means that the amount you pay on your premiums will be reduced, but what you pay upon an accident will be larger. So even though you might be tempted to choose a higher deductible, you should also consider your economic situation if an accident does happen. If the accident does happen, you will need to pay for that very high deductible all at once for insurance to do its part. If you don't have the money at the time, then you will find yourself in trouble.
Risk factors increasing premiums
Insurances consider several risk factors before determining the amount of money you pay for your home insurance. The higher the risk, the higher the insurance rates will be. For example:
-Location of the house. Insurance will consider whether you live in a dangerous neighbourhood or in a zone that is prone to floods or is highly exposed to forest fires.
-condition and age of the house. The older the house or the more unstable its condition, the most prone to damage it is.
- Proximity to a fire station. Or other elements that might ensure house security like a water hydrant. Leaving near these will ensure you present a lesser risk in case of accidents.
- Your claiming history. You will be a higher risk to insurance if you have an extensive claiming history.
- Recreational structures in your house. Having recreational structures such as pools, trampolines, and playgrounds might present a higher risk for insurances.
Plenty of insurance companies exist countrywide, so it is necessary to let different insurance companies assess risks before making a final decision.
Investing in my house
‘The amount of money you pay on insurance varies from company to company. But there is nothing important as knowing all your valuables are protected in case of a disaster. So, you need to invest in your house more to ensure you are getting better deals. The age and construction of your house play a huge role in getting you better premium deals from insurance companies. The types of materials you use in construction such as brick, security systems, smoke detectors, and sprinkler systems all have different deals. Furthermore, having an outdoor spa, a hot tub, ora swimming pool increases the premium amount you pay since you will need liability coverage
Getting cheaper home insurance
Do your Homework
You are not restricted to a specific insurance company. Therefore, ensure you look at three or
more different insurance companies and compare their prices.
Raise your deductibles
A higher deductible means you are paying little premiums. Before going this route, ensure your
a house is not at risk of frequent damages, as this will lead you to lots of claims.
Claims Process-Homeowner Insurance
After a loss, the insured must take steps to mitigate the loss. Insurance policies require the policyholder to notify the insurer within a reasonable time. A claims adjuster is assigned to investigate the claim. Insured may need to provide various information such as ownership, receipt etc. Filing a claim will increase insurance rates, and multiple claims can result in non-renewal or cancellation. Most insurer companies will share the claim data in an industry database.
Let's say half of your house roof was blown off due to intense rainstorms. After you ensure your safety and prevent further damage from happening, (maybe by picking up the blown shingles) you will want to file for insurance. Here are some steps you might want to take to claim insurance:
Call Your Broker.
Provide your broker with the information regarding the extent of the damage. You will want to provide a list and documentation of the damages that resulted due to the rainstorm.
Your insurance will send a professional to investigate the incident then determine the actual extent of the damages caused by the storm.
Your insurance will then review your policy to determine if all damages caused by rainstorms are covered, and then you will be informed of the deductibles applicable to this case. The insurance company will also provide you with a list of possible contractors you might want to consider to do the repairments.
The payment might be made to you as the construction is being completed so that you can pay the contractors once they request the payment. In some situations, payments may be made from the insurance to the contractor directly, but it will depend on your insurer's arrangements. Check your homeowner insurance policy for wording and talk to your insurance broker. Get homeowner insurance quotes online.
Don't forget to download home inventory list from Here to keep track of what content you have
You should have home insurance since it will provide you financial protection when accidents occur destroying both your home and property. It is your responsibility to protect your belongings and we are here to help you.