While it’s your broker’s job to ask the questions and provide options, it’s important that you understand each section of your home insurance policy. This policy will be there to cover you on your worst day, so we all want to make sure that we get it right! In order to properly insure your home, here are 3 topics to think about.
1. Contents Coverage
Your homeowners or tenants insurance policy provides coverage for your personal contents up to a certain limit (value that is pre-determined in your policy). Most policies will protect possessions such as clothing, appliances, furniture, tools, and decorative items from a covered loss or theft.
When you are talking with your broker about a new homeowners policy, it’s really important that you provide an accurate value for your possessions. Think about how much it would cost to replace ev-er-y-thing. Your clothes, dishes, jewelry, pots, pans, side tables, couches, pillows, items for your pets, kids sports equipment or your gardening tools. The coverage is there for when you need it, so ensuring that your policy accurately reflects how much it would cost to replace everything in your home is really important. We want to get that right now, so that we’re right if we needed it.
Now, items such as jewelry, sports equipment, art, or specialty items like customized wheel chairs or furniture may need something called a “personal property endorsement or floater”. This means that you provide their value separately from the rest of your contents and pay extra premium to ensure that these items are replaced to their full value (rather than being subject to a limit), should a loss occur. These items should be appraised by a professional to get full coverage on these items. Most insurance companies require this to be done every few years to ensure a more accurate value in case of a loss.
We recommend that you either make a list, or make a video of all of the items in your home and their values. This will help you and your broker know how to best protect your belongings.
2. Actual Cash Value vs. Replacement Cost
There are two different options when it comes to how your insurance company reimburses you for your property, should an insurable loss occur: Actual Cash Value (ACV) or Replacement Cost.
Actual Cash Value coverage is typically the most affordable, as such it is more common. With this type of coverage, your insurance company will only pay what your property is worth minus depreciation.
With Replacement Cost coverage, your insurance company will pay out what it would cost to repair or rebuild your home in today's dollars. This more accurately reflects what it would actually cost to replace your home and its belongings. Insuring your home based on the replacement cost value will protect you from labor, materials, and transportation expenses required to rebuild your home back to its original state.
For example, you own a 2015 stove valued at $800. A fire destroys your stove. A replacement cost policy would pay whatever it costs to replace the stove (now costs $950). But, a cash value policy would only pay what the couch is worth today ($500 because 5 years old).
3. Water Risk
Southwestern Ontario loves water (hello Great Lakes and snow squalls!), but unfortunately, insurance companies do not. Understandably though, because water can cause a lot of damage to a property, and you want to ensure that the damage is properly fixed so that you don’t have mold or rust issues later down the road.
As such, property insurance policies are priced according to your water damage risk (among many, many other things). This is really something to think about if you are looking to purchase a home. Take a look at the city mapping to see if it is in a flood plain, or ensure that your site inspection checks thoroughly for signs of water damage. There are three main types of water coverage:
- Sewer Back-up: If water enters your unit through your toilet, tub/shower or sinks and causes damage, this coverage helps you to replace your personal property that is damaged.
- Overland Water: This coverage can protect you from sudden direct physical loss or damage caused by: a) flood; b) unusual and rapid accumulation of groundwater; or c) surface water; or d) Mass Evacuation as specified in your policy
- Water Escape: Typically in Ontario, Water Escape is built into your home policy and will cover events that we call “discharge and overflow” scenarios. To put this simply, these are scenarios where vessels in your home that are normally supposed to hold water do not perform as expected
Will you please have an honest conversation with your broker about your location’s water damage risk? Water Coverage is not something that you want to get wrong because when you need it, you really need it to be there properly.
Are you properly covered? Be sure to discuss your needs with your insurance broker so that we can design the perfect coverage plan for your needs!