Frequently Asked Questions: Homeowners’ & Tenants’ Insurance
The information below is intended to serve as a guideline only. Always be sure to check with your insurance provider for specific details.
Do home insurance policies vary from one insurance company to another?
Very much so, although there are broad similarities. There are generally three types of policies, known in the industry as the Standard (or Basic), the Broad, and the Comprehensive.
The "Standard" provides protection against a number of "named perils" that might cause damage to the dwelling and its contents. Named perils could include such things as fire, lightning, windstorm, hail, theft, and specific types of water damage.
The "Broad" policy improves named perils coverage on a dwelling to "all risks" coverage, but leaves the contents coverage on a named perils basis. ("All risks" coverage provides protection from anything that can cause you loss or damage, unless the policy specifically excludes that cause of damage. Typical exclusions on an all risks policy could include faulty workmanship -- e.g., your roof shingling was not properly installed and the shingles are now causing water to leak into your home, or wear and tear – even all risks policies would not provide protection if some component of your home or contents simply wore out.)
The "Comprehensive" policy provides all risks coverage on both the dwelling AND the contents.
Can you explain about the dollar limitations on valuable items, such as jewellery, furs, etc.?
These items are covered under the home policy as part of the contents of the home. They are, however, only covered for the perils of the main policy and are also subject to any dollar limitation in that policy.
Neither the Standard nor the Broad policy, therefore, would provide coverage if you lost such an item, since these policies are written on a Named Peril basis for the contents coverage. While the Comprehensive coverage would most likely cover "lost" jewellery, it would be subject to a relatively low dollar limit of a few thousand dollars.
People therefore tend to add jewellery on specific riders to obtain better (all risks) coverage if the policy is a Standard or Broad, and to eliminate the dollar limitations.
Make sure you have your agent or broker go through the dollar limitations in detail with you. They vary from insurance company to insurance company in terms of actual dollar amounts, the types of property (e.g., some have limits on bikes, others do not), and also whether the limitations apply to all types of losses, or just to certain types.
I understand the water damage coverage varies very much from one policy to another. What should I be concerned about?
You really need to have your agent or broker explain the various options to you. At the low end of the scale, water damage caused by water overflow from the plumbing system, water from burst pipes, and also frozen pipes could be covered, but not damage caused by continuous seepage, sewer backup, etc. With this very significant peril that can cause so much damage, it is important that you understand precisely what your policy covers – and what is excluded.
If there is damage to my home or contents, will that be settled on a depreciated or a non-depreciated basis?
You will need to have your agent or broker explain this to you. Most building settlements are on a non-depreciated basis, and many policies settle contents on the same basis. Such a settlement on contents normally requires that you actually replace. Should you choose to settle on a cash basis, the settlement reverts to a depreciated one.
Will my homeowner policy pick up the extra cost of having to conform to current building codes (e.g., rebuilding a brick instead of a frame home?
Excellent question! Most likely – no. You should enquire of your agent or broker about this. Most property policies do not pay for this. You should also think in terms here of your cottage coverage. For example, local bylaws may require that a replacement cottage be moved further back from the lake, possibly involving significant extra expense.
As a tenant in a high-rise apartment building, and with very limited contents, do I really need Tenant insurance?
Yes, if for no other reason than the damage you could very easily cause to your own apartment (and other ones too) from, say, a kitchen grease fire or the overflow of water from your sink. Like Homeowner policies, the Tenant policy not only protects your own belongings, but also provides protection against damage you might cause to others.
Answers supplied by Michael C. Maclean, F.I.I.C.