What Exactly Does Your Home Insurance Policy Cover?

I recently received my home insurance renewal notice. The company I deal with merged (or was bought out?) by another company and the accompanying letter advised reviewing the policy to make sure I was getting the appropriate coverage.

Being obsessive that way, I did go through it with a fine-tooth comb. I don’t want to be disappointed if I ever have to make a claim.

Do you know exactly what your home insurance policy covers?

Are you planning a vacation this summer?

Since an unoccupied home is at greater risk of damage and susceptible to break-ins, you may not be covered while you are away. Coverage may only be provided for a certain number of days. If your house will be empty for longer than that minimum you will probably be required to have someone visit your home on a regular basis – generally every three to seven days depending on your policy.

What exactly does your home insurance policy cover?

Water coverage depends a lot on your policy

I was really glad to find out that I had been paying an extra $12 for extended water coverage (I didn’t actually pay attention to it before) when a major sewer backup flooded my basement. My neighbours – who assumed they were automatically covered – were giving me the stink eye when the clean-up and restoration crews pulled into my driveway and totally rebuilt my basement.

Typically, this coverage is for when water backs up into your home from a sanitary or storm sewer that overflows, or any accidental water seepage from burst pipes, for example.

Check to see what your limit is. If you did extensive and costly renovations to your basement, a $10,000 limit is not going to cut it for you.

What we think of as “flood” insurance – when water gushes in to your home due to a river or lake overflowing its banks – was not available in Canada until recently (2015). If you build your dream home five metres away from a babbling brook that triggers only a “hundred-year flood,” be safe and buy the optional coverage.

Home insurance doesn’t cover your home’s market value

Home insurance only covers the actual cost to repair or replace your home as it was before the loss.

Insurance companies will look at the overall maintenance of your home. You need to keep up with repairs. You are not usually covered if you have cracks in your foundation, loose window casements, or a leaky dishwasher that allow water to seep through.

Related: Our house insurance bill is up 30 percent!

They will take into account depreciation of your roof and garden shed, and the condition of that (dead) tree in your yard that crushed the neighbour’s gazebo.

You can’t say, “I hope there’s a big wind storm that knocks down my (broken down) fence so I can replace it with a nice new cedar fence.”

Personal property is almost always covered for replacement cost at today’s prices. Actual cash value will only pay today’s value for the item, prorated for age, use and condition.

However, you must actually replace the items and provide receipts. The insurance company won’t just hand you a cheque.

Condominium corporation insurance doesn’t cover your condo

This insurance covers the building structure, such as roof or windows, and common areas. It does not cover the contents of your own condo, or third-party liability if you cause damage to other condo units. You need your own separate policy. My condo corporation insurance has a $25,000 deductible if I cause any damage – so I made sure that this liability was included in my personal policy.

Likewise, if you are a tenant, your landlord’s insurance is not going to cover you. A lot of renters don’t bother getting tenant’s insurance – as you have probably noticed when you hear of a building fire in the news and the tenants have lost everything.

What’s personal liability protection?

Personal liability protection only covers accidental injury to other people on your property, or damage to another person’s property.

So, if you get sued by your neighbour after punching him in the face during an altercation – you are on your own.

Final thoughts

Home insurance is not regulated like auto insurance. In fact, unless you have a mortgage, you are not obligated to even have it.

Policies can differ widely and may not fully protect you. Sometimes you need to pay a bit more to add a rider to the policy for your valuables, or to protect against different risks.

Know what’s covered. What are the coverage limitations? Don’t assume that insurance will pay for all damages. Update your policy if necessary to best protect your property. It doesn’t make sense to reduce your coverage in order to save a bit of money.

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  1. Christine Tremblay on June 28, 2017 at 8:59 am

    We just had a friend whose back yard was like a waterbed. The copper main had broken in middle of their yard and leaked away from house. Tiny water in bsmt, but back yard had to be dug up.
    City said not their problem. They’re only responsible to lane border. Your yard is your problem. INSURANCE DID NOT cover this, and never does. It’ll be a five to ten thousand dollar touch for them to re-fill-in their ten-foot deep hole in back yard, rebuild the fence, and what a hassle ! I phoned our insco and they would not tell me if I would be covered, they just referred me to read the policy…..seemed to need to know if it happened before giving info..! That’s life, I guess in this crazy world.

    • boomer on June 28, 2017 at 10:10 am

      @Christine Tremblay: Ouch! I really feel for your friend. I can’t believe your insurer just told you to read your policy to see if you’re covered. The wording is often so ambiguous it’s hard to interpret.
      In any case, although “outbuildings” are often covered – shed, garage – usually water damage to your lawn (the land) is not covered.
      As I read it, water damage insurance protects against “sudden and unexpected incidents” and water seepage into the ground doesn’t fall into that category.

  2. Dreamer in Chief on June 28, 2017 at 10:01 am

    I went through the same process when we bought our new home about a year ago. I actually went back and forth with a few different agents about what was covered by their policies and what I could add on. That was a great process, because I was able to take the best of all of them and then get to a true apples to apples comparison. I added a bunch of extras to cover things like you’ve mentioned, plus others. By the time I was done, I knew I was covered adequately for anything I could see being an issue and I had a fair price for that coverage. It’s definitely worth reading the fine print!

    • boomer on June 28, 2017 at 5:29 pm

      @Dreamer in Chief: It seems you were quite diligent in researching the best insurance deal for you when most people just shop around for the lowest rates. You don’t want to be in a position of trying to make a claim only to be denied (or get just partial reimbursement) because you aren’t covered.

  3. Tom on July 1, 2017 at 8:08 am

    A home is worth a lot of money, so get a very good policy. Make sure you are covered for sewer backup and replacement cost coverage- in a fire you need to get full value for your contents.

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