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Understanding changes to policy deductibles

Reviewed by Rena Novotny

A policy deductible is the amount you must pay out of your own pocket before your insurance provider will pay for any insured loss or damage. For example, let’s say your $1,500 laptop was stolen and you have a $500 deductible. In this case, you would be responsible to pay the first $500 out of your own pocket and your insurance provider would pay the remaining $1,000.

Why deductibles change

Many home insurance providers, including Square One, are making changes to the policy deductibles they offer. New deductibles are being introduced and existing deductibles are being increased. These changes are a result of higher claim volumes and costs, which are largely due to:

  • changing weather patterns; and,
  • aging municipal infrastructure systems.

If your home is located in an area with a greater-than-usual history of claims, your insurance provider may increase your deductibles. This means you may be responsible for smaller losses but remain protected under your insurance for larger or catastrophic losses.

It’s also worth noting that many providers are eliminating lower deductible amounts. For example, $200 minimum deductibles are being replaced by $500 or $1,000 minimums. That’s because a $200 deductible is just too low by today’s standards. With a $200 deductible, the cost of handling a smaller claim is often greater than the payout made to the customer, and the future impact of lost claims-free discounts is often greater than the amount of money recovered under a small claim.

Listed below are some examples of policy deductible changes being made by Square One.

Water backup deductible introduced

Insurance companies across Canada are experiencing more water backup claims than ever before. This is largely because of changing weather systems that produce more frequent severe-rainfall events and aging municipal infrastructure that can’t handle the amount of water that comes along with more severe weather events. Furthermore, finished basements are becoming much more common, instead of the bare, unfinished concrete basement areas that used to be the norm. This means that water backups now cause damage to much more expensive finishings and personal items – from extra bedrooms to high-end home theatres and games rooms – increasing the overall cost of recovering from a water backup event.

To combat rising water backup claims costs, many home insurance providers now limit the amount of coverage for water backup claims to as little as $5,000. Rather than take this approach, Square One decided to introduce new deductibles for water backup related losses, without unreasonably limiting the amount of coverage to levels that would be inadequate to restore most modern, finished basements.

Our water backup deductibles range from $500 to $25,000 based upon an individual risk assessment completed by Square One for every home we insure. While our policies have water backup deductibles, we do cover water backup claims up to the policy’s full limits. For many customers, Square One can also provide advice for reducing the risk of water backup in order to become eligible for lower deductibles; for example, backflow preventer valves and sump pumps are both effective ways to reduce risk and improve your ability to obtain competitive premiums.

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Hail deductibles

As weather around the world continues to become more volatile, certain regions in Canada are susceptible to much more frequent and severe wind and hail storms. Together, hail can wreak havoc on the exterior of homes by tearing away some parts of the building envelope, while making it easier for water to subsequently enter through damaged areas. Insurance companies across Canada have taken different approaches to respond to this, with many companies restricting their roof coverage to “actual cash value” only; this means that claims for damage due to hail would be reduced according to the age of the roof.

Rather than taking that approach, Square One decided to introduce different deductibles in high-risk hail regions. This way, we can ensure that our rates remain affordable, without reducing the quality of the coverage that our customers receive. With Square One, as long as a customer’s roof has not exceeded its useful life, hail damage is covered up to the full cost of repair or replacement, subject to the policy’s limits and exclusions.

Glass deductible eliminated for condo owners

At one point, Square One offered condo owners different deductible options for glass that formed part of their condo units. These options are no longer offered because most condo corporations are responsible for damage to exterior glass. Condo owners who are responsible for damage to exterior glass have the option of purchasing our Condo Owner’s Protection, which is subject to the standard policy deductible.

Insurance is designed to take care of large losses which can cause significant financial damage to your family. Appropriate deductibles can help to keep your insurance premiums as competitive as possible, while preserving your coverage for those critical incidents when you really need it.

For more information on deductibles, or to get a quote and explore a wide range of deductibles, contact Square One at 1.855.331.6933.


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