Transparency and Your Home Insurance Policy
The insurance industry doesn’t have the best reputation. Many people fear their insurance provider will refuse to pay out, and having a claim denied can be a bitter pill to swallow. So, what can you do?
Chances are, unless you work in insurance or have a law degree, the small print on most home insurance policies doesn’t make a whole lot of sense. That’s a problem, because buried within the policy are a bunch of details that answer the only question worth asking when it comes to insurance: am I covered?
To make life easier, Square One has taken two steps. First, we’ve written our policy in simple language- see for yourself by downloading a sample. Next, we’ve come up with this transparency page. We want you to understand exactly what’s in your policy, so we’ll explain the most important parts in plain English. We’ll also underline all the technical terms, so you know what to look out for.
Let’s start with the basics. Your Square One policy is comprehensive. That means it insures against everything except for a list of exclusions. We’ll go over the list, but first we’ll take a look at the things your insurer requires of you. Then we’ll cover deductibles and how to make a claim.
What is required of you?
Buying insurance isn’t like buying a candy bar. Firstly, not everyone can buy insurance. If the risk is too great, insurance providers can simply refuse coverage. Secondly, buying insurance requires something from you in return. Not only must you provide your insurer with details upon your application, but if they accept your application, then there are certain situations where you are required to contact them to provide information.
The good news is that there are only a handful of situations where something is required of you:
- Initial application: The most important thing to keep in mind when buying insurance is to be honest. Your insurance provider can’t give you the coverage you need if you lie about what your needs are. Sure, lying about the condition of your home might save you a few bucks a month, but what if those lies result in your claim being denied? Yes, there are a lot of questions on an insurance application. But try to remember that every question on that form is there for a reason. If a question is asked, then the answer matters.
- Material changes: There are some circumstances where you need to contact us and let us know about certain changes. Here are some examples. Let’s say you’re replacing the bathroom in your home. While you’re at it, you decide to upgrade the kitchen and replace the carpets with hardwood floors. If the value of your changes is more than $25,000, then you must contact us to let us know of the changes. We’ll change the value of your home on the policy to reflect the changes you’ve made. That way, if your house (and the new bathroom inside it) burn down, then your insurance will cover the cost of replacing the new bathroom, not the old one. You also need to inform us if there is a change of occupancy in your home- if you decide to rent out your basement to a tenant, for instance- or if your home undergoes construction or renovation. These changes represent a higher risk for insurers and many will simply refuse coverage. Square One offers a wide variety of coverages, including coverage for homes under construction/renovation, but it’s essential that you inform us of these changes. That way, we can update your policy and keep you protected.
- Proof of value: At Square One, we let you choose the coverage that suits your needs. Optional coverage is available for specialty property, such as jewellery, watches, fine arts and collectables. If you select coverage for specialty property, then you must provide proof of the item’s value before you submit a claim. If you don’t, then the amount you receive for your lost or damaged property will be limited to $3,000-$6,000 depending on the item.
- Leaving your home in winter: There is an exclusion in your policy relating to water damage that occurs if pipes burst after they become frozen during the winter. To avoid this, if you know you’re going to be leaving your home for more than 7 days, then you need to take action. Either leave the heating on or drain your pipes. If you’re interested, here are some useful home maintenance articles in our resource centre. While this might seem like overkill, a burst pipe can do a lot of damage, so if you know you’ll be away from home, take precautions and stay covered. Don’t worry, if you require emergency medical treatment and are forced to leave your home, then you’ll still be covered.
- Making a claim: When submitting a claim to your insurance provider, it’s important to do so quickly. This gives your insurance provider the opportunity to take quick action by inspecting the loss and preventing any further loss or damage. Your home insurance provider needs to determine the extent and cause of the loss before they can come up with a fair settlement.
- Pay your premiums: It almost goes without saying, but given the scope of this page, let’s say it anyway. Your insurance isn’t valid if you don’t pay for it.
That’s it! Pretty simple, right? Now, let’s look at some of the things that your policy doesn’t cover.
What is the point of comprehensive insurance if it comes with a list of exclusions? Good question. There are three main reasons that insurers refuse to cover certain things.
- Some things are just uninsurable. Take war, for example. There’s no way to predict the risk involved, so there’s no way to charge a premium.
- No need. There’s no point having two left shoes, and there’s no point having two insurance policies for the same thing. Some objects are excluded from your home insurance policy because they’re covered elsewhere. Your car, for example, is covered by your auto insurance, even when it’s in your garage.
- Insurance companies don’t want to insure it. Some things are just out of scope. Take wear and tear, for example. If you could insure your shoes for this, you’d only buy one pair in your whole life and your insurance company would go bankrupt replacing them every year.
That last point is of more relevance to consumers than most would think. The price of insurance premiums is directly related to the number of claims in the industry as a whole. If there are a series of floods, then insurance providers must pay out many millions. The money they use to pay those claims comes from their only source of income; your premiums. Their only choice to stay afloat is to raise your premiums to cover the cost of future claims. So, the reason exclusions exist is actually to keep premiums affordable.
So, what’s excluded from your Square One policy? Well, there are three categories of exclusions. Some apply to your home, some to your liability and some to both.
The first list of exclusions applies to your entire policy; that is, they apply to both your home and your liability. Put simply, you’re not insured if:
- you deliberately do something illegal.
- you notice that a loss is about to occur, or that a loss has already begun, and you choose not to do anything to prevent or reduce the damage.
- you are deliberately negligent. For example, if you refuse to fix the holes in your roof, you can’t claim for water damage done to the fur coat stored in the attic.
- you participate in illegal activities relating to growing/producing drugs (including cannabis).
- your house is damaged from war or civil unrest.
Liability is a term used a lot in insurance, but what does it mean? To be liable for something means you are legally responsible for it. Your policy deals with two kinds of liability; personal liability and premises liability. Both protect against actions you take that might cause someone to sue you. Personal liability protects you anywhere in the world. For example, if you hit someone with your golf ball while on holiday. Premises liability protects you for accidents that happen at home. For example, if a neighbour slips on your icy porch, because you didn’t take proper care to keep it safe for visitors.
So, what are the exclusions to this coverage? You’re not insured if:
- your claim results from terrorism or government anti-terrorism efforts.
- your claim results from a nuclear incident that is already covered by the Nuclear Insurance Association of Canada.
- you assume liability for other people’s property, even through a verbal contract. For example, your friend agrees to lend you his expensive laptop on one condition; you break it, you buy it. If you break it (or if it’s stolen) you can’t claim this on your insurance.
- your claim results from the ownership/use of aircraft or any premises used as an airport.
- you transfer a disease to someone – it wouldn’t make sense for your insurance provider to pay out every time a cold spreads through the office.
- you sexually, physically or emotionally abuse someone, or fail to take steps to prevent such abuse.
- data is lost in transmission.
- you commit libel or slander.
- your claim results from the discharge of pollutants. If the government tells you to clean or neutralize pollutants, you also can’t claim this on your insurance.
- your claim results from fungi, spores, bacteria or mould that make others ill.
Property and Loss of Use exclusions
The second list of exclusions in your policy relates to everything other than your liability. (This includes your home, belongings, etc.) These exclusions are separated into two categories in your policy; general exclusions, and water damage exclusions.
General exclusions relate to your losses. You’re not insured if:
- the loss is related to business activities conducted from your home (unless you disclose it to us and we still agreed to insure you).
- your property has been vacant for 30 consecutive days (unless you contact us beforehand to let us know).
- your house is undergoing construction or renovation (unless you contact us beforehand to let us know).
- the police legally confiscate or seize your property. (I.e. if the police seize your computer, you can’t claim for it.)
- acts of terrorism or counterterrorism cause loss or damage to your home. Unless the damage results from fire or the explosion of natural, coal or manufactured gas. In that case, you are insured.
- a nuclear incident causes loss or damage to your home. Unless the damage results from fire or the explosion of natural, coal or manufactured gas. In that case, you are insured.
- your loss/damage results from radioactive contamination.
- your loss/damage results from the release or escape of pollutants.
- your loss/damage results from wear and tear or deterioration.
- your loss/damage results from a snowslide or landslide unless that damage results from an earthquake.
- your claim is to make good any faulty design of your home. That’s not really the realm of insurance as there has been no sudden or accidental loss.
- your loss/damage was caused by birds, bats, vermin, racoons, skunks, rodents or insects.
Water exclusions (unsurprisingly) relate specifically to water losses. You’re not insured if:
- your loss/damage was caused by coastal flood.
- your loss/damage was caused by groundwater rising or the water table.
- your loss/damage was caused by seepage or leakage over time. For instance, if a pipe in your home is leaking and your drywall gets mouldy as a result, that’s not something you can claim on your insurance.
- water damages your home while it is vacant…even if you told us it’s vacant.
- a pipe freezes and then bursts in your home while you are away for 7 days or more unless you made sure the heating kept working or drained the pipes.
- ice or water damages your fence, pavement, patio or swimming pool.
- your loss/damage was caused by waterborne objects.
So, you want to make a claim. You’ve fulfilled the requirements of your insurance and you’re aware of the exclusions to your policy. There’s just one more thing you need to be aware of before dealing with the claims process: deductibles. A deductible is the amount of money you have to pay toward a claim before your insurance policy covers the rest. If your a pipe bursts in your home causing $15,000 of damage and you have a $5,000 deductible, your insurance provider will cover $10,000 of the $15,000.
All policies have deductibles, and most actually have more than one type. Deductibles help to keep the cost of your premium down. If you want to pay less per month you can raise your deductible. You’re agreeing to pay for a bigger portion of the loss, so don’t agree to a pay an amount you can’t afford. There are several different types of deductibles.
- Earthquake deductible: for claims relating to earthquake, but only if you’ve selected the coverage.
- Glass deductible: for damage to windows.
- Hail deductible: for claims resulting from hail.
- Inland flood deductible: for claims resulting from inland flood.
- Standard deductible: for claims resulting from any other type of covered loss.
People often wonder why earthquake deductibles are so high, frequently reaching hundreds of thousands of dollars. Any earthquake that causes enough damage to warrant an influx of claims regardless of a sizeable deductible could have significant effects on the solvency of an insurance provider. This means if the earthquake is big enough, everyone’s house gets destroyed and the insurance company could be overwhelmed with claims, leaving you homeless. To protect against this, earthquake deductibles are traditionally high. That reduces the amount the insurance provider must pay out, and spreads the risk, meaning no one loses their home. But what if you can’t afford your deductible? At Square One, we let you choose an earthquake deductible that you feel comfortable with.
Making a claim
You’ve complied with the requirements, you’re a master of exclusions, and you laugh in the face of deductibles. All that’s left now is making a successful claim.
First things first; if crime is involved, contact the emergency services on 911. Then contact your insurance provider. They’ll assign an adjuster to your case and he/she will help you document your loss. At this stage it’s important to take preventative measures to stop any further damage or loss from occurring.
Make sure to provide your adjuster with as much detail as you can during this process. Remember that it’s important to be honest about your claim. If your house is broken into and thieves steal your computer, don’t lie about what else was stolen, or even exaggerate the value of the computer. The law considers lying in an insurance claim to be fraud, so the insurance provider could then refuse the entire claim. As we mentioned above, it’s also important to report claims quickly, and allow your insurers to inspect the cause and extent of the damage.
If it’s an emergency (say, if you’re forced to evacuate due to a fire) and you have selected coverage for additional living expenses, then make sure you hold onto all your receipts for accommodations, food, and other living expenses. If needed, Square One can send a cash advance to help you.
Once your claim has been processed, and once any necessary inspections have been completed, your adjuster will offer you a settlement. If you’re not happy with the settlement, then you have options. Start by voicing your concern with your adjuster or their manager. You always have the option of bringing a lawsuit against your home insurance provider. This option can be expensive but it’s worth knowing about as a last resort. (More information on service concerns can be found here.)
That said, Square One pays out on 90% of claims submitted in Canada. The most common claims result from water damage or crime, so we recommend checking your coverages (and deductibles) for these perils.
Most people fear that once they’ve made a claim on their home insurance policy, their renewal rate will soar. This is not necessarily the case. It’s true, your rate may increase, but the rate may have increased anyway because of the number of claims across the whole industry, or generally as the result of inflation. Rate increases may also be less significant than you fear. Don’t be afraid to make a claim on your policy, just keep your deductibles in mind; it may work out cheaper to replace less expensive items yourself.
That’s it! You’re now a certified PhD of insurance policies. The unfortunate truth is that most people never bother to read their policy, so take a minute to check the extent and limits of your coverage. Make sure you fulfil the requirements and be clear on what’s excluded from your policy. For any more specific questions on your Square One policy, call us on 1.855.331.6933 and a licensed insurance agent will be happy to assist you.