What Does Homeowner’s Insurance Cover?
Carefully read through your insurance policy contract. The damages for which you are insured are termed “designated risks.” The most common are:
- Damage or loss to your property.
- Theft or damage to your belongings.
- Damage or injury to persons visiting your property.
- Damage you accidentally cause to someone else’s property.
- The theft of belongings from inside your vehicle. (That’s right! Property stolen from inside your car is covered by your home insurance and not your auto insurance!)
There are three types of home insurance policies available in Canada:
- A standard policy covers a predetermined list of risks, such as fire and smoke damage, theft, and personal injury. You will only be protected against what is included in the list.
- A broad policy provides standard coverage plus a few extras, such as including your belongings and the property’s structure.
- A comprehensive policy, also termed all-perils coverage, provides the broadest protection, explicitly naming, instead, the risks for which you are not covered. Therefore, if flooding is specifically stated as an exclusion in your policy, your insurance company will reimburse you for all damage caused by any unexpected event, like fire, except that resulting from flooding.
Check the Fine Print
We purchase insurance in the hope that we will never have to use it. Despite this, no one’s residence is invulnerable. In general, it can be worthwhile to increase the amount of the deductible to reduce your monthly premiums. It is often recommended that you pay for minor damage (under $5,000) out of your own pocket, rather than submit a claim to your insurance. Your first claim, although it may be small, can in fact cause your premiums to rise by 25%.
A bit of advice: beware of cut-rate companies that sell insurance policies at unbelievably low prices. The coverage provided will either be far below your needs, or your provider will consistently increase your premiums when your policy is up for renewal every year. You may end up in a lose-lose situation!