Home insurance myths you need to know about

By Sheryl Smolkin

If you’ve have ever had a fire or theft, you know how important home insurance is. But you may have had a shock when you learned that the policy did not cover the full replacement cost of your home or that you would not be reimbursed for the antique car stored in your garage when the house went up in smoke.  That’s why it’s important to clear up some home insurance misunderstandings, so you are fully aware of what your policy does and does not cover.

Insureye has compiled a comprehensive list of home insurance myths.  Here are 10 of my favourites:

1. You must have home insurance. Unlike auto insurance, home insurance has not been made mandatory by the government. however, if you own the property and have a mortgage on it, often, your bank or lender will require that you hold an active home insurance policy and name them on that policy. If you do not own the property but are renting it, your landlord may require insurance coverage.
2. If I have a home insurance policy, I am protected against sewer backup. Sewer backup damage occurs when the sanitary and storm sewer systems cannot handle high volumes of water, which causes water to back up into your home through toilets and drains.

As is the case with freshwater flood protection, most providers offer some sort of OPTIONAL sewer backup protection, but just a few providers include it in their standard default home insurance policies.

3. If I am away on vacation, my house is covered. If you simply leave for vacation without taking precautions, you are not always covered. Thus, if you go away during the “usual heating season” then you usually need to either:

  • Shut off the home’s water supply and empty all pipes;
  • Take steps to ensure the home’s heating is maintained.

If you don’t take one of these two precautions, then you may not be protected against water damage resulting from frozen pipes that burst.
Check with your provider to determine what length of vacation requires you to take extra precautions, such as somebody visiting your place on a regular basis in your absence. Different policies may require different frequency of those visits, but in general it is every 3-7 days.

4. If I have valuables, they are covered. A standard home insurance policy covers your personal property and most valuables up to the selected limit of insurance. It’s important to note that sub-limits often apply to specialty property, like jewellery or furs. For these items, you have the option of adding coverage to your policy. Often, you will need to provide proof of value (e.g. an appraisal or a receipt).
5. Home insurance covers the market value of my house. Home insurance does not cover market value, only the rebuilding or replacement value of your house. If your house burns down, the purpose of home insurance is to cover the costs required to re-build the house as it was before the loss. Rebuilding value is typically lower than market value because it does not include the value of the land.

An insurance policy can often include costs to clean up the debris, such as after a fire.

6. Home insurance automatically covers upgrades to the home or condo. Home insurance will not automatically cover your kitchen, washroom or other upgrades. Typically, you must advise your insurance provider of these upgrades when they happen. You need to find out how your policy treats upgrades and, eventually, add them to the policy.
7. It is fine to overstate the value of the damage. Overstating the value of damage is a dangerous thing to do. That’s because your insurance provider will conduct their own assessment/ investigation to check your claim. If they determine that you were overstating your claim, your entire claim can be denied and your policy can be cancelled. You risk ruining your credibility and your ability to get home insurance elsewhere.
5. Condominium corporations provide insurance that covers my condo. Condominium corporation insurance will cover the overall building structure, its exterior finishes, roof, windows and common areas like elevators and hallways. It does not cover the contents of your condo, its upgrades and 3rd party liability should you cause damage to other condo units (e.g. flooding).
9. If my dog bites and injures someone, my home insurance will not protect me. I need a special insurance policy. As long as you properly answered any questions relating to your pets in the application and investigation process, then your policy will cover costs associated with your dog biting and injuring a third party.
10. My belongings, left in a storage locker that I rent, are protected by my home insurance. Not necessarily. Most insurance providers specifically exclude personal property left in a rented storage locker (unless that locker is in the basement of the apartment building that you live in).

 

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