Understanding flood insurance in CanadaAugust 31, 2017
We moved into our newly-built home in 2001 and fortunately we have never experienced flooding. But some of our neighbours have and I still get really nervous when we periods of torrential rain or spring freezes and thaws.
In particular, I worry about whether or not in these circumstances our home insurance would cover necessary repairs. That’s why when the article Home Insurance and Flooding in Canada: Finally Explained from InsureEYE appeared in my inbox, I was pleased when company co-founder Alexey Saltykov gave me permission to share the information* with savewithspp.com readers.
According to insurEYE, there are actually four different types of flooding from the perspective of insurance companies in Canada and each of them is treated differently. They can all be protected via a home insurance policy (sometimes with additional endorsements).
Flood Insurance Topic #1: Overland flooding
- Originates outside of your home.
- Often enters your house through the basement/ windows/doors/walls and house foundation.
- Often has natural causes e.g. rising river level, heavy rains, melting snow.
- High to very high degree of damage.
Insurance perspective: Until recently, home insurance in Canada has not covered this risk. Then, during the last two to three years, Canadian home insurers developed overland flooding coverage that is typically sold separately and added on top of your standard home insurance policy.
Insurance companies will typically assess the risk associated with your property and decide if you fall into one of the following categories:
- Low risk: You will be able to get overland flooding protection (also called an overland flooding endorsement) for a low price and it will have extensive coverage.
- Medium risk: An insurer will offer you overland flooding coverage, but the limits might be lower than in the previous case and this coverage will be more expensive.
- High risk: You might have challenges getting this coverage due to the history of flooding in your neighbourhood, or your case will be treated as a high-risk home insurance case (i.e. meaning much higher premiums). High River in Alberta is an example of such a location.
Chances that insurer will pay your claim: With an overland flooding endorsement – very high; without it – very low.
What could you do up front to avoid potential issues?
- Home location: Before buying a property, try to understand if it is located in a flood-endangered location. Typically, local flooding maps will help you understand this In addition, a good real estate lawyer who works on your closing formalities should inform you if your property is in a flood-endangered zone.
- Overland flooding endorsement: In general, if you have a house that has a basement (the part of the house that is most likely to be flooded during overland flooding), consider getting an overland flooding endorsement after understanding its cost.
- Bundles: For customers’ simplicity, some insurers bundle sewer backup and overland flooding insurance riders, offering a combined product with a range of limits and deductibles. Examples of such companies include Intact Insurance and Economical Insurance.
Flood Insurance Topic #2: Sewer Backup
- Originates inside your home.
- Often enters your dwelling through a toilet/sewage system.
- The major cause is an overflow in municipal water storage pushing sewer water back into your house.
- High to very high degree of damage.
Insurance perspective: Insurance companies treat sewer backup as a separate risk and often cover it through a separate, optional endorsement, also called a sewer backup endorsement. This insurance coverage has been on the market for a long time; therefore, significantly more policy holders know about it – somewhere around 50%. This coverage is typically not that expensive, and it adds just a few additional dollars per month to your home insurance policy.
Chances that your insurer will pay your claim: With a sewer backup endorsement – very high; without it – very low.
What can you do up front to avoid potential issues?
- Sewer backup valve: Getting a sewer backup valve (also called a backwater valve) is not too complicated. If it is integrated into your plumbing system, it will help to keep the house protected against unpleasant sewer backup surprises. These devices cost under $250 and are a cost-efficient way to prevent sewer backup accidents. Depending on the age and construction, your home may require either a backwater valve on the main sewage line (typically for homes built before the 70s) or both on the main sewage and storm line (newer homes). Check with your plumber or with municipal services.
- Water damage/sewer backup endorsement: As mentioned earlier, this type of coverage does not cost a lot, but it can prevent significant financial loss. Cleaning and restoration costs can add up to $50,000 – $100,000 and, together with damaged content upgrades (especially in the case of finished basements), can reach $250,000 – $500,000 for larger homes.
- Coverage limits: Carefully understand coverage limits for sewer backup – these can either be defined separately, or can be equal to the full policy coverage. Be careful when insuring with insurers that cap their coverage (e.g. TD Insurance, State Farm).
Flood Insurance Topic #3: Plumbing issues
- Originates inside your home
- Can be caused by burst pipes, broken faucets, malfunctioning taps, incorrectly sealed pipes
- Medium to high degree of damage
Insurance perspective: From the insurance perspective, this is one of the easiest flooding situations to deal with. The flood originates within your house and, in most cases, is covered by your standard home insurance policy without the purchase of an additional rider.
Chances that an insurer will pay your claim: High
Unless there are special circumstances, the insurance company will typically pay this claim (after subtraction of your deductibles, which are mentioned in the insurance policy).
What can you do upfront to avoid potential issues?
- Modern plumbing: Make sure your home uses copper or plastic pipes as opposed to lead or galvanized plumbing. That will also be rewarded with lower insurance premiums.
- Switch off water: Turn off water if you are leaving for several weeks (like on a long vacation or a business trip), and make sure that somebody visits your place regularly. It is important to know that some insurers may even reject your claim if something happens during your long absence and nobody was regularly visiting your home. Some policies may even require that these visits take place as often as every 4th or 5th day.
- Insulation for interior pipes in winter: Your interior pipes may cause problems while you are away – make sure they are well insulated in the winter to prevent pipe bursts due to ice buildup.
- Keep external pipes dry in the winter: Your external pipes should be dry in order to prevent any ice build-up; otherwise, that can also lead to a burst pipe.
Flood Insurance Topic #4: Flooding Due to a Leaking Roof
This type of flooding normally happens when water enters your home through a damaged roof and starts damaging your dwelling, starting from the top floor.
- Originates on your roof starting from the top floor/attic
- Reasons can vary from lacking roof maintenance and natural wear-and-tear to roof damage due to falling trees or ice
- Low to medium degree of damage
Insurance perspective: Insurance companies know that, often, flooding via a leaking roof is a consequence of poor maintenance or an old roof. If you have a leaking roof, make sure that it does not fall into the category of insufficient maintenance. However, if your roof has been badly damaged due to hail, a falling tree, ice, etc., you have a good chance to get your insurance claim paid.
But if you live in a condo and have a leaking roof that has resulted in some damage within your unit (e.g. when you live on the top floors), it is important to understand that your own condo insurance covers only content damage within your unit. The roof itself is covered by commercial condo insurance that your condo corporation owns.
Chances that the insurer will pay your claim: Medium – if an insurer decides that it is a lack of maintenance that led to the leakage, you are on the hook for all the costs.
What could you have done upfront to avoid potential issues? Make sure that you maintain your roof in a good condition. Fixing or upgrading your roof prior to getting home insurance may result in insurance savings. Insurers like properties with upgraded elements (e.g. roof, plumbing, etc.) as opposed to older, not upgraded properties.
In addition to the above, when purchasing water damage and flood insurance:
Pay attention to deductibles: Make sure that you understand what your deductible for flooding-related accidents is. Some providers have very high deductibles ($10,000 or even $30,000 and higher) while others do not. In the first case, you might be on the hook for tens of thousands of dollars before your insurer even jumps in.
Know and document your expenses: Should you face an extensive water-related incident in your place and submit a home insurance claim, there will be a question of a claim payout. It is not in the interest of an insurance company to overpay for insurance claims – these are purely expenses for insurers. Thus, make sure that you have confirmation for all major spending associated with your home.
Last Resort: Government Flooding Programs
In addition to the home insurance, there is another potential safety net that you could use in some cases. It by no means it substitutes your home insurance, but it is important to know this source of help.
Below you will find an overview of provincial disaster financial assistance programs for Canadians.
Alberta, Emergency Management Agency
British Columbia, Disaster Financial Assistance
Manitoba, Disaster Financial Assistance
New Brunswick, Disaster Financial Assistance
Newfoundland and Labrador, Disaster Financial Assistance Program
Nunavut, Emergency Management
Nova Scotia, Flood Assistance
Prince Edward Island (PEI), Emergency Measures Organization
Northwest Territories, Disaster Financial Assistance
Ontario, Disaster Recovery Assistance
Quebec, Financial Assistance for Disaster Victims
Saskatchewan, Provincial Disaster Assistance Program
Yukon, Emergency Measures Organization
|Written by Sheryl Smolkin|
|Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.|
Home insurance myths you need to know aboutMarch 9, 2017
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:
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.
|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).|
How to buy life insurance. Let me count the waysMay 28, 2015
By Sheryl Smolkin
If you asked me how to go about buying life insurance, only two thoughts would come to mind: directly from a life insurance salesman or an online purchase. Therefore I was interested in a recent column on insureye which discussed the pros and cons of purchasing life insurance in several other ways.
Here are five of the most common ways of purchasing life insurance noted in the article you will likely encounter, plus I’ve added one of my own.
- Captive Agents
Buying through an insurance agent is the familiar way to buy life insurance. You talk to an agent who represents an insurance company, you get a quote and you purchase your policy.
PROS CONS You might know an agent personally because somebody from your family has already dealt with him/her. Captive agents work for one company and can sell only the products of that company. If an agent’s compensation is linked to sales performance, he/she may try to sell you as much as possible. Captive agents often have pre-determined sales quotes. They cannot compare offers across different providers so you may lose out on policy features or a better price point that an independent broker can offer.
Though banks were not significant vendors of insurance in the past, they currently sell a variety of insurance products. As required by law, their insurance business is separate from banking activities.
PROS CONS You know the brand and already trust the bank with your money. Limited to the bank’s products and will not compare features, price against other offerings. May only offer simple products like term life. Do not also offer complimentary products like disability or critical illness insurance.
- Insurance Brokers and Financial Planners
Insurance brokers and financial planners typically offer products from multiple providers since they work for many companies and can compare rates and products across multiple providers.
PROS CONS Independent insurance brokers work for multiple companies and are less motivated to sell products from only one company. Find out how many companies the broker works with. Depending on your health, their knowledge of companies with special offerings for pre-existing conditions, poor health etc. may be more robust. Not all brokers are created equal you’re your research and get references or opinions from past clients before you commit to a broker
- Online aggregators
Online platforms allow you to get life insurance quotes across multiple providers, and subsequently connect you with insurance providers or insurance brokers.
PROS CONS Available 24/7. You can easily compare different quotes and find out the best offer, or change your criteria to see how that affects the policy and the price. It is important to find out how many providers an aggregator works with since comparison across three companies is not the same as comparison against 30. Lack of personal advice. Aggregator platforms offer online tools, but not all offer online chat or personal assistance. However, in most cases, aggregators connect customers to insurance brokers who can respond to any questions or concerns.
- Direct Call
In most cases, purchase of insurance consists of several steps: the initial quote, medical tests (including blood and urine), a questionnaire, and the policy purchase (potentially for an adjusted price that reflects your health condition). In some cases, you can purchase insurance directly via a telephone call, without any further interactions. Generally however, the product would be a guaranteed issue or simplified issue insurance policy. These products do not require medical tests.
PROS CONS Easy and fast. You call, in some cases answer a few questions and you are done. That is much simpler than have a nurse visit your home, conduct your health check and take your fluids. Since there are almost no insurance checks, an insurer automatically assumes that you are a high-risk customer (e.g. pre-existing conditions) and thus will charge you more than other customers who agree to medical tests. A telephone call will get you only a limited amount of coverage e.g. $10,000 or $20,000. Do not expect coverage of $1,000,000 of coverage in guaranteed or simplified issue policies.
- Group insurance
If you are employed, some group life insurance may be offered as part of your employee benefit package. Since employer-paid life insurance premiums are a taxable benefit, you may be required to pay all or part of the premiums via payroll deduction. You may also be offered additional optional group life insurance for you and family members.
PROS CONS Because group life insurance is easy and often fully or partially paid for by your employer, it’s a “no-brainer” for most people. An added advantage is that for the basic amount, no medical examination is required. Term insurance only. If you need coverage for an extended period, group insurance premiums are often more expensive than individual rates since group rates tend to increase annually or on an age-banded basis while individual life premiums remain the same for a specified period. If you leave your employer you must arrange new coverage. “Follow me” policies that do not require medical evidence are available from most carriers but they may be more expensive than comparable individual coverage.
For the pros and cons of optional group life insurance, see Should you buy extra life insurance at work?
However you choose to purchase life insurance, it is important to ensure your family is adequately covered. You can calculate how much life insurance you need here.
How to save money on home, auto insuranceMarch 21, 2013
By Sheryl Smolkin
Nobody likes paying for home or automobile insurance. But you can’t get a mortgage or drive a car without it. And if you are involved in an accident or a natural disaster your insurance company will suddenly become your best friend.
But insurance premiums are going up all the time and there is no reason why you should pay anymore than you have to. Recently the insurance rating website InsurEye put together a comprehensive list of “101 tips on how to save money on insurance.”
Some of the more obvious, general suggestions are:
- Shop around online and on the telephone.
- Bundle home and auto insurance with the same carrier.
- If you are a member of an association (i.e. professional engineers) or an alumni group there may be a deal for members.
- Staying with one insurer longer may result in loyalty discounts.
However, the list also includes some unusual money-saving options which were news to me. Here are some of my favourite.
- Welcome discount: Some insurers offer a welcome discount just for becoming a customer. E.g. five per cent at Grey Power.
- Rental car rider: If your existing auto insurance policy does not cover rental cars, you can often add it as a rider (policy extension) for $20-$30/year. Compared to the $20/day you might pay when renting a car, it’s not a bad deal.
- Dashboard camera: Get a dashboard camera for your vehicle. Insurance companies do not offer any premium discount related to dashboard cameras, but it can help you prove you are not at fault if you have an accident.
- Claims history: Keeping a clean claims history may make more sense than submitting claims for small damage repairs that could result in increased premiums. Contact your insurance provider/broker before you decide whether or not to claim for minor property damage.
- Good students: Students with good grades may be eligible for a break on car insurance rates. For example, the State Farm good student discount rewards student who are younger than 25 with a discount of 25% if they have a B average or better.
- Short distance to work: If you are located close to work, the distance you need to drive is short or you may not have to drive at all. The further you have to drive to work, the higher your premiums.
- Valuing your contents: If you are renting an apartment or condo and you only have a laptop and some IKEA furniture you may not need hundreds of thousands of dollars worth of coverage. Check the policy to see what you are paying for.
- Mortgage free home: When you have paid off your mortgage, some insurers will reward you with lower premiums. This one was news to me and I am now looking into discharging my mortgage.
- Heating: Insurers like forced-air gas furnaces or electric heating. If you have an oil-heated home, you might be paying more than your peers who have alternative heating sources.
- Stability of residence: Some insurance companies will offer a stability of residence discount if you have lived at the same address for a certain number of years.
- Dependent students: Some insurers will cover dependent students living in their own apartment under their parents’ home insurance policy at no additional charge.
- Credit scores: Some insurers factor in credit scores when calculating home insurance premiums. If you have a good credit rating your rates will be lower.
These are only a few of the tips. However, the list also includes some interesting ways to keep down premiums for life insurance, travel insurance and credit card protection.
Some of these ideas are more practical than others, but every little bit helps.
Have you saved money on insurance lately? Send us an email to firstname.lastname@example.org. If your story is posted, your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.
If you would like to send us other money saving ideas, here are the themes for the next three weeks:
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