Understanding the Laws Surrounding Home Insurance To Better Protect Yourself

When it comes to protecting your home – a house, condominium, apartment or cottage etc. – home insurance is a must. In fact, according to a poll in 2010, CBC found that most renters skip home insurance! When a disaster strikes, the last thing on our mind is money. We rely on our home insurer for that peace of mind to protect us from life’s biggest surprises. Unfortunately, many homeowners face problems when dealing with their home insurer. Common issues with home insurance include unresponsive insurance adjusters, long wait times during the investigation and repair stages of the claim, disagreements with the insurer about the severity of damage, and the worst of all – denial of an insurance claim. To avoid these issues, it is important to understand your insurance policy before an insured loss occurs. While there is an insurance council in Alberta, you want to avoid problems. Here are the Top 10 things all homeowners and renters need to understand before signing a home insurance policy contract.

1) Do I Legally Need Home Insurance?

The short answer is no… BUT! Although not mandatory by law, all homeowners or renters should purchase home insurance. This is to protect you from unfortunate events causing serious damage to your home. Your home is probably the largest investment you will make, and no matter how well built, it is vulnerable to life’s disasters such as fire and vandalism. Homeowners should purchase home insurance to protect their homes and personal property. Renters need insurance to protect their personal property. Also, your policy will also help you pay for temporary living expenses if you cannot live in your home after an insured loss.

Most lenders will require you to purchase an insurance policy that covers at least the amount of the mortgage. In this case, you must show proof of purchase before they’ll lend you money to buy a property. You may be delayed possession of the property you are buying, if you cannot show that you have insurance in place.

2) Who is Covered by Home Insurance?

Home insurance covers the personal property and personal liability of you, your spouse/partner, and your children. Generally, dependents under age 18 and dependents under age 21 who are students are covered by your policy.

Remember: If you decide to have a roommate or rent out part of your residence, you must let your insurer know or risk impacting your coverage in the event of a loss.

3) What is Liability?

Homeowners or renters could be held liable for unintentionally causing bodily injury or property damage to others on their property. For instance, if a visitor happens to slip and fall on an icy walkway located on your property, you may be held legally responsible. If negligence is found, the personal liability portion of your home insurance covers damages caused by the injury, up to the policy coverage limit. Deductibles do not apply. Injuries sustained by you or a household member are not covered under the policy.

4) Your Personal Belongings – What is Covered?

Home insurance covers the personal property and personal liability of you, your spouse/partner, and your children. Generally, dependents under age 18 and dependents under age 21 who are students are covered by your policy. Your policy will typically cover items such as appliances, clothing, furniture and electronics (i.e. bikes, jewelry, cash and computers).

5) Your Personal Belongings – How Much Coverage Do I Need?

Know your stuff. It is important to figure out how much your possessions are worth. You can make an inventory of all your personal belongings by labeling the make/model/serial number of each item and its estimated replacement value. Make sure to regularly update this list. You can also take a photo or video on your smartphone of your prized collections – i.e. stamps and books. Also, keep receipts for big purchases. Store these records in a secure location.  This will simplify the process should you file a claim in future.

6) Your Home – What is Covered?

If you’re a homeowner, your policy will likely cover the building itself, its contents and outbuildings (i.e. detached garages and sheds). When purchasing your policy, your insurer will ask you basic information about your home such as its age, square footage, and type of construction. This information will be used to calculate your home’s estimated replacement value – which impacts how much your policy will cost you.

Remember: If you plan on renovating your home, setting up a home-based business (i.e. daycare), leasing a portion of your home, or purchasing expensive jewelry or art, notify your insurer before doing so. Failure to contact your insurer risks impacting your coverage in the event of a loss.

7) What is My Deductible?

Your deductible is the amount that you pay out of pocket when you start a claim with your insurer. Generally, a policy with a lower deductible costs you more than one with a higher deductible.

8) Your Personal Belongings: Actual Cash Value or Replacement Costs?

You may choose between actual cash value or replacement costs to insure your home and personal belongings.

Actual cash value refers to the amount it takes to repair or replace damage to your personal belongings after taking into account depreciation after an insured loss. For example, your two-year-old computer purchased for $1,000 may only be worth $500 today.

Replacement cost means that, in the event of a disaster, you will be paid the amount it costs to repair damages or rebuild your home/personal belongings with similar materials without deducting the depreciation. For instance, your two-year-old computer will be replaced by a computer of similar type/quality.

Remember, although most policies choose replacement cost coverage for personal property, you should clarify this with your insurer.

9) Your Home: Replacement Cost

It is important that your policy insures your home for replacement value. This means that when an insured loss occurs, your home will be replaced by its replacement value (which differs from a market assessment of your home). Some policies even include guaranteed replacement costs which covers the full replacement value of your residential building regardless of the amount of insurance.

10) I Need To File a Homeowners Insurance Claim… Now What?

In the event that you need to file a home insurance claim, here’s what you should do:

• Promptly inform your insurer about the loss – this is a condition of your policy.
• Write down a timeline of events after the loss occurs and make sure to note who you spoke with at the insurance company and what you spoke about
• Confirm with your adjuster what steps are to be taken by you or your insurer, and follow up with your insurer once steps are completed
• If you haven’t been asked to complete a proof of loss form, do so accurately and as soon as possible and submit it to your insurer.
• If your insurer is delaying your claim or not following through with their obligations, contact us for advice and assistance. With the guidance of our experienced insurance lawyers, most claims can be resolved through negotiations.

Need Legal Help When Filing Your Home Insurance Claim?

We’re here to help. If you are having issues with your insurance company on a claim covered by your homeowner’s policy, contact Kahane Law Office to maximize your changes of receiving full coverage.  Our lawyers can help enforce your rights to insurance coverage in a range of situations, including losses caused by fire, theft, flood, water, and snow storms. You can reach us in Calgary at 403-225-8810 (toll-free at 1-877-225-8817), or email us here directly.

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