Home Insurance - What You Need To Know

I had my first experience making a claim on our homeowners insurance last May when our home was struck by lightening. Lightening hit an antennae on our chimney causing both an electrical surge and bursting a water pipe in the basement ceiling. Luckily we were home at the time and were able to shut off both power and water before too much damage was done and there was no fire. That said, it still took months to replace all the broken electronics and repair the damage to plumbing and drywall. The total claim was in the tens of thousands of dollars and, although the adjusters and contractors were a pleasure to deal with, it was a major inconvenience getting it all fixed. The experience reinforced to me the importance of quality home insurance.

At its most basic, home insurance will cover the cost of replacing your freehold home (just the interior of your condo unit), the contents in your home and protect you from personal liability should there be an accident involving someone while at your home.

 

 

 

 

 

 

 

 Insurance policies will generally not pay out in cases where damage is predictable (i.e home built in a flood plain and subsequently flooded) or preventable (frozen pipes inside a home that burst due to homeowner negligence). Some forms of disaster are not automatically covered, such as damage due to sewer backup, mudslide or earthquake, although extra coverage can be added at an additional cost.

It is generally recommended that you purchase enough insurance to re-build your home – keep in mind that this is the replacement cost of the home and doesn’t include the property or reflect market value.

Generally, furniture, appliances and clothing are covered by home insurance. There may be limits to how much you can claim on certain items, notably computer equipment, stamp or coin collections and jewelry. It is best to specify items of value in a special rider in order to ensure they will be covered in the event of loss or theft.

As with most things, there are different types of policy available for all budgets:

Comprehensive Insurance guards against the widest range of claims.

Basic (or “named perils”) offers coverage on perils set out in the policy.

Broad offers comprehensive coverage of your house but limited coverage of contents.

No frills is very low coverage for a property that doesn’t meet the criteria necessary for other types.

Another way to manage the ongoing cost of insurance premiums is to negotiate a higher deductible. A deductible is the amount of money you pay out of pocket against a claim before the insurance payments kick in. Even agreeing to up the deductible by a couple of hundreds of dollars can make a difference in premiums.

Home insurance is not a legal requirement of home ownership, however most mortgage lenders require it. Likewise, most landlords require tenants to have tenants insurance to cover damage to the rental unit caused by the tenants or their guests and to cover the tenant’s belongings.