Home Insurance. Is it neccesary?

OK, you’ve just bought a Vancouver home or Vancouver condo, or, maybe, you’ve bought a place and are renting it out to people or, maybe, you just rent yourselves, either way, whichever situation you are in, I’m sure you’ve asked yourself, do I need insurance? What will it cover and of course how much will it cost?

One of the first questions, if not the first question I get asked by my prospective clients is: “I need insurance that will cover fire, do you do that???” My answer in short, is, “Absolutely!” Since the earlier part of the latter century it was legislated in Canada that ALL types of insurance covers fire (subject to specified exclusions in the policy). Where one must pay attention is what your insurance will not include and that usually depends on the type of policy you need: Homeowners Insurance, Condo Insurance, Tenants Insurance or Rental Insurance.

Your Insurance Advisor should be going through this with you, however, not all insurance Advisors come from the same tree, and therefore it is important to understand what you are purchasing (and indeed what you are not purchasing). Take a quick read of just some of the most popular items I see on a day-to day basis, and the items you should be thinking about when figuring what you need for insurance.

Condo Insurance (Mainly for those people who own and live in their condo)

You have equity in your condominium and you want to protect that from a variety of factors, and not just its contents.

One factor is any type of legal liability; Just as you could be liable if you hit someone in the eye with a golf ball while you play golf, or if a pipe burst in your suite causing water damage to trickle down to the suite below and heaven forbid the suite below that, you want to make sure your Insurance will cover the damage you caused to another person’s property.

As water damage in Condo policies have become a hot topic with insurance companies as of late you should check the ‘Strata Water Deductible’ in your Strata Bylaws. I’ve seen the deductibles range from as low as $5,000 up to an obscene $100,000! Once you know this, you will need to refer back to your insurance policy and see what their cap is on the ‘Strata Water Deductible’ clause.

What is the strata water deductible clause you ask? Depending on the exact wordings of your Strata Bylaws, this clause illustrates that if there is water damage to strata property, owners MUST pay the deducible first before the strata’s insurance will kick in. Example: If a dishwasher leaks or a water supply line to a toilet bursts and the owner is responsible, the Strata Council may ask the owner to pay up to the amount of the insurance deductible. This can amount to several thousands of dollars. Please check the deductible amount with your strata and then refer back to what your current insurance policy will cover.

 

Tenant’s Insurance (this applies to you if you are renting a condo or house that you do not own)

When you rent an apartment or house it is a good time to start thinking about getting insurance. Sure you don’t own the house or condo and you might not have a financial stake in it, but you do have a financial stake in the contents of your suite. Your flat-screen TV, designer handbags, engagement rings, art etc are items you own and paid for and you don’t want to be out of pocket should something happen.  

Liability coverage protects Tenants the same as it would protect a homeowner. As with all types of home insurance policies, should something happened where you are found negligent you could be sued, and indeed your financial assets could be put at risk. -Insurance is handy in this instance. For example even as a Tenant, suppose you were found responsible for starting a fire? You may be expected to fork out for the damage.

Did you know one of the factors that dictate your insurance premium is based on how long you have consecutively carried insurance for? Regardless if you are renting now with the idea of owning in the future, building a solid insurance history may prove beneficial to you when you come to purchase a condo or home, as you may be eligible for insurance discounts!

Homeowner’s Insurance (If you own a house that is not part of a strata)

Ah the big one! So much to think about when every wall, pipe and roof shingle is your responsibility to maintain, protect and even upgrade!

Homeowner’s insurance is more often than not mandatory when securing one’s mortgage. Your lender will require it and often impose minimum amounts of coverage. By and large their standards are quite easy to comply with and the rest is up to you and what you have to insure.

There are several steps to setting up Homeowners Insurance. The first step will be to go through an industry standard evaluator that will calculate how much it would cost to replace your house prior to a loss with your Insurance Advisor.

 The main dialogue that I like to have with all my homeowner clients is the difference between GAURUNTEED Replacement Cost (GRC) and just Replacement Cost. Most homeowner’s policies nowadays will include GRC, unless it is an usual type of homeowners policy like Heritage homes, homes built by owner etc – these types of insurance policies may have to be looked at more closely by the insurance companies to see if they will offer GRC or not – your Insurance Advisor will coordinate this for you. GRC means that you are entitled to get the full replacement cost of the home should it be a total loss by an insured peril.

 Next, we usually get into the details about what you’ve got in this new home of yours. I particularly focus on items that would qualify as ‘Special Limits of Insurance.’ These items are true to other types of policies e.g.: Condo and Tenant’s policy but usually appear more abundant in Homeowner’s polices, hence I mention them here. Items like Fine Art, Jewelry, and Collectors items to name a few, (please see your policy wordings, or ask your Insurance Advisor for a full list), will have a capped amount of insurance on them. This means regardless of what how much you have listed in the ‘Personal Property’ section of your Homeowner’s Policy, Insurance companies may only pay up to a maximum amount for items that fall under a ‘Special Limit’ Category. So, for example, if you have a couple of Picassos in your home, your insurance policy may only over the Picassos for maximum of $6,000! Some may cover up to more, but it is important that you take a look at your policy and call your Advisor or Insurance Company to make sure those Picassos are insured to their value!

 Another point I’d like to mention is Age. Yes we are all getting older, but once our home’s start to hit their mid 20’s they may be condisered ‘over the hill’ as far as Insurance companies are concerned. Usually, any home that is 20 or more years old will be required to have a minimum set of upgrades to the Roof, Electrical, Plumbing and Heating in order to be accepted by an Insurance Company. It may be a good idea to look at these components when buying your house since most Insurance companies will NOT insure a home that has not had its upgrades done. My main advice to you when looking to, or in the process of purchasing a house, please give an Insurance Advisor(s) a call to check into what you are looking at for insurance requirements for your home. – Quite a bit of upgrading may be required if the house is not up to par prior being accepted for insurance.

Rental Insurance (you own a condo or house and are renting it out to a family/persons

 A lot of my clients do this: whether they have a family living in the basement of their house to help pay their mortgage or have an investment property and also rent it out, Rental Insurance is an easy policy to add on to any of the existing policies above. In some cases Insurance companies will even just insure the rental place by itself – please ask your Advisor for more details

Please note! Most Rental policies WILL NOT cover you for Theft. So if your renters run off with any of your property, you may be own your own financially. A large portion of the public is under the impression that having a rental insurance policy will protect you from your renters running off with your property. Sadly it is not the case. Rental Insurance covers you for Fire and Water Damage to name a few perils (subject to the exclusions on the policy). For example, if you are renting your condo and a pipe bursts, your insurance could cover you for the damage that ensues due to the rupture. It is important as with the types of insurance afore mentioned in this article that you talk to your Insurance Advisor so that they can search for the best type of coverages that fit your needs

My final point is the common questions clients often ask when trying to get Insurance: Who do I deal with? An Insurance Brokerage, or directly with an Insurance company? Well being a bit on the bias side, one advantage of working with an Insurance Brokerage is that they will have access to a number of insurance providers and are generally more equipped to find the right policy for you, with the right premium and coverages. Each year when they get your policy renewal they are able to review it for you, discuss with you and recommend any changes or even, if the market allows, shop you around for a better deal! So, with that in mind, give me a buzz! I’d be happy to answer your questions and point you in the right direction. I know, I know, Insurance is boring….but you need it!For all Insurance related matters including home, travel, and auto, please contact Rebecca Al-Sadiqq at Thomspson Insurance!

Rebecca Al-Sadiqq

Thompson Insurance

604-626-3475

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