The important points
- Home insurance is complex, and misinformation on the subject is everywhere.
- Learning about home insurance misconceptions can help alleviate a lot of stress associated with insurance.
1. Insurance companies never pay out claims and take forever to process them
The claim experience is often emotional, especially if a claim is denied after someone’s home has suffered extensive damage. We hear much more about the claims that are refused than the ones that are handled smoothly and paid out. This gives the public the impression that insurance companies go out of their way to deny claims.
At Square One, we pay out over 90% of the home insurance claims we receive, and most are settled within 60 days. For smaller claims, such as a damaged laptop, we even have an express option where the insured is paid their settlement outright.
2. My all risk policy covers everything
Home insurance companies offer many types of policies, including all risk or comprehensive coverage. Many customers believe that because they have taken out insurance, every kind of loss or peril is covered. However, all insurance policies carry exclusions, which are losses that are not covered by their policy.
These exclusions are outlined in the policy wording or document. For example, Square One lists their exclusions in section 7 of their policies. Common exclusions include war and terrorism, fraudulent or intentional losses, or nuclear disasters.
If you’re not sure about your what’s excluded from your coverage, contact your insurance provider.
3. My premium will never go up if I don’t make any claims
It is true that people who have a history of not making claims usually pay lower premiums. However, an insured’s claims history is just one of hundreds of premium calculation factors that insurance providers use.
For example, if you install a shed in your backyard and want to add it to your policy, your premium will go up as a result. If you miss a payment, your premium could rise. The increased frequency and severity of natural disasters has also caused premiums to rise, since claims costs are shared amongst all insureds, not just those who make claims.
4. My condo is covered by my condo corporation’s policy
Many condo owners believe that their strata, condominium corporation, or syndicate’s master policy covers their unit against losses. The master policy certainly covers the building’s common property, and it does cover individual units — but only based on their original construction.
The corporation’s master policy does not cover any upgrades you make to your unit, such as the addition of granite countertops. It doesn’t cover your belongings, nor does it cover personal liability if a visitor were to be injured in your condo.
Condominium corporations can also issue loss assessments against individual units. A loss assessment means paying a portion of the master policy’s deductible, or covering shortfalls in their master policy’s coverage. You would need to take out separate condo owners’ insurance, such as Square One’s Condo Owners Protection, to be protected against these types of assessments.
5. Acts of God, like floods and earthquakes, are not covered
Many consumers want to know if their policy covers acts of God or natural disasters. However, you won’t see the term “act of God” in a home insurance policy.
In fact, home insurance’s primary function is to protect against what you might call acts of God: sudden, unexpected events, especially natural disasters.
Apart from coastal floods and landslides, you can get coverage for most natural disasters, including earthquakes and inland flooding. These are offered on an optional basis by some companies, while Square One automatically includes them for most of its customers.
6. I don’t need tenant insurance because my stuff isn’t worth anything
While tenant insurance is not mandatory, it covers more than just your belongings.
For example, if someone were to injure themself in your rental unit, you could be sued for damages and be forced to pay for your legal costs out of pocket. Tenant insurance provides personal liability coverage.
Square One also offers tenant’s protection coverage, which covers accidental damage you cause to your landlord’s property. Additionally, many landlords and property management companies require their renters to take out tenant insurance.
7. I don’t need tenant insurance because my landlord’s policy covers my stuff
Think again. Your landlord’s policy covers their property (appliances, fixtures, etc.), but you will need to take out a tenant insurance policy for your belongings (such as bicycles, laptops, or clothing) if you want coverage.
8. My home’s insurable value is based on its market value
Contrary to popular belief, home insurance is based on replacement cost, not market value.
Replacement cost is the amount required to rebuild your house on the same site. Given that, you don’t need to purchase the land again if your house burns down. Thus, the replacement value is almost always significantly lower than the market value.
Guaranteed replacement cost coverage will cover the full cost of rebuilding the home, even if this cost is above the policy limit. This coverage is important to consider, as the cost of materials and labour can be unpredictable. In addition, bylaw changes that have come into effect since the construction of your home can also inflate the replacement cost. Square One’s building coverage offers this protection.
9. I have to cancel my insurance if I move
Sometimes this is true, since you are moving to a completely different home which comes with its own set of risks, such as location, replacement cost, and materials. But, most insurers will let you transfer your policy as long as you meet their requirements.
At Square One, customers can buy a policy for their new home and cancel the policy for their old home through their online account. This will ensure that their belongings will be covered while they’re in transit to the new home.
