Home Insurance: What You Don't Know Can Cost You

Home insurance covers your property against losses caused by wind, fire, falling trees, vandalism, theft and other catastrophic events or perils. Yet many Canadians don't understand what their policies cover--and, more importantly, what they don't. Use this guide to evaluate your home insurance and identify areas where your policy falls short.

Replacement Value Vs. Depreciated Value

Imagine returning home one night and finding all your electronics missing. Computer, flat-screen TV, stereo equipment, game console, tablet...all gone.

If your insurance reimburses you for depreciated value, you'll only be able to claim the amount the items were worth at the time they were stolen. That value might be a small fraction of the amount you paid for them, and nowhere near the amount you need to replace them. If, on the other hand, your policy pays replacement value, you'll get the amount of money needed to replace the lost items with brand new ones.

Limited Peril Coverage

Some policies limit the types of perils for which homeowners may file claims. If you have this type of insurance, the policy will list the specific perils covered. If you suffer a loss from a peril that isn't listed, you're out of luck.

Enhanced policies, on the other hand, cover all perils except those specifically excluded. The coverage typically is far more comprehensive than that offered by specific peril coverage.

Expenses for Displaced Homeowners

You could be displaced for weeks or even months, if your home suffers catastrophic damage. Make sure your policy covers the costs of other accommodations, such as a hotel room or apartment rental, as well as reasonable costs incurred during your displacement. Such costs might include laundry services and meals, for example, if your accommodations lack a kitchen and washer and dryer.

Flood Coverage

According to the Insurance Bureau of Canada, 61 percent of Canadians believe their home insurance covers overland flooding such as that caused by run-off. Although overland flooding is the most common type, coverage remains unavailable as of 2014. Storm flooding is also uninsurable.

Review your policy to see whether it covers other types of flooding, such as sewer backup or damage from water resulting from a covered peril, such roof damage from a fallen tree during a storm.

If it turns out that you're underinsured, contact your insurance broker to increase your coverage or add on special coverage such as sewer backup. If necessary, you may be able to reduce your premium by increasing your deductible. It's a small price to pay to protect your investment and your peace of mind.

For more information, contact Grandin Agencies or a similar company.

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