Understanding home insurance

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Why home insurance matters

Whether you own a house or a condo, or prefer to rent, home insurance will help protect the things you own in case of loss or damage; for example, from a fire, water damage or burglary.

When you consider all that you own, replacing everything could be very expensive. While that’s especially true if you bought a house or condo, it’s also true if your personal property or contents of your home (whether you own or rent) is lost or damaged. That’s where home insurance comes in: It protects you from having to pay to replace all or some of it.

But that’s not all: Home insurance protects you in other ways as well; for example, if someone gets hurt on the property you own or rent, and you’re found liable and must pay damages.

Just keep in mind though that not all home insurance policies are identical. It’s important to understand what your coverage includes and excludes, and customize it to fit your needs.

Find out more about the different types of home insurance and the benefits they provide:

  • Homeowner’s insurance
  • Condo insurance
  • Renter’s insurance

    • Generally, all home insurance (homeowner’s insurance, condo insurance and renter’s insurance) will include coverage for your belongings or property (contents), your personal liability (should you be legally required to pay damages), and, if you’re a homeowner, your house (building). It may also include other protections, like living expenses in case loss or damage forces you to leave your home.

      And if you own a condo, you’ll likely also want coverage for improvements and betterments, supplemental coverage and loss assessment. (See Additional condo insurance coverage areas below for a more detailed explanation.)

      While it may be confusing at first, once you become familiar with the terms and phrases, comparing different policies does get easier. Just note that it’s important to read the details because not all insurers use the same terminology. Here are the basics.

      Whether you own a house or condo, or are a renter (even temporarily), home insurance will protect your belongings or personal property and the building(s) you own (if any).

      Here’s how coverage options differ and the advantages they bring:

      All-risk (also known as all-perils) coverage
      Insures your building and/or contents for the most common types of losses (like fire, loss or water damage).

      • Your building/contents are insured for everything, unless it's specifically excluded from your policy (e.g. intentional damage to your own property would not be covered).
      • Rather than list which risks are covered, only exclusions will be spelled out in your policy.

      Designated-risk (also known as Named-perils) coverage
      Names the specific types of risks/perils that your home and/or contents are insured for (like fire, theft and water damage).

      • Everything is listed very clearly in your policy booklet so you have a complete and thorough understanding of what your insurance policy covers.
      • Homeowners please note: Designated-risk building coverage is very rare because your home is probably the largest investment you will ever make and you want full protection.

      Detached private structure coverage
      Applies to structures that exist on your property but that are not connected to your primary residence (e.g. a detached garage).
      There is usually a certain limit assigned to this kind of coverage, but you can always increase that limit by purchasing additional coverage options.

      If your personal belongings are lost, stolen or damaged, your coverage probably includes a Replacement Value option that will help you replace them:

      • The contents of your home are insured for the amount it costs to replace them.
      • When you replace the item(s) with a similar kind and quality, within a specified time, your insurer will pay you what it cost to replace the item(s) — not what they were actually worth in their used state.
      • For example: If your 5-year-old TV was lost in a fire, you would get the full amount it would cost to replace it, even if that is more than you paid for that TV in the first place.

      Personal liability is also known as third-party liability. If you are found responsible for unintentionally injuring someone or damaging their property, liability insurance will help protect you from having to pay damages to them.

      • Protects you if someone gets injured on your property or the property you’re renting. For example: Someone slips on your front steps or trips on a loose tile in the kitchen. If they break a leg and can’t go to work, you could be held responsible for their lost wages.
      • Protects you if you or a member of your family damages another person’s property. For example: Your son accidentally throws a baseball through a neighbour’s window and breaks an antique vase on the windowsill; you may have to pay to replace it.
      • Protects you anywhere in the world. For example: You’re on a golf vacation in Florida, lose grip of your golf club, and it ends up striking and injuring another player. Your liability insurance would cover it.

      This coverage applies if you are forced to leave your home because of loss or damage (e.g., a fire).

      • Pays for reasonable and necessary expenses to live temporarily away from home; for example, hotel and food costs could be covered.
      • A dollar limit is usually specified.

      Voluntary payments may be made for medical expenses and damage to property. Here’s how they work:

      Voluntary payments for medical expenses

      • Covers eligible medical costs if someone is accidentally injured as a result of your personal activities or the way you have maintained your building.
      • Covers injuries experienced by resident employees (such as a nanny or housekeeper) while working for you.
      • You don't have to be found liable to make a claim under this coverage, but some limits do apply and may be different from insurer to insurer.

      Voluntary payments for damage to property

      • The accidental physical damage to the property of others is covered.
      • This may occur as a result of your personal activities, the way your building is maintained or used, be caused by pets or animals that you own or care for, or by the actions of your resident employees (like a nanny or housekeeper).
      • This type of coverage would also include the intentional acts of other insured individuals under a certain age (set by the individual provider).
      • You don't have to be found liable to make a claim under this coverage, but some limits do apply and may be different from insurer to insurer.

      If you own a condo, your policy should include extra coverage to help protect your investment and yourself from personal liability.

      Improvements and betterments protection

      • Improvements and betterments protection compensates you for any money you’ve spent on upgrades that you’ve made to your condo.
      • It compensates you for improvements above what the builder originally provided, up to a limit of your replacement value.
      • For example: Your unit was originally finished with $5,000 worth of laminate flooring. You’ve upgraded to hardwood flooring valued at $10,000. If there’s a fire and the builder only gives you $5,000 to cover the value of the original laminate, your insurer will provide you with the remaining $5,000.

      Supplemental coverage

      • This allows you to insure your condo unit itself.
      • If your condominium corporation’s insurance does not fully cover a loss to your unit, the supplemental coverage will ensure you’re protected.

      Loss assessment
      This is an important feature of your condo insurance policy. It protects you when you share responsibility for common property with others. Your insurer will pay (up to a stipulated limit) your portion of any special assessment that’s valid under your condominium corporation’s governing rules:

      • If it’s due to a direct loss that affects a shared part of the premises and if it has been caused by an insured risk.
      • If it's due to legal liability arising out of shared ownership of common areas of the condominium premises (e.g. to compensate a visitor for injuries incurred by tripping over a frayed carpet in a corridor).
      • Providing that the assessment has not been made necessary because of a deductible in the corporation's own insurance policy.
      • In most cases, the condominium corporation’s own insurance coverage will be adequate.

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