Reviewed by Daniel Mirkovic
Whether you’re a homeowner, condo owner or a renter, you’ll want to make sure your insurance covers what you think it does. A number of policy types exist for these three situations, as well as vacation homes, rental properties and homes under construction or renovation.
Customers usually get quotes from a number of insurance providers before choosing a policy to purchase. Price is a significant factor, but it’s important to remember that the actual type of policy quoted will affect not only your price, but also the quality of your protection in the event of a claim.
Three fundamental types of policies include:
These are the most restrictive policies available, protecting you against only a narrow selection of losses. Typically, this includes fire or lightning, explosion, smoke, falling objects, impact by aircraft or land vehicle, riot, vandalism or malicious acts, some types of water damage, windstorm or hail, and theft or attempted theft. Named perils policies will only cover loss or damage caused by one of these specified perils; if loss or damage is caused by something else, then your policy will not assist you.
Named perils policies are usually offered for homes in unusual circumstances; for example, remote vacation homes without fire protection, homes under major repair or renovation, or very old homes without modern equipment.
On the other end of the spectrum are comprehensive policies, which are also referred to as all-risk policies. These policies protect you against all types of loss except those specifically excluded. Loss or damage due to wear and tear, snowslide or landslide, acts of terrorism, and war are some examples of the types of loss typically excluded in comprehensive policies. Even with the exclusions, comprehensive policies provide you with the best protection; a loss can only be excluded if it specifically appears in the policy wording.
Comprehensive policies are usually offered to owner-occupied primary residences and represent the industry standard in Canada. Keep in mind that even these comprehensive policies can vary widely between insurance providers, and most policies will limit the amount of coverage provided for valuable articles like jewellery or bicycles.
Broad form policies fall somewhere in the middle ground, providing comprehensive protection for your home, and named perils protection for your personal property. While this may seem like an interesting idea, it’s ineffective in a wide range of potential losses. For example: if you accidentally drop your television, damage to your hardwood floors would be covered, but damage to the TV would not.
Broad form policies are often sold for seasonal dwellings and rental properties, where most people assume that the dwelling itself deserves better protection than the contents that remain inside it. In such circumstances, broad form policies are sometimes slightly less expensive than comprehensive policies – however, they represent much poorer coverage for personal property, so the minor difference in cost is difficult to justify.
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Each of these three types of policies offer protection for different types of losses and some policies restrict the amount of coverage. As a general rule of thumb, comprehensive policies provide better protection and should be your first choice. So, make sure you understand the differences and ask insurance providers what kind of policy is quoted.
Above and beyond these three forms, some insurance providers offer basic coverage for water damage and require you to pay extra to purchase broader coverage. Most providers also charge an additional premium to add protection for earthquakes. Make sure you understand just what types of losses are covered under your specific policy, and contact your insurance provider for detailed information if you can’t be sure. Another of our resource articles provides more detailed information on common exclusions in home insurance policies.
Beyond these types of policies, some customers need a specialized approach to home insurance that will properly address other unique circumstances:
Sometimes specialized coverage is required for construction or renovation projects, to protect against unique construction exposures like interruption or delay due to covered claims. Course of construction policies vary widely, especially regarding coverage for water backup, vandalism and theft; customers are advised to look for the most comprehensive policy available in order to avoid exposure to serious financial exposures in the event that the project falls victim to unexpected losses.
Almost all home insurance policies in Canada contain an exclusion that will deny coverage for any losses occurring in a home that is used, in whole or in part, for business purposes. Homeowners who run small home businesses, like hairdressing or accounting, often don’t realize that their policy could leave them without any protection if the home were to suffer a loss, even if the business didn’t cause it. Fortunately, insurance providers like Square One can add permission and coverage for home businesses, ensuring that coverage remains in effect should a loss occur. Home business owners should also explore options for specialized business insurance, which can help protect against their liability to customers arising out of their work, or for lost income if a loss were to prevent them from carrying on their usual business activities.
Customers of Square One automatically receive a comprehensive policy form, with the ability to customize their coverage further to meet their precise needs, including renovations, vacation homes and rental properties. Some Square One policies also offer earthquake coverage, and automatically include inland flood coverage for most customers.
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Even when you take precautions, accidents can happen. Home insurance is one way to protect your family against financial losses from accidents. And, home insurance can start from as little as $12/month.