Do you know what type of homeowner’s insurance is right for you? If you’re like most home buyers, you probably treat the process of getting insurance for your home as an afterthought. Understanding the type of insurance coverage you have and what is (and is not) covered is vital, especially when it comes time to make a claim. Just ask the thousands of homeowners who were recently affected by Hurricane Sandy.
The following interview with Mark Romani will give you some insights into what types of coverage you need and how each one protects both you and your home. Mark is an insurance broker with Pearson Dunn and has been in the industry for over 20 years. You can find out more about Mark at the end of the interview.
1- When should a potential home buyer start the process of finding homeowners insurance?
Two to three weeks prior to close. If it’s an older home I would suggest you start the process even earlier.
2- A typical homeowners policy has many parts to it, could you explain the difference between Property Protection and Liability Protection?
The typical homeowner’s insurance policy is divided into 2 parts:
- Part I: Home Insurance Property Protection
- Part II: Home Insurance Liability Protection
If one was to look at a home insurance declarations page, which is usually the first page in a homeowner’s insurance policy, they would see Part I: Property Protection. This protection is usually broken down into four additional sections:
- A. Dwelling
- B. Other Structures
- C. Personal Property
- D. Loss of Use
Coverage A. Dwelling typically covers your house, attached structures, fixtures in the house such as built-in appliances, plumbing, heating, permanently installed air conditioning systems, and electrical wiring.
Coverage B. Other Structures typically covers detached structures such as garages, storage sheds, and fixtures attached to the land including fences, driveways, sidewalks, patios, and retaining walls. Detached structures used for business purposes are not covered under a personal homeowner’s insurance policy.
Coverage C. Personal Property typically covers personal property including the contents of your home and other personal items owned by you or family members who live with you. This protection can be based on actual cash value or replacement cost. Home insurance policies may provide limited coverage for small boats; however, most home insurance policies do not cover motorized vehicles unless they are unlicensed and used only at your home. Some items may have coverage limits such as firearms, artwork, business property, electronic data, jewellry, and money. Extra coverage is usually available by adding endorsements to your policy.
Coverage D. Loss of Use typically covers living expenses over and above your normal living expenses if you cannot live in your home while repairs are being made or if you are denied access by government order.
The Liability Coverage’s section is broken down into two parts:
- E. Home Insurance Personal Liability
- F. Home Insurance Medical Payments
The Personal Liability section provides personal liability coverage against a claim or lawsuit resulting from bodily injury or property damage to others caused by an accident on your property or as a result of your personal activities anywhere. This home owner insurance coverage does not provide protection for auto and business related incidents. This coverage protects you and all family members who live with you.
The Medical Payments section includes coverage to pay medical expenses for persons accidentally injured on your property regardless of fault. Medical expense payments do not apply to your injuries or those of family members living with you or to activities involving you’re at home business.
As with every home owners insurance policy there are exclusions. A typical homeowner’s insurance policy does not cover injuries to animals, damage to motor vehicles, aircraft, and parts. Nor do they typically cover losses due to floods, mudslides, water damage from sewer backups, damage resulting from war or nuclear hazard, neglect, earthquakes, power failures, seepage, dry rot, or vermin.
All homeowner’s insurance policies have different covered perils and exclusions so one will want to make sure to check with their home insurance policy to verify all coverage’s for their individual policy.
3- Beyond the typical homeowners policy, there are several extra endorsements that are optional. Are there any of these endorsements that you recommend people to purchase?
Endorsements can also be added to your home owner insurance policy at an additional cost to provide extra protection. Examples of endorsements include:
- Guaranteed replacement cost coverage will pay the cost to rebuild your home as long as you have met the requirements of your home insurance policy.
- Inflation Guard increases the amount of your home owner insurance to keep up with inflation so that you can maintain adequate coverage to replace your home in the event of a loss.
- Scheduled personal property protects articles such as jewellry, furs, stamps, coins, guns, computers, antiques, and other items that often exceed normal policy limits in your regular homeowners insurance policy. It often provides coverage that is broader than the coverage in the home insurance policy. There normally is not a deductible for this coverage. Increased limits on money and securities provide additional coverage for money, bank notes, securities, and deeds.
- Sewer Back Up coverage when heavy volumes of water overload a drainage system the waste water rises above your basement drains resulting in a back-flow into your home. Sewer back-ups can introduce black mould, harmful bacteria and sewage waste into your home, creating health risks and extensive damage. Depending on where your home is located, sewer back-up insurance may be available to help cover losses or damage caused by water that has accidentally escaped from a sewer, drain, storm drain, sump, septic tank, eaves trough or downspout.
4- Does somebody purchasing a condo need homeowners insurance? Are there differences in the types of policies that a condo purchaser should be aware of?
When you purchase a condominium, you own your “unit” and own a share in the common areas of the condominium — the roof, basement, elevator, heating room, lobby, swimming pool, parking garage, or garden. As a condo owner, you may be held responsible for harm you might cause to any part your building, or to others who live or visit the condominium complex. A condominium insurance policy can remove some of the financial worries of condominium ownership.
A Condominium insurance policy should provide coverage for your personal property, betterments or improvements to your unit and additional living expenses if you are the victim of fire, water damage or theft. You will get liability protection to protect you for harm you might cause to any part of the building you live in or to others who live in or visit the condominium complex.
Loss Assessment coverage is also very important. As a condominium owner, you share responsibility with others in your building for common property. Loss assessment protects you from damage to these common areas.
5-How often should a homeowner review and update their policy?
A homeowner should review his homeowners policy every two years. However, if they are considering making any changes to their dwelling such as a finishing their basement or adding an addition they should contact their broker before commencing the work.
6. I’m Buying an Older Home, Will I Be Able To Get Insurance?
If you are looking to purchase an older home that has galvanized steel plumbing, 60-amp electrical service, knob and tube electrical wiring, a wood-burning stove or a fuel oil tank, make sure to factor the cost of necessary upgrades into your offering price!
Galvanized steel pipes, commonly installed in homes prior to 1950, have an average life expectancy of 40–50 years.
Over time, the galvanized steel pipes begin to rust or corrode from the inside out, resulting in reduced water pressure and restricted water flow. This presents an increased risk of leaks or ruptures occurring in the pipes and the potential for flood damage.
Insurance companies are concerned that the 60-amp electrical service, common in homes built prior to 1950, poses the threat of overuse and overheating, potentially increasing the risk of an electrical fire and a subsequent claim.
Before providing you with insurance coverage, your insurance company may require you to upgrade your 60-amp electrical service to 100 amps (the standard for new home construction) or install a switching device that allows for the operation of only one major appliance at a time.
Knob and tube wiring, also commonly found in homes over 50 years of age, consists of parallel hot (black) and neutral (white) wires, separated by knobs (or insulators) and ceramic tubes. Knob and tube wiring is considered a higher risk than contemporary wiring installations mainly because
- There is no ground wire (in contrast to contemporary wiring).
- Given their age, the wires are highly susceptible to wearing and exposure, presenting a serious safety hazard.
The unintentional contact of the hot and neutral wires may potentially cause an electrical fire. As a result, you may be required to replace all exposed knob and tube wiring with approved permanent wiring material before an insurance company will provide you with homeowners insurance coverage.
About Mark Romani
As a sought after insurance professional and a member of the Insurance Brokers Association of Ontario, I am focused on providing my clients with exceptional service and helping them achieve piece of mind. Whether it’s Home, Auto or Business insurance, I use my strong work ethic and my 20 plus years of experience to get my clients a competitive premium without giving up the coverage they need. I truly pride myself on great service. After all, a satisfied customer takes great pride in referring business to someone that cares.
Pearson Dunn Insurance Inc. is a full service independent brokerage offering a full range of insurance risk management services to individual and business clients. Pearson Dunn is proud to represent the majority of the leading insurance companies operating in Canada.
Pearson Dunn Insurance Inc
120 Woodstream Blvd Suite 13