Are you in the process of buying a new home? Do you know exactly what your homeowners insurance covers?
Every year, more than 500,000 Canadians purchase new homes. Home prices are setting record highs, but what's the best way to protect your investment?
Having homeowners insurance isn't required for people who own their own homes, but if you're in the market for a mortgage you'll need to buy it.
If you're wondering, "What does homeowners insurance not cover?", this article's for you. We'll give you the lowdown on what to expect when you buy a homeowners insurance policy and help you find the coverage you need.
What Is Homeowners Insurance and What Does It Cover?
In general, a homeowners insurance policy is your protection against damage to your home. A typical policy covers damage from fire, smoke, lightning, wind, and explosions.
There are several types of policies, offering a range of coverage options. You will pay a monthly or quarterly premium and you may have to document the items in your home.
You can also invest in a personal liability policy, which will cover you in case a guest has an accident on your property. You don't want to have to pay hospital bills for a slip-and-fall accident.
Policies vary in their coverage, so talk to a licensed insurance agent before you commit to a plan.
What Does Homeowners Insurance Not Cover?
Homeowners insurance policies can't cover everything. If you run a home business out of your residence, you won't be covered for theft or smoke damage unless you buy extra coverage.
Your homeowners insurance won't cover the cost of your mortgage if you suddenly pass away. You'll need to buy a separate mortgage insurance policy if you want that kind of protection.
If you don't perform regular maintenance on your property, you could void your homeowners insurance policy. There are many common problems that homeowners insurance doesn't cover, and we've listed them below.
1. Flooding and Burst Pipes
In general, homeowners insurance won't cover damage due to flooding or burst pipes. If you live in an area that's prone to flooding, like much of Eastern Canada, you may be able to purchase additional insurance.
When you're looking for homeowners insurance, don't go with the first company you speak to. Take your time and connect with at least three companies to get quotes.
Your yearly cost for an insurance policy will be less than $1,000, no matter where in Canada you live. You may be able to get a discount for having good credit or for taking out additional policies.
2. Mold Remediation
Speaking of problems linked to flooding, mold takes over your home in a matter of weeks. It can also destroy the value of your home, so why won't home insurance policies cover mold removal?
The only way that you can get mold removal covered by your insurance is if it results from an event that's already covered.
If your policy covers water damage from leaky pipes and those leaks cause mold to grow, you may be able to get your mold remediation covered.
It's a bit of a grey area, so check with your insurance agent if this occurs.
3. Sewer Problems
What does home insurance cover as far as sewer issues? Not as much as you might think.
Most homeowners insurance policies don't cover sewer backups because they see that as an issue for the city to solve. They won't cover damage due to a septic system overflowing or a city sewer malfunction.
The problem with sewers is that most home inspections don't include the home's connection with the city's sewer system. You may end up buying a home that has frequent sewer issues and not realize it until you move in.
You may be able to purchase separate coverage for your sewer, however.
4. Termite Infestations
You might be surprised to learn that most homeowners insurance policies don't cover pest infestations.
Insurance companies consider termites and other insects to be the homeowners' responsibility and recommend pest control service.
Unfortunately, you can't buy extra coverage to cover damage from termites. Termites live along the southern part of Canada, including the coastal region, so you may want to get a thorough pest inspection before you buy a home.
If you knock on your walls and the wood sounds hollow, you might have a termite infestation.
5. Dog Bites
Next on the list of what is not covered by homeowners insurance is damage caused by dogs.
There is a list of "high-risk dogs" that insurance companies keep, and if your dog is on the list then you're not eligible for liability coverage.
That means that if your dog bites someone on your property, you'll be responsible for their medical bills and perhaps their legal fees.
Dogs that are included in the high-risk list include German Shepherds, Huskies, Akitas, and Rottweilers. The list also includes Pit Bulls, Chow Chows, and Malamutes.
If your dog isn't on the list but has a history of biting, you may not be able to get liability coverage through your insurance company.
6. Jewelry and Fine Art
Before you commit to a homeowners insurance policy, take the time to see if your valuables will be covered.
Many insurance companies have an upper limit for coverage. It typically ranges from $5,000 to $10,000. If you want more coverage, you can purchase it.
No matter how much coverage you get, you should be prepared to thoroughly catalog your belongings. If you can, get high-ticket items appraised so that you have a record of their cost.
If you keep cash in your home, make sure that it's in a safe. Even though homeowners insurance covers theft, they won't reimburse you for cash that's stolen from your home.
The reason for this is that it's impossible to prove how much was stolen.
7. Contractor Errors
Another thing that homeowners insurance won't cover is damage due to construction accidents.
If your contractor puts a hole in your roof, for example, you wouldn't be able to get any money from your home insurance policy.
The good news is, though, that you could sue your construction company for damages. Contractors typically carry liability insurance to pay their customers in the event of a preventable error.
You also won't get coverage for a roof that leaks or for an aging electrical system. Those problems fall under the category of normal wear and tear, meaning that the homeowner is responsible for them.
8. Trampolines and Swimming Pools
If you have an accident on a trampoline, you won't be able to get any money from your insurance company.
The same thing goes for swimming pools. Swimming and trampolining are considered risky activities and insurance companies won't cover the cost of medical bills or property damage.
If you do have a trampoline at home, you must notify your insurance company. There are some companies that will refuse to issue a homeowners insurance policy to people who own trampolines.
9. Home Business
Do you work from home? You may not realize that your work equipment and inventory aren't covered by your homeowners insurance policy.
If you have a home office, you'll have to get separate insurance. If you don't, you won't be covered for theft, accidents, or damage from extreme weather.
There are several types of business policies, and they can help protect you from customer lawsuits and property damage. You can also get insurance that covers workers' compensation claims.
As you shop for business insurance, you might want to bundle health insurance or life insurance as well. Most Canadians have health care coverage, but are you getting the best deal?
Surprisingly, most homeowners insurance policies don't cover damage from earthquakes. There are more than 4,000 earthquakes in Canada each year, and the Eastern Coast is particularly vulnerable.
If you live in an area of Canada that's prone to earthquakes, you may be able to get additional insurance. Just talk to your insurance provider, preferably before you buy your home.
The rates that you'll have to pay for an earthquake rider will vary according to your location and the likelihood of damage from an earthquake.
How to Find the Right Homeowners Insurance Policy
What does homeowners insurance not cover? Unfortunately, the answer is "a lot."
When you're ready to buy insurance, however, the first step is to compare rates and coverage options.
Always ask if you can get a discount by bundling insurance packages, and don't hesitate to pay a little bit more for better coverage.
We work with homeowners and business owners to find the best rates on insurance.
No matter how much insurance you need, we can help. We're connected with more than 20,000 insurance agents and serve customers in more than 50 countries.
We can work with businesses of any size to secure health care coverage, liability insurance, and workers' compensation insurance.
If you have any further questions, you can contact us online or by phone. Thank you for using our service, and we're looking forward to hearing from you soon!