At the most basic level, a homeowner’s insurance policy is intended to protect an insured homeowner against unexpected loss. However, as anyone who has suffered a loss has likely learned, your insurance company may not be there when you need them.
In this post, I will try to give a very basic overview of some of the basic concepts defining your homeowner’s insurance policy and your resulting insurance coverage.
Generally speaking, when is there home insurance coverage?
As a preliminary matter, for there to be home insurance coverage, there must be a policy of insurance in place, and the loss complained of must have been caused by an accident or an unexpected, fortuitous (not intentional) event. As a result, this means that insurance covers losses caused by mistake, theft, vandalism and even stupidity (i.e. leaving the stove on by accident, resulting in a fire), but not intentional acts by the policy holders (i.e. intentionally setting your own house on fire).
When can your insurer deny coverage?
There are some instances where an insurer can validly deny insurance coverage and refuse to pay for losses. As noted above, where a loss was caused intentionally by the insured, there will be no insurance coverage. Likewise, in some cases, policy exclusions take some matters that would otherwise be insured under the policy, and render them excluded. A common example of such an exclusion is to the personal property/belongings of tenants/renters that are not related to the property owners (hence the need for tenants to obtain tenant’s insurance).
However, in many cases, insurers claim that matters are excluded from coverage when that is not in fact the case. As such, you should be very hesitant to trust a claims denial from your insurer based on an exclusion before having same reviewed by an experienced insurance lawyer. For example, read my article on $1.3 M Reasons Not to Trust an Insurance Denial.
Why is ‘All Risks’ Coverage so important, and how does it differ from ‘Named Peril’ or ‘Specified Peril’ Coverage?
All Risks coverage provides insurance coverage against all fortuitous causes of damage to your insured property, except those risks specifically excluded.
Named Peril or Specified Peril coverage conversely provides insurance coverage for only a listed subset or fraction of those risks. It’s a bit like the difference between eating your entire dessert or only some listed portion of it, i.e. 50%.
All Risks home insurance is clearly better.
What is the difference between ‘Guaranteed Replacement Cost, ‘Replacement Cost’ and ‘Actual Cash Value’ Coverage?
The amount of insurance available under any particular coverage will either be ‘Guaranteed Replacement Cost‘ (the best), ‘Replacement Cost’ or ‘Actual Cash Value‘ (the worst).
Guaranteed Replacement Cost is the best available coverage, as it provides for the cost of replacement, even where that cost is more than the amount of coverage provided for in the policy. For example, if a leather couch was insured for $1,000.00, but cost $1,200.00 to replace on the date of loss, the insurance policy would pay $1,200.00.
Replacement Cost coverage would pay the replacement costs, up to the policy limits of $1,000.00 in my example.
Actual Cash Value is at the other end of the spectrum, and takes into account replacement costs less depreciation, such that in any event, the insurance policy would pay less than $1,000.00, depending upon the age and condition of the couch, the market value etc. As you can see, this coverage provides the least protection against loss.
How can I tell what home insurance coverage I have?
The types of insurance coverage you have purchased will be set forth in your home insurance policy and indicated on your ‘Certificate of Insurance’ which is sometimes also called a ‘Declarations Page’. This page will list the names of the insured, insurer, the policy number, the types of coverages, and the amounts of each such coverage.
What types of coverage are provided under a Homeowner’s Insurance Policy?
Generally speaking, most homeowner’s policies provide five standard types of coverage:
- The House Itself: Typically called ‘Dwelling Building’ this coverage provides insurance to repair or rebuild your house if it is damaged or destroyed by an insured peril. This section also provides insurance coverage for things including attached structures, permanently installed outdoor equipment, outdoor swimming pools, construction materials, trees, plants and lawns, as well as a limited amount of coverage for resulting costs incurred due to By-Laws, termed By-Laws Coverage.
- Other Structures on the Property: Usually termed ‘Detached Private Structures’ this section provides coverage for other buildings on the property that are not attached to the main dwelling, such as sheds, boathouses and guest cottages. Coverage is often 10-20% of the amount provided for the main Dwelling Building. This also includes related By-Laws Coverage.
- Your Possessions: Called ‘Personal Property,’ this coverage provides insurance for the contents of your home, garage and/or shed, and includes things such as clothes, furniture, appliances and other household furnishings. This section also provides limited coverage to your children’s possessions while they are living away at school. However, this section does not cover damage to automobiles or to the property of tenants who are not related.
- Additional Living Expenses: This coverage provides reimbursement for additional expenses incurred when your house is unfit to live in, and includes things such as hotel bills, restaurant bills (over the amount you normally spend on food), moving expenses, additional transportation expenses etc. Significantly, this section also provides reimbursement of the loss of the ‘Fair Rental Value’ when a unit rented to others is rendered unfit for occupancy. Like other aspects of your insurance claim, you will need to ensure you keep receipts to recover under this coverage.
- Liability Insurance: This section provides coverage where a policyholder is sued for accidentally causing injury or property damage, and covers things such as injuries from falls and even dog bites. It may also include coverage for injuries caused by an insured to another (Voluntary Medical Payments) and also for accidental damage to property (Voluntary Payment for Damage to Property).
What should you do if you have a home insurance claim in Ontario?
If you have sustained a loss, you should first notify your insurance company (not your broker).
Next, you should begin to put together an itemized list of the items that have been damaged.
It is also advisable to obtain a copy of your insurance policy and call an insurance claims lawyer, such as the lawyers at Michael’s Firm at 647-495-8995, for a free, over the phone, no obligation consultation.
To learn more about the insurance claims process, visit the Insurance practice areas of our site or call our insurance lawyers today.
This post is general in nature and is not intended as an exhaustive overview of Ontario insurance law. It does not constitute legal advice for your specific situation and your policy may be different than explained above. For legal advice on an insurance claim, please do not hesitate to contact our insurance lawyers in Toronto and Hamilton ON by calling 647-495-8995.