by Eddie Rodriguez, CAIB | Jul 12, 2011 | Research Centre
What you’ll discover in our “home insurance” articles:
- How your home may not be fully rebuilt – even though you have insurance!
- 11 ways to save money on your home insurance – including how to catch your insurer automatically increasing your premium every year
- SIX primary kinds of insurance in your home policy? Yes … and the right decision for each one
- The secret to brushing off a lawsuit
- How your jewelry and other personal property are NOT covered – and what to do about it!
- Why what’s not covered is more important than what is
- And more!
Your home is probably your most valuable asset. It is also a huge risk for you financially.
What if something happens to it?
A fire? A flood? Vandalism? Will your insurance policy actually pay for the damage? Will it pay for ALL of it?
What if someone visiting you slips and falls and suffers a serious injury? And sues you? An accident like that could put a dent — or worse — in your financial security.
For most people, insurance is a mystery. They know they need to have insurance for their homes (mortgage lenders require it), but they don’t understand the protection provided by the policy. And, more importantly, they don’t understand what their policy does NOT cover and what to do about that.
All homeowner’s insurance is not created equal. In fact, almost none of it is. There are thousands of different products out there, from hundreds of insurance companies. And your policy includes literally dozens of options and decisions you must make that determine how much insurance protection you actually have. Your home policy is not a commodity. It’s something tailored specifically to your needs and desires.
Six Primary Coverages Provided By Your Home Policy
Your home policy protects you in six primary ways. You’ll find these listed on your policy’s “Declarations” page. Here’s what they mean to you.
Dwelling
The word Dwelling in your home policy essentially refers to your home itself. It includes attached structures, as well … like an attached garage. The Dwelling Limit (or Amount of Insurance) stated on your Declarations page indicates the most the insurance company will pay to replace your home if it’s destroyed by a covered claim. Is it enough?
Warning: Don’t make the mistake of thinking your home is fully covered just because you have an insurance policy! You must make sure your Dwelling Limit is enough to rebuild your home. How?
Contact our office and one of our brokers can run a replacement cost estimate that calculates the cost to rebuild your particular home. Be sure to adjust the amount of insurance for your dwelling appropriately. If you don’t you may not have enough insurance to replace your home if disaster strikes.
Note: Some policies include built-in protection above the stated Dwelling Limit – usually a percentage of the Dwelling – just in case the estimate is too low. Be sure to discuss this with us as an additional protection feature. It’s probably worth having.
Other Structures
The most common Other Structures are sheds, stand-alone garages (known as “detached” garages in insurance terms), barns, pool houses, etc. These structures are not directly attached to your home, the “dwelling”.
Other Structures have their own protection limit – the most your company will pay to rebuild them – as stated on your Declarations page. This limit will be significantly less than the dwelling limit … usually 10% – 20% of the dwelling
For most people that’s plenty of insurance for other structures. But not for everyone. You need to know what it would cost to rebuild or replace those structures if they’re destroyed. Discuss it with the licensed professionals in our office. You can buy more protection for your other structures if you need it.
Personal Property
Your personal property is all your stuff – furniture, clothing, electronics, appliances, art collection, jewelry, etc. It, too, has its own protection limit stated on your Declarations page. And, again, this amount is the most the insurance company will pay to replace your personal property.
Your personal property limit is usually 70% – 75% of your dwelling limit. However, you can adjust this upward if you need more protection, Discuss your options with us. We’re here to help!
Regardless of the protection limit for your personal property, there’s a very important question you must get answered. How is your property protected … on an “actual cash value” basis or a “replacement cost” basis? The difference is huge!
In very basic terms, if your property is protected on a replacement cost basis the insurance company will replace your old stuff with new stuff. For example, if your 5-year old TV is destroyed in a covered claim, the company will pay for a brand new TV. That’s a good deal for you.
But if your property is protected on actual cash value basis, an “allowance for depreciation” is applied to the cost of a new TV based on the age of your destroyed TV. The result is you get a settlement amount less than the cost of a new TV. To buy a new TV you’ll have to come up with the difference out of pocket. Not as good a deal for you.
Clearly, insuring your personal property on a replacement cost basis is much better protection than actual cash value. Sometimes it costs a bit more, but not always. Make sure you know how your policy works and check the price both ways. Make the right decision for you.
Loss of Use
If your home is badly damaged you won’t be able to live in it while it’s being fixed or replaced. That means you may have to pay rent somewhere while you’re also paying your mortgage. The Loss of Use coverage on your home policy pays those additional expenses for you.
Your Declarations page may state a dollar limit for this coverage, or it may state a time limit. If there is a dollar limit, this is the most the insurance company will pay for these expenses. If there’s a time limit, your insurance will pay all covered expenses regardless of the amount but only for the specified period.
Liability
Your liability coverage pays if someone sues you for their injuries due to a covered claim. When we think of such accidents we most commonly think of injuries that occur on your property – someone slips and falls, a dog bite, etc.
However, the liability protection under your home policy extends beyond your property to your everyday life. For example, your home policy could also protect you if you knock someone over with a shopping cart at the grocery store.
Liability insurance is all about protecting your assets from someone who sues you. So, you should have at least as much liability insurance as your financial worth. However, more than that may be prudent, and you should discuss your needs and risks thoroughly with a licensed broker in our office. Your current liability limit will be stated on your Declarations page.
Medical Payments to Others
This pays medical bills for a guest who is injured on your property or in another covered claim. The idea is to do the right thing for someone – pay their medical bills – and then hope they don’t sue you. This protection is inexpensive, but could save you major hassles by preventing a lawsuit.
by Eddie Rodriguez, CAIB | Jul 11, 2011 | Research Centre
You can get sideways with your insurance company because you haven’t been upfront about how you are using your vehicle.
For example, do you drive your car to work? If so, you will pay more for auto insurance than if you take mass transit. In fact, the further you have to drive to work, the more you will pay.
* Tip. If you drive to work and tell your insurance company you don’t, you have basically committed fraud. Resist this temptation, even if it might save you a few dollars.
* Example. Say you have an accident on the way to work. Say, also, that you have told your insurance company you don’t drive to work. Your insurer could technically argue that it is not obligated to provide coverage and you’ve given them a good reason to cancel your policy.
Honesty is the best policy when it comes to insurance. Insurance fraud is a huge problem in North America, and Ontario is no exception; claims are frequently padded with nonexistent damages; accidents are staged and injuries are faked.
* Fact. It is estimated that fraud accounts for as much as 25 cents to 30 cents of every auto insurance premium dollar. Think about that. If even half the auto insurance fraud in in North America were wiped out in the next year, you would pay 12% to 15% less for your next policy.
Personal Car for Business, Company Car for Personal Use
Do you use your personal car for business?
Do you have access to a company car?
If the answer to either question is yes, you could have potential coverage gaps.
* Example. Let’s say you use your personal car for business. It’s possible your employer is providing some coverage for you through your employer’s commercial auto policy. In most cases the coverage is for liability only, and often this commercial auto policy doesn’t even apply until the limits on your personal auto policy are exhausted. (This is what insurance people call “excess” coverage.)
* Tip. You should talk to your employer about what, if any, coverage is available to you through the company’s commercial auto policy. That way, if you have an accident while on company business, you know who (or which insurance company) to call.
If you use your personal car for regular business purposes – trips, visiting clients, etc. – your personal auto policy probably provides enough coverage for these activities. (Assuming you have “enough” coverage to begin with.)
But what if your car is actually a source of revenue? You make deliveries, for example. In that case, you likely need a commercial auto policy as well.
* Note. If you have an accident while delivering a product or using your car as a taxi, your personal auto insurer may deny your claim. Talk to your broker to make sure you have coverage for all the business activities for which you use your car.
What about company cars? They can be an insurance problem, if you use the company car for business and pleasure, particularly if you don’t have a car of your own.
If you don’t have a car, you probably don’t have a personal auto policy. If you don’t have a car (or personal auto coverage) and use a company vehicle for pleasure, you are inviting disaster if you have an accident during a pleasure trip.
* Tip. If you are in this situation, you should have what is called a non-owned personal auto policy.
Such a policy can also come in handy if you don’t have a car and you rent a vehicle on a trip. Your non-owned auto policy will cover you and your rental car if you have an accident. Otherwise, you would probably need to buy coverage from the rental car company, coverage that is very, very expensive.
* Tip. You can have coverage gaps even if you have a personal auto policy and use a company car for pleasure or if your spouse or children use the company car for pleasure. Find out from your employer the extent of coverage that is available for your corporate car. Once you know the extent, talk to your MIB insurance broker about any additional coverage you might need.
by Eddie Rodriguez, CAIB | Jul 11, 2011 | Research Centre
All the coverages in your auto policy apply when you are driving, but they also apply when other people are driving your vehicle.
The coverages are actually for the car, not the person.
* Note. If someone is going to be a regular user of your car, that person’s name needs to be added to the policy.
Your insurance company wants to know who’s going to be using the car. After all, you could be a great driver with no tickets or accidents, but your spouse, your teenage child, or your reckless cousin could be a lousy driver.
If you let these people drive your car without telling your insurer and these people keep getting in accidents, your insurance company isn’t going to be happy. In fact, they may cancel your policy.
* Tip. It’s not wise to risk losing your policy by failing to disclose who’s driving the insured vehicle. Keep in mind, however, that if you add drivers with lousy records or who haven’t had much driving experience, your premiums will go up.
Any parent of a driving teenager can tell you this; teenagers are notorious for getting tickets and having accidents. They are also very inexperienced drivers. As such, when your child gets his or her license, your insurance premiums will go up when he or she is added to the policy. (There are a few exceptions to this … In some cases, your premium will NOT go up when adding a young, inexperienced driver).
This is a complex issue, and you’re better off to contact your MIB broker and tell him/her what your particular situation is.
by Eddie Rodriguez, CAIB | Jul 11, 2011 | Research Centre
In addition to buying “optional coverages” for extra protection, you have the option to increase the coverage of some of the mandatory coverages you already have (such as the Liability and Accident Benefits).
Let’s talk about that briefly:
How much insurance do you need?
Bodily Injury Liability
You can buy the minimum required by law: $200,000. Or you can buy limits as high as $1000,000, even $2 million. Remember that someone you hit can sue you for everything you have.
* Tip. If you have a home, own stock and have a decent income, you should probably buy, at minimum, limits of 1 million. If you have more than $300,000 in assets, you should buy higher limits or an umbrella policy. Consult with your professional broker about this!
Property Damage Liability
Several years ago, the $200,000 minimum was considered “more than enough” for this coverage. Not anymore. You should seriously considerat least 2 million of coverage.
In Ontario, the limit you select form “Bodily Injury Liability” will automatically be the same limit you’ll buy for “Property Damage Liability” and for the “Family Protection Coverage” we mentioned in this other article.
Collision
Consider how much you can afford to pay to have your car fixed if you have an accident. Auto policies have several deductible options.
* Note. A deductible is the part you pay before the insurance kicks in. You can buy deductibles of $500, even $1,000. The lower the deductible, the more this coverage will cost.
Unless you’re planning to have a lot of accidents, it’s probably a good idea to have a deductible of at least five hundred dollars. (By the way, the “collision deductible” does not apply if someone else hits you and that person is charged “100% at fault” by their insurance company. – If the other person is found only “50% at fault” (as an example), then you would have to pay 50% of your deductible.)
Comprehensive
Like collision, there’s a deductible with comprehensive, although it is often lower. For example, if you have a $500 deductible for collision, your comprehensive deductible may be, say, $300.
* Note. While collision and comprehensive will pay for damage or loss to your car, neither coverage will pay for everything on or in your vehicle. Most policies exclude things like CB radios, two-way radios, car phones, cassettes and CDs. – The “contents” of your car, may be covered by your homeowner’s, condo owner’s or renter’s insurance policy … if you have one.
If you add special features to pickups, vans or SUVS, these things probably will be excluded as well. In fact, it’s a good idea for you to talk to your insurance broker about any high-tech equipment or special features you have added to your vehicle. Many, perhaps even most, of these features aren’t covered in the standard policy. It is possible, however, to obtain special coverage for any high-tech equipment or special features your vehicle may have.
Your MIB broker can advise you of the options.
by Eddie Rodriguez, CAIB | Jul 11, 2011 | Research Centre
There are some additional coverages you can buy.
You can buy rental reimbursement (“Loss of Use“), which will pay for a rental car while your vehicle is being repaired. ( If the accident was not your fault, the cost of the rental car is automatically picked up by your insurance company .. subject to some exceptions).
If the accident is completely – or partially – your fault, you’d be covered for the Car rental cost IF you’ve bought the optional “Loss of Use” coverage.
If you’re not sure whether you’ve purchased this coverage, let us know and we’ll check your policy for you ]
If you are buying or leasing a NEW vehicle (a private passenger automibilie or a snowmobile), you can buy the “Removing Depreciation Deduction” endorsement: Under certain conditions, this endorsement waves depreciation when setting physical damage loss to new vehicles for set period of time following purchase. If your car is written off during this period you would be reimbursed the original purchase price (instead of the probably-much-lower current value).
Another very popular optional coverage (which you can buy IF you qualify) is the A.P.E …
… no, not that APE in the picture!
I’m talking about the A.P.E: Accident Protection Endorsement. This relatively-inexpensive coverage would protect you from having to pay a higher premium after your first AT-FAULT accident.
What if you damage a vehicle you don’t own … such as a rented car?!!!
Yup, you can get coverage for that (assuming you qualify). In Ontario this is known as the OPCF27. By adding an “OPCF 27” to your automobile policy, you won’t have to worry about buying extra insurance whenever you rent a car ……… Unless in cases when it would make sense to buy the insurance from the rental company. Feel free to ask an MIB broker about this to make sure you don’t waste your money.
