We live under the protective umbrella of insurance every day. Once we’ve paid for our policy we’re protected, right? In the most cases, yes. However, you may be surprised to learn that there are three common activities that can void some important coverage in your homeowner’s policy without you even realizing it. Fundamentally, it comes down to what insurance companies refer to as “material change to the risk.” This means that when you buy a homeowner’s policy, and subsequently you do something to your home that represents a significant change to the level of risk that your home is exposed to—you need to inform your insurance company; otherwise you may void some types of coverage under your policy.
Let’s consider three things that you can do to avoid invalidating your coverage: 1) protect your home when absent for more than four days; 2) inform your insurance broker whenever you make substantial renovations or add a suite to your home; 3) inform your broker if you start a home-based business.
Protect Your Home When Absent for More Than Four Days
No, you don’t need to check in with your insurer every time you decide to go on vacation or for some other reasons are absent from your home. However, there are a few important steps to take to keep your coverage valid whenever you are absent from your home for more than four days. During the usual heating season you must do one of the following, otherwise you will not be covered for water damage due to your water pipes freezing and bursting.
- Have someone of a responsible age check your residence every day to ensure that it is being properly heated. Or, you can,
- Shut off the water supply and drain the pipes
- Install a water flow alarm system that is centrally monitored by an alarm company
To illustrate the above, imagine you live in Kelowna and you leave for a 3-week vacation in January. You forgot to ask someone to check on your home every day to ensure all is in order. Neither did you shut off the water and drain the pipes before you left. And you didn’t know you could get a water monitoring system installed in your home. During the second week of your vacation temperatures in Kelowna drop to 15 degrees below freezing. You congratulate yourself on the timing of your vacation. However, the cold snap has caused power failures in Kelowna that last 2 days (or the oil tank for your furnace runs dry), the furnace shuts off, and the water pipes freeze and burst. Your place is a water-damaged mess.
Upon your return home, you file a claim, only to find out that your coverage has been voided because you did not follow the rules of your policy. So, protect your home by contacting your insurance broker to find out exactly what steps are required to maintain coverage under your policy. Your broker is your partner in protecting your home. Call us today.
Inform Your Insurance Broker Whenever Making Substantial Renovations or Adding a Suite to Your Home
A 2007 survey found that almost 40% of Canadians had renovated their homes in the past year. However, 67% of this group did not consult their insurance broker or company prior to doing the upgrades. The main reason that those surveyed chose not to notify their insurance company was that they felt the work was minor.
Why is it so important to inform your insurance company of your plans to build a rental suite in your home or make any other alterations to the structure or the way your home is used?
Fundamentally, adding a suite to a home is considered by the insurance companies as a “material change of risk.” This means that when you buy a homeowner’s policy, and subsequently you do something to your home that represents a significant change to the level of risk that your home is exposed to—you need to inform your insurance company; otherwise your coverage could be voided.
Renovations. Depending on the extent of your renovation your coverage could be voided if the insurance company is not informed. So, it is best to talk to your insurance broker about your planned renovations before you begin to be sure you are adequately covered.
Also, insurance policies exclude coverage for vandalism, water damage and glass breakage for buildings that are under construction. Therefore, you may need to arrange for special insurance to protect you during renovations.
Another important reason to inform your insurance broker about your renovation is that the valuable Guaranteed Replacement Cost (GRC) protection that comes with your homeower’s policy, could otherwise be voided. Here’s why. The Guaranteed Replacement Cost protection means that if you had a fire in your home the insurance company would cover the cost of repairing and replacing the damage at today’s reconstruction prices, even if those costs exceeded the amount of coverage purchased.
However, the premium you paid for your homeowner’s policy was based upon its condition at the time you bought the policy, and on the estimated cost to reconstruct it should it be damaged or destroyed. The renovations that you make increase the “replacement cost” value of a home. Once again, to protect themselves from having to pay for reconstruction costs that they did not charge adequate premiums for, the insurance company would determine that the GRC protection would be void. Understandably, this could leave you seriously exposed to financial loss in the event of a claim.
For more information on how to maintain your coverage during and after your renovations, contact us online or by telephone.
Starting a Home-based Business
You may be one of them—the approximately 3.3 million Canadians who in 2007 said that they planned to start a business within the next five years, according to RBC’s annual small business survey. A second survey conducted by the Insurance Bureau of Canada found that 39% of Canadians who operate a home-based business do not have insurance coverage appropriate to this special need.
Your homeowner’s policy protects your home and the risks related to normal activities in and around the home. Homeowners’ policies exclude coverage for buildings that are used in whole or in part for business purposes. Therefore, if you begin operating a business from you home, inform your insurance company, otherwise your policy will be considered invalid.
For example, imagine that a water pipe bursts and damages or destroys some or all of your business equipment, business records, products, etc. If you have not informed your insurance broker about your home-based business, it is possible that none of your losses related to your business would be covered under your homeowner’s policy. Worse still, your entire homeowner’s policy may be voided, which would mean none of your losses would be covered—even those unrelated to your business. Ouch!
Two Fundamental Types of Business Insurance Coverage
There are numerous types of insurance that a business needs, depending upon the type of business it conducts. Let’s consider two fundamental types of coverage that all businesses should have: 1) contents and/or property coverage, and 2) liability coverage.
Contents coverage protects you against the damage to or loss of any business-related equipment either in the home or if it is taken outside the home, such as to a client’s office. So, if your laptop computer was damaged or stolen while you are out making a sales call, an appropriate business policy would cover its loss. This would also be true of business materials such as products for sale, samples or other promotional items.
Your business insurance will also protect you against liability risks. For example, you hire a plumber to replace a sink in your home and he trips and breaks his leg. Your home insurance policy will cover the costs related to this trip-and-fall incident. If, however, a client meets you at your home, trips on the stairs and breaks his leg or is otherwise injured, without appropriate business liability insurance, you could end up paying for his medical and other costs from your own pocket.
Even if you never have clients or employees come to your home, liability risks remain. You may operate a graphic design business from your home and are required to give a presentation to a prospective client in their boardroom. You plug the projector into a wall outlet and someone trips on your power cord, and breaks their arm. If sued, the court may decide that you are liable for the accident and are required to pay for the person’s medical costs and for their lost time from work. Business liability insurance protects you and your business against such claims.
What Insurance Options Are There for My Home-based Business?
The type of coverage that you require very much depends upon the type of business you are operating from your home. Basically there are two types of policies. One option is to obtain what is called an endorsement to your homeowner’s policy that is especially crafted for your home-based business.
A second option is to purchase a business insurance policy that is tailored to the precise nature and needs of your business, whether or not it is a home-based business. A business insurance policy provides the best coverage that will help ensure the longevity of your business.
Whenever we talk about home insurance, it’s always good to be reminded that our insurance broker is our partner in protecting our home and our valuables. For insurance to work well, full disclosure of potential risks that result from an altered use of the home is important. Unwittingly voiding your homeowner’s insurance policy is a surprise no one likes to think about. Talk to us about your home insurance needs. We’re on your side.