By definition, a material change is a standard insurance policy statutory condition that states you must give immediate notice in writing to an insurer or broker of any change that is directly relevant to liability risk and within your knowledge and control. Any failure to promptly disclose this information can void your policy. While material change in risk can apply to various forms of insurance, homeowners policies are perhaps most volatile, as it is not uncommon for policy holders (homeowners) to make a change to their residential environment that may indeed present a new level of risk.
The implications of a void contract is of great concern to homeowners, which is why Park Insurance has been quite vocal about this topic over recent years. It all started with our article on the three things that may void your insurance policy, and continued with an addendum as homestay services (Airbnb, etc.) gained momentum in the province. Here in 2019, the time has come for yet another adjustment to the definition of material change in risk for BC homeowners. Today, we will briefly review four common activities that can void your policy, and shed light on a 5th in greater detail.
5 Things That Constitute a Material Change in Risk and How it May Void Insurance Policies for BC Homeowners
1. Adding Your Home to the Short Term Rental Market
The homestay and short term rental (STR) market has grown fast throughout British Columbia, and has provided homeowners with a new source of income to complement their primary earnings, allowing them to pay down their mortgage and even enter other residential investments. However, this lucrative activity (a material change) can backfire and void your policy if you have not reported it to your insurer and/or broker. If this is the case, injury or damage could end up costing you a large fortune. Not only may you need to add a rider to your insurance, you may need to obtain a business license. We recently reported that throughout BC, including Vancouver, Victoria, and the Okanagan, homeowners are now required to hold a commercial license if putting their property on Airbnb and VRBO. Failure to abide by this new law adds yet another complication that can impact your homeowners insurance policy.
2. Vacating Your Home Without Taking Precautions
Most homeowners are surprised to hear about this one. If you are vacating your home for more than four days during the usual heating season and you have not taken reasonable precautions to protect it from the elements, you may be ignoring the small print of your policy. For instance, in the winter, you may be required to prove that you have taken the necessary steps to protect water pipes from freezing or bursting. Consider all that can happen when away from your home for an extended period, from break-ins to spring floods and summertime wildfires. View more on how your vacation could void your policy, should a damage and loss prevention plan not be put in place.
3. SIGNIFICANT HOME RENOVATIONS
Installing a swimming pool in the backyard? Adding a rental suite in your basement? There are wide variety of retrofits, renovations, expansions, and additions that can forever change the risk of damage and injury in the home. Follow this guide to determining when a renovation may void your policy and get in touch with your broker accordingly.
4. starting a home based business
Kudos to your entrepreneurial spirit! There’s nothing like the freedom of working from your own home. That said, you may not have anticipated trading conveniences for a greater level of insurance and liability risk. Standard homeowner insurance polices are designed to cover risks associated with typical activities around the home, not a business per se. A standard homeowner’s policy will likely exclude coverage for properties that are used in whole or in part for commercial purposes. Moving forward, you will need to update coverage to ensure that your home, and business, remain protected. Learn more about the insurance options for your home-based business.
5. A Newfound penchant for Horticulture
Now we arrive at the latest addendum. In Canada, 2018 went down in the history books as the year when recreational cannabis became legal, and 2019 is becoming the year when the reverberating effects are being felt, especially as they apply to residential insurance policies. In October, we provided an article presenting the new risks faced by tenants and homeowners when cannabis cultivation is permitted in the home. These include an increased risk of fire, burglary, vandalism, water damage, mold/mildew growth, and host liability (injuries that can occur as a result of a host sharing marijuana with a guest, including those under the age of 19). If all of the above doesn’t directly constitute a material change in risk, we don’t know what does.
Allow us to reference a recent case that went to the Supreme Court of British Columbia regarding a homeowner’s policy that was voided based on a failure to disclose cannabis cultivation that resulted in a fire. Homeowners claimed they did not recognize the grow operation was an insurance risk. They further argued that their broker failed to “ask the right questions” to ensure adequate coverage during the renewal process. In the end, the Supreme Court of B.C. dismissed their case, citing that not only was such a fundamental change a clear material change of risk, but that it was not reasonable to expect the broker to ask about the presence of a grow-op.
Long story short, if cannabis is being grown in your property, whether you are the owner occupant or landlord, you will need to inform your insurer/broker immediately.
While the above provides insight into the primary material changes that may void your current homeowners policy, it is not an exhaustive list. If you have recently made, or plan on making, a significant adjustment to the environment of your BC home, it’s always a good idea to speak with an independent broker so that you can receive a reassessment of potential risk. Contact Park Insurance today for peace of mind.