ABC's of Buying Homeowners Insurance

By Vancouver Sun

Home insurance comes in many different shapes and sizes, but the most important thing about it is to get the replacement value correct, a Vancouver insurance expert says.

“The cost to repair or rebuild a house can be substantially different from the cost of purchasing it, so establishing a correct value is very important,” said Patricia Stirling, director for underwriting at BCAA. “I think the same principle can apply to renters because it’s so easy to overlook a lot of your things. It’s only when it’s all gone that you realize you forgot about your Christmas decorations or your roller blades — those sorts of things that are in a box in the closet.”

There are three main types of home insurance — homeowners’ policies for detached single-family homes, renters’ policies and policies for people who live in a strata property.

Homeowners’ policies are for people who own and live in their own single-family house. These policies insure both the building and the contents in a comprehensive package, Stirling said.

Renters’ policies insure personal property, such as clothing, TVs, furniture or kitchen equipment, Stirling said.

The most complex type of home insurance is a condominium owner’s policy, which covers personal property such as a renters’ policy. Typically, building insurance is paid through an owner’s condo fees.

“You really need to take the time to dig a bit more,” Stirling said. “I would want to sit down with my agent and ask about all of the things I need to think about, (such as) all of the extra coverages that are available or ... what questions to ask at the strata meetings.”

All three types can include personal liability insurance, which covers personal actions, Stirling said.

“A very important component of buying any type of insurance is the liability aspect,” Stirling said. “You might be out golfing and you hit someone with the golf ball and they sue you. You really want to make sure that you’ve got homeowners,’ renters’ or condominium insurance, because these come in a package that includes comprehensive personal liability coverage.”

Replacement costs to rebuild a home can be calculated by an insurance agent, but figuring out the cost of replacing your belongings can be more difficult. Stirling said people often underestimate the cost of things such as refitting a kitchen.

“If you had to buy every single food item the first time around again, you’d find it’s a substantial bill,” Stirling said. “It’s really best to go through each room and use what’s called an inventory booklet ... and really be thorough and look at everything.”

Natural disasters like earthquakes and water damage are usually not covered in an average policy, but riders can be purchased. They will generally have a deductible based on the percentage of the amount insured, Stirling said.

“If it’s five per cent, you can do the math. (The deductible) would be $2,500 for a $50,000 earthquake insurance package,” Stirling said.

A recent J.D. Power and Associates’ Canadian Home Insurance Study found that only 56 per cent of home insurance policy owners in B.C. have earthquake insurance, while only 37 per cent of Canadians purchase flood insurance.

“Home insurance customers who discover the limitations of their basic coverage after a major event occurs, have waited too long. With more than two in three Canadian home insurance customers uninsured for these catastrophic events, many may find themselves in a lengthy discussion with their insurer in the event of a disaster, such as a flood or earthquake,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “In the case of flood claims, it is a common misperception among homeowners that their basic home insurance policy provides this coverage.”

Stirling said water damage has surpassed fire damage in the past decade in terms of claims. “Water represents more than 50 per cent of what insurance companies are paying out in claims,” Stirling said. “Your parents might have had a rec room in the basement with vinyl floors and the kids’ sofas and whatnot. Today, the downstairs isn’t a rec room, it’s a beautiful media suite with hardwood floors and flatscreen TVs. When water occurs today, our homes tend to be built of more expensive things and with more finished basements, so the water losses are more expensive.

“Always check with your agent to see if you have the broadest water coverage available.”

Stirling said flood damage — from a tsunami, for example — is never covered. However, a sewer backup that occurs as a result of a flood might be covered. And water damage from a plugged toilet or broken water tank is usually covered.

“It’s definitely a conversation that you want to have with your insurance agent,” Stirling said.