Archive for June, 2011

How does my Policy Really Work?

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The following definitions explain a few of the major building blocks of home insurance.

ACTS OF GOD

Acts of God are considered natural disasters that could not have reasonably prevented or avoided. Most standard forms cover the hurricanes and tornados.

Lighting and hail are classified as named perils. Coverage’s for flood or earthquake, not automatic in standard policies, may be available in most cases for an additional premium. Flood coverage is likely to be more and diffi cult to obtain in areas susceptible to these perils.

DEDUCTIBLES

Deductibles are the amounts you pay to cover a loss before you are entitled to payment by your insurer. Just about every policy has a deductible, usually ranging from $500 to $5000. Deductibles are designed to discourage small claims, since the purpose of insurance is to protect you from catastrophic losses not minor inconveniences.

EXCLUSIONS

Quite simply, exclusions are items, perils or situations that are not covered by your policy. Your insurer might exclude anything from long-term mould damage to natural disasters, computer data or high-speed watercraft. Other common exclusions include avoidable damage from termites or rodents, water seepage, frozen pipes, intentional damage and high-value items such as art and jewellery.

LIABILITY–IN THE HOME AND AWAY FROM HOME

Although liability insurance is part of your homeowner policy, it also protects against third party claims for bodily injury and property damage caused (unintentionally) by you when you are away from home.

DEPRECIATION

Depreciation is a measure value of an item over time, taking into consideration wear or obsolescence.

VALUATIONS

Your insurer will likely want to conduct a valuation of your home in order to set the right replacement value and coverage level. Unlike an appraisal, this does not determine the market value of the property but rather the likely cost to rebuild the dwelling and other structures to original standards in the event of a complete loss.

OVERCOMING INSURANCE-ESE

Insurance involves technical terms that can be baffling. These terms help to make policies precise but don’t always help to make them clear. Don’t be afraid to ask your broker to explain

 

What if My Home is Unoccupied?

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Your insurer considers an unoccupied dwelling riskier than an occupied one.  Depending on how long you are away from your home, you need to make arrangements to ensure your dwelling is checked regularly and you may need to inform your insurer.

WHEN AWAY FOR A SHORT TIME

If you will be away from your home for fewer than 30 days you do not need to inform your insurer. However, you do need to arrange for a competent person to look in on your home every day or two to make sure that everything is in good order. If a food freezer and a broken furnace result in frozen pipes and water damage that went unnoticed for several days, your insurer could refuse to cover the costs if no one was looking in on the house.

FOR LONGER ABSENCES

If you are away for more than 30 days your home is considered “unoccupied” because you plan to return. In this case you should contact your broker to determine whether you will need to inform your insurer and obtain a special permit to leave the house empty. You will still need to arrange regular checks on the property, and you might want to consider draining water pipes and installing a good security alarm.

IF THE PROPERTY IS EMPTY

A fully vacant property is one with no occupants and no contents. This may occur if a house sale is delayed and the property remains vacant until sold. In this case you need to obtain a vacancy permit from your insurer. This permit will maintain most of your coverage, except for risks associated with vacancy such as broken water pipes, broken glass or vandalism.

TRAVELING?

Personal items covered by your home, condo or tenants insurance are also covered when they are temporarily away from these locations, for example, when you are traveling. Items belonging to a dependent child temporarily living outside your home to attend school, for example, are also covered. Home-business items, however, require additional coverage.

 

How do I Choose the right Policy for My Home?

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Make sure you purchase a policy that reflects the unique qualities of your home, its contents and the people who live there.

Your home should be insured from the moment you take legal ownership – even if it is under construction. Your broker’s expertise is particularly useful at this stage when you really need to match policy features with needs.

Here’s a primer to get you started:

HOME INSURANCE COVERS THE BUILDING, ITS CONTENTS AND LIABILITY

There are usually three parts to your homeowner’s policy. For condominium owners and tenants, just the contents and liability coverage’s apply:

1. Building insurance covers the main dwelling, garage and any out-buildings.

2. Contents insurance covers the cost of replacing furniture, carpets and personal possessions. Valuables such as art, jewels and furs may require additional coverage. Note that most contents are insured even outside the home, for example, if stolen while you are on a trip.

3. Liability policies insure against the costs incurred if, due to negligence, you are held responsible for an act causing injury or property damage to others.

POLICIES RANGE FROM COMPREHENSIVE TO “BARE-BONES”

You can save money by scaling down your policy but be careful not to underinsure.

There are three general policy categories from which to choose:

1. Comprehensive policies cover the building and its contents for normal risks to which a home is exposed.

Some risks will be excluded, such as acts of terrorism or flooding.

2. Broad policies takes a blended approach by providing all risk coverage on big items as your dwelling and named perils coverage on contents.

3. Basic/Named Perils policies help you save by letting you carry more of the financial risk. You will be covered for just the perils that are specified, for example, fire, lightning and explosion.

TAKE THE TIME TO UNDERSTAND WHAT’S COVERED AND WHAT ISN’T.

Don’t assume that once you have a policy you are covered for everything. Ask your broker to explain the details.

WHY ARE INSURANCE VALUATIONS ON HOMES INCREASING?

Most comprehensive homeowners’ policies guarantee the replacement of your home and contents in the event of a loss. In order to provide that guarantee, the value of your home must be determined at the time the policy is purchased, and the policy must adequately cover your home to that value

 

Does having a Home Based Business affect my Insurance?

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The short answer is yes, and the best way to know what is covered is to talk to your broker.

More and more people are starting home-based businesses, for everything from marketing home-made products to keeping a home office for a consulting business.

From an insurer’s perspective this adds new types of risk to your home, and therefore, may require additional insurance.

RESIDENTIAL POLICIES PROVIDE LIMITED COVERAGE ON BUSINESS PROPERTY

Anything you use to carry on your home based business is subject to the limits of insurance as well as your other possessions and some things might not be covered at all.

• Dollar limits apply on business property, computer and software. This limit might be as low as $2000 in total, which would not cover even the most basic home office.

• Limits on what is covered might completely exclude any special equipment that you keep in your home for business purposes.

• Items that are covered for business use are only covered while in the home. So, for example, if the computer you use for your home-based business is stolen while on a trip, it will not be covered.

SOME HOME BUSINESSES MAY REQUIRE ADDED LIABILITY INSURANCE

The operation of your home-based business might mean that you have more people coming and going, and therefore, more risk associated with the activities in your home. If this is the case, not only will a basic liability limit of one million dollars likely not cover you, some insurers might refuse to cover a third party claim by a customer or employee who is injured in your home. If you think this situation applies to you, be sure to tell your broker about your home business and make sure your insurance company is made aware of your home-based business activities.

CONSIDER AUGMENTING YOUR POLICY TO GIVE YOU MORE SECURITY

If you have high value or business items that exceed the limits in your policy and you want to have them separately insured, you will likely have to have the items valued by a professional appraiser so that the insurer knows what level of coverage to set. Depending on the type of property and how much information you can provide, an estimate of value can be determined. There is a fee for this service.

LET YOUR BROKER KNOW

If you participate in a timeshare using your home, or you rent out your cottage, you must tell your broker. These activities represent an increase in liability and risk to the property and may require additional insurance.

 

High Value Items – Contents?

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Knowing the value of the contents of your home is vital to being properly insured. Your broker can help you find the tools and resources you need.

Take the time to ensure that your most precious things are protected.

MOST POLICIES LIMIT PAYMENTS FOR INDIVIDUAL ITEMS AND CATEGORIES

It is common practice for policies that cover personal property to have special limits on the amount that will be covered for individual items or items within specific categories. If you require the full replacement or market value to be insured, you will have to arrange for additional insurance and pay the appropriate premiums.

The rationale behind this practice is to ensure that everyone is provided with a base level of insurance at reasonable rates and that those with high-value items cover their own extra costs. Examples include:

• Jewellery, watches, gems and furs

• Coin collections

• Silver and gold ware

• Money or bullion

• Business property

A THOROUGH HOME INVENTORY WILL TELL YOU WHERE YOU STAND

One of the best ways to know if your belongings are covered is to do a complete home-contents inventory and review it with your broker. A home inventory will help you itemize your losses if you need to make a claim, and it is a good way to test if your overall coverage level is right. You should include a list of contents, a brief description or photograph and an estimate of the replacement value of each item. Consider making a video of your rooms, cupboards and shelves and store it off-site. You can also take advantage of pre-made inventory tools such as the IBAC Home Inventory Form available online, at www.nbinsurancebrokers.ca.

WITH A PROFESSIONAL APPRAISAL, YOU CAN ARRANGE THE EXTRA INSURANCE YOU NEED

If you have high-value items that exceed the limits in your policy and you want to have them separately insured, you will likely have to have the items valued by a professional appraiser so that the insure knows what level of coverage to set.

Depending on the type of property and how much information you can provide, an estimate of value can be determined. There is a fee for this service.

TIPS ON FINDING A PERSONAL BELONGINGS APPRAISER

Start by asking your broker for a recommendation. Make sure that the appraiser you hire is professionally accredited, has relevant experience and will provide a written report that meets the standards of the profession.

INVENTORY

Why should you take an inventory of your home or apartment? An up-to-date inventory will help you to:

Purchase enough insurance to replace your possessions

Get your insurance claim settled faster

Consider adding pictures of your possessions, which can be done easily with a digital camera or walk through your home or apartment and videotape the contents. Remember to open closets. One advantage of videotaping if that you can narrate what you are filming.

And remember to keep your inventory away from your home.