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June 28 is National Insurance Awareness Day!

Writer's picture: danlebrundanlebrun

National Insurance Awareness Day was proclaimed by the Canadian Insurance Services Regulatory Organizations (CISRO) “to encourage Canadians to review their insurance policies and to learn more about other types of policies and products that may help protect their financial interests.

 

CISRO recommends that people review their coverage annually to make sure they are not under – or over-insured.

 

Sound simple? If you said ‘no’ you’re far from alone. In a recent study published by The Canadian Council of Insurance Regulators (CCIR) it found that there are worrying gaps in consumer knowledge about the content, limitations and exclusions in home insurance contracts. The CCIR found that:

 

“Although detailed breakdowns of the content, coverage, and limitations/exclusions is included in insurance contracts, CCIR’s review found that there is tremendous variation in the content and quality of information provided to consumers. Some disclosures provided valuable, plain language explanations of coverage; others provided very little, if any specific information.

 

At the same time, insurers often rely on intermediaries to share disclosures with customers, and to solicit and distribute their products, which may result in inconsistencies in terms of the information and level of detail provided to the customer when the product was originally purchased.

 

Knowledge is POWER! Here are some questions to ask yourself and your insurance provider:

 

1.  What type of insurance do I have? Comprehensive, Broad, Basic or No-Frills?

 

(a)  Comprehensive: This is the most inclusive type of policy, covering sudden and accidental occurrences involving buildings and personal property, as well as liability. You would be covered for everything, except for the exclusions specified in your policy.

(b)  Broad: Considered a middle-tier offering between basic and comprehensive coverage, broad policies come with comprehensive coverage on certain items, such as the building, but also with more exclusions for your home’s contents.

(c)   Basic: Also called “named perils,” these policies cover only the basic perils that are named in the policy, such as fire, wind and theft. They are more affordable than broad and comprehensive options.

(d)   No frills: This type of policy offers the least amount of coverage and is designed for homes that don’t meet normal standards for insurability. For example, if your home has structural problems, you may need this type of insurance until you make the necessary fixes and can qualify for a different type of coverage. 


2.  Do I have ‘replacement cost insurance’ or ‘actual cash value insurance’?

 

(a)  Replacement cost insurance covers the lesser cost of restoring items to their original condition or buying new items of similar quality; there’s no deduction for depreciation. In other words, if your four-year-old TV is stolen, the claims payment will be equivalent to what it would cost to buy a new TV with similar features as the one that was stolen. The payment may not be equal to what you originally paid, however, as a similar model may now be less expensive. Your claims payment will allow you to adequately replace your lost items although your premium will be significantly higher.

 (b)  Actual cash value insurance covers the cost of buying items in similar condition to the ones you’ve lost, factoring in depreciation. So, if your six-year-old washing machine is damaged in a fire, your insurance company will determine the current value of that same machine in its used condition and pay you that amount. You’re likely to be charged a lower premium but you will have to cover the difference between the insurance payout and the cost of a brand-new item.


3.  Should I consider raising my deductible? It’ll likely be more affordable to pay more of the cost of a minor repair than to pay a higher premium over time. Also, some insurers offer a ‘disappearing deductible’ feature. The disappearing deductible is an endorsement (add-on) that you can buy to reduce the cost of your deductible over time. It works by reducing your deductible by 20% for every year that goes by without you making a claim until you reach 0%.


4.  Have I made upgrades to the safety and security of my home? If yes, schedule a review with your insurance provider.


5.   Has my home changed in value, been renovated, or have I bought or sold items since my last policy review? The Insurance Bureau of Canada provides a Personal Property Inventory template that can help you document how much your possessions are worth so that you can secure coverage for the full value of your possessions. IBC Personal Property Inventory

 

6.   Has my credit score improved? Allowing insurers to check your credit score could result in a discount on your premium.

 

7.   Will my insurer run my home through a ‘rebuild underwriting system’ to get an idea of actual rebuilding costs? This could reveal that replacing the home might be less expensive than anticipated, so it would be possible to set policy limits lower. Knowing what replacement would actually cost could help to avoid paying for unnecessarily high coverage.

 

8.   In the event of wildfire, does my policy require that I rebuild on my property? Most policies do, unless you pay for a provision that will allow you to build elsewhere. The reality is that there are only so many building contractors in Whitehorse and if we are hit by a Fort McMurray level wildfire, the timeline for re-building will be very long.

 

The Insurance Bureau of Canada has lots of other information and advice. See their resources specific to the 2024 Wildfire Season.

 

Happy National Insurance Awareness Day!

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