In our last blog, Home Insurance Q&A Part 1, Jadyn of Agnew Insurance broke down their company’s policies and coverage on certain factors that can affect your insurance policy. This is a friendly reminder to review your policy and update any changes. ie. capital upgrades to your home, any large purchases, home security systems etc.
Q: How can I reduce my premium? (home upgrades, security etc.)
A: The million-dollar question! There are ways for homeowners to reduce their premiums and make upgrades to ensure their home is less of a risk. Here is our Top 5:
- Roof and siding replacement is one that can provide savings to a homeowner. Aged, deteriorated roofs/siding provide risk for leaks, and damage to the interior. The older the roof/siding, the more expensive your home insurance will likely be. Replacement with weather-resident products is recommended.
- Home security systems can provide savings to your home insurance. Third party monitored alarms with heat and water sensors as well as fire and burglary protection are the most recommended.
- Homes with wood heating pose a higher-risk, replacing those sources with other heat sources can help your premium.
- Plumbing replacement can help to prevent water damage in your home, replacing old plumbing, installing an automatic water shut-off system, centrally monitored water sensor system, sump pumps and backflow prevention devices can aid in premium reduction.
- Increasing your deductible can help to reduce your premiums. It is important to consider the impact of this increase. While it can help to decrease your payment now, would you be comfortable paying that deductible in the event of a claim?
Q: Do your premiums always go up when there is a claim even if it’s not your fault? For example, hail or a fire from a neighbouring home?
A: In most situations, a claim on your home insurance policy will affect your premiums. We always encourage clients to consider the extent of the damage, their deductible and the impact the potential impact to your premium it could have prior to moving forward with a claim. Sometimes it makes more sense to pay for a claim out of pocket to avoid future increases. If a claim is deemed to be the fault of another party, for example your neighbor, there is possibility that the cost of the claim can be subrogated to (taken over by) the at fault party. The client would likely be required to pay the deductible up front to trigger coverage for damage to their property at which may be reimbursed if liability is accepted by another party. Some companies do offer a Claims Forgiveness feature in their policies that allow the first claim on the policy to be forgiven with no impact to premium, if the client has been claims free for a period of time up until that point.
Q: What is a normal deductible on house insurance and can I choose to increase that in order to reduce my monthly payments?
A: The deductible for your home can typically range from $1000 to $5000, and usually depends on the replacement cost value of your home. You are welcome to choose a higher deductible in order to lower your premiums, however, you should feel comfortable knowing you would need to pay this deductible in the event of a claim.
Many companies offer a disappearing deductible feature on their policy meaning every year you are claims free your deductible may decrease by a set amount. This feature can allow you to increase your standard deductible to lower the premium but only be required to pay a lower amount in the event of a claim.
Q: What is the process of making a claim and how long can it take?
A: Every company’s claim process will look a little different. However, the most important step is to report the claim as soon as possible. Most companies have a direct line you can contact to submit a claim. Others have several options for submitting a claim, for example, through an Online App, through their website, or by calling your local agency/advisor. A claims adjuster will then be assigned to your claim and request further documentation, statements, photos, etc. regarding the claim. From there, it really depends on the severity of the claim, the time it takes determine the fault if necessary, if repairs or appraisals are required, the time it takes to make repairs, and then issue the payout. With the recent lack of labour in the automobile repair industry and home repair/improvement industry, claims are typically taking longer to settle.
Q: If my home needs repairs, do I get to choose who does them?
A: Most companies claim departments will have a list of preferred vendors that they work with in the event of a claim. You have the option to work with the preferred vendor or select your own, however, you would likely need to receive approval from your insurance company to do so.
Q: When should I start shopping for home insurance? Should I speak to my insurance broker prior to shopping for a home?
A: As soon as you can! The more notice a company has to place coverage the better. Most quotes are only valid for 30 days, however, if there is an element of the home that may require approval by Underwriting, or need to be placed in another market, it is best you give your insurance provider as much time as possible to ensure they can put coverage in place in time for when you sign all the paperwork with your lawyers and realtor.
Q: How is home insurance different from mortgage insurance?
A: Home Insurance provides coverage for your physical dwelling and contents. Damage to your roof, your basement, your siding, your personal belongings would be covered under a home insurance policy. Mortgage insurance provides coverage for your mortgage itself. In the event you pass while your mortgage is still outstanding, mortgage insurance provides coverage to ensure the payments continue or is paid out in full upon death. It is important for all homeowners to have mortgage insurance if they have a mortgage in place. It is also extremely important for a homeowner to explore the options of mortgage insurance between lenders/banks and insurance providers and chose the policy best suited for them. Be sure to compare who has control of the policy, who receives the benefit in the event of death, portability of the policy if you refinance, what happens if your health deteriorates and you change banks, the underwriting process and what is covered in terms of critical illness and disability.
Q: How do I prove what I owned and how much they cost if they are damaged in a fire? How do I know I’ll be covered for the full amount?
A: In the unfortunate circumstance of your home and contents being a total loss, meaning the cost to restore your property to its pre-loss condition is more than its value, insurance companies will typically pay to replace the dwelling itself as well as the contents. It is important to ensure you have replacement cost coverage on both, otherwise you will only be paid on actual cash value for your property. With a total loss resulting from a fire, many clients ponder “how will they know what I actually had if it is virtually gone?” and this is a fair question. Clients will typically be paid out on the replacement cost value up to the limit on the policy. This is why it is important to continually review your policy with your provider to ensure that the limits are sufficient. Some policies do offer a Guaranteed Replacement on dwellings however, in which in the event of a total loss would cover the actual value at the time of the loss.
As an advisor, I often encourage my clients to take frequent videos and photos of their homes displaying the contents and high-value items. Keeping a digital copy of receipts, bills of sales or appraisals of higher value items it also recommended so that they can be retrieved, and as mentioned, doing regular reviews of your policy to ensure that any items you have purchased will be covered.
Q: What are some items you can insure but wouldn’t normally think about it?
A: Everyone has things in their homes that not everyone has or finds as valuable as them. While insurance does not cover the sentimental value of articles, items like wine and spirits collections, jewelry, artwork (sadly not your children’s finger painting), video games, collectible cards, spare automobile parts, garden tractors, golf carts, that hold material value are often forgotten in the insurance process under the assumption they are covered under your content limit. It is important for clients to review the limits of their insurance and take inventory of their items. It is always best to confirm with your provider if those particular items require additional insurance.
Q: What are the costliest claims?
A: Water damage claims, and weather-related claims are typically where we see most of our clients make claims due to significant damage. Especially with the increase in Alberta of wild weather, combined with the cost of materials to replace and repair your property, these types of claims can add up quickly. Claims like these, particularly water damage can cause damage not only to the visible property but behind the walls to your electrical, furnaces, appliances, your personal belongings, drywall, flooring which will not only need to be replaced, but torn out, remediated etc. It is important to ensure you have the proper coverage to cover these types of claims as well as coverage in the event you are displaced from your home due to the loss.
Q: How much does it cost to insure one-off items such as a wedding ring?
A: Depending on the value of the item, high-value, special articles like a wedding ring, bicycles, artwork, wine collections, can be covered under the limits of a policy or may be required to be individually scheduled on a policy and insured separately. It is very important that homeowners inquire about the built-in limits within their policies for items like these to ensure the full value is covered. If not, it is highly recommended to schedule these articles on their own. Again, depending on the value of the item, and number of items you have, cost can vary from $100/year to $600/year per item and beyond. Most insurers will request a bill of sale, receipt and/or appraisal for certain items, so it is important to file these documents at the time of purchase.
Q: How do I choose an insurance provider to insure my home?
A: All clients are going to consider the premium when shopping for home insurance. However, we always encourage our clients to consider the benefits of each provider beyond the premium. Your home is likely going to be your largest asset you own, why would you not protect it properly? Typically, the less you pay for insurance, the lower the limits and less coverages you have to protect your home against loss and damage. Beyond cost, clients should consider the experience they are going to receive with their provider.
Important questions to ask yourself when shopping for insurance: How long do you need to wait on hold to make a change or submit a claim? Is there a local office in your area where you can meet with an Advisor face to face? Do you have the ability to speak to the same Advisor every time you call? How often is your policy going to be reviewed by an Advisor? What else does the provider offer in terms of your holistic protection? Are you able to protect your home, vehicle, business, life, income, and savings under the same roof? How much is the savings worth if your provider does not offer these benefits to you as a client. Food for thought when leaning towards choosing the least expensive option for protecting your home.
We want to say thank you to Jadyn for taking the time to provide these in-depth answers to our questions. If you have any additional questions about home insurance please reach out and we’d be happy to help you find the answers!
Jadyn Agnew, Associate Insurance Advisor
Agnew Insurance Ltd., Co-operators