Are You Familiar With Your Home Insurance Policy Exclusions?

We often shop for insurance based on the cost of the premium and the types of coverage we need. We rarely pay much attention to exclusions in the insurance policy—particularly if we have taken out “all risks” insurance. However, various exclusions apply to your basic policy, and it is important to be aware of them to ensure you can weather any storm. Here is a brief guide to the most common insurance limits.

Where Can I Find These Exclusions?

To find out about the various limits in your policy, you should consult your policy wording. Unlike your personalized policy, this document contains:

• A list of covered risks
• Limits
• Payment clauses
• The insured’s duty to inform the insurer
• General exclusions

It should be noted that some exclusions can be covered by adding an endorsement to your policy. However, other exclusions cannot be covered in any circumstances, even if you have so-called “all risks” insurance.

Water Damage

Did you know that water damage is the number one cause of home insurance claims? However, most types of water damage are excluded from your insurance policy. Some examples of excluded damage include damage resulting from:

• Water leakage, overflow or back-up that occurs continuously and repeatedly, regardless of whether you are aware of it.
• Rain, snow, or melting snow or ice that leaks through the roof, walls, doors or windows of the building.
• Ground or aboveground water seepage into your building.
• Water damage resulting from the rupture of plumbing fixtures, water containers or any other appliance due to freezing when you are away for more than seven days and/or the building is unheated.
• A sewer back-up.
• An overflowing retention tank (discharge pump that stops working).

It is important to note that certain exclusions can be covered through an endorsement in accordance with the wording of your policy. For example, your broker can add “Water damage—Ground water and sewer back-up” and “Water damage—Aboveground water” coverage for an additional premium.

Gradual Damage

It is important to note that insurers cover damage that is sudden and accidental, i.e., an unforeseen and unplanned event. Gradual damage is therefore excluded from insurance policies. This exclusion is well-founded: insurers do not want to cover normal wear and tear, since this is a certainty rather than a risk. This is also true of repeated damage.

Statutory Conditions

If you live in an “older” neighbourhood, you may be affected by statutory conditions, which apply to the reconstruction and renovation of your residential building and outbuildings. You will need to contact your city’s urban planning department to find out more about these conditions. If you purchase a new residence, the notary or real estate broker is required to mention this to you. Here are some examples of statutory conditions:

• Your aluminum siding needs to be replaced by brick siding, which is more expensive. In the case of a claim, you would need the “statutory conditions” endorsement for the insurer to pay the difference between the two materials. Without this endorsement, the insured is responsible for paying the difference.
• There is a fire at your residence, and over 50% of your home is damaged according to the municipal assessment. Certain conditions require that you demolish and rebuild your entire home. The basic insurance policy does not cover this type of situation: the home must be a total loss for the insurer to pay for demolition and reconstruction. You will need to negotiate with your insurer to add this coverage to your policy before this type of event occurs. Some insurers may refuse to add this coverage, depending on the nature of the conditions.

Earthquakes

Direct or indirect losses resulting from an earthquake are excluded from the basic insurance policy. The only way to be insured for this type of damage is through an endorsement. Note: this addition to the basic policy naturally involves an additional premium. In addition, the deductible for this risk is higher (between 4% and 5% of the coverage amount). Some insurers only cover the building, while others include the building, movable property and outbuildings. Learn more about why this coverage is important in this article.

Of course, these are just a few examples of the many exclusions that may be found in an insurance policy. For a more exhaustive list, check your policy wording or ask your broker! Don’t hesitate to contact your broker for more information about policy exclusions and to check whether endorsements are available so you have the coverage you need.