lautorite.qc.ca Choosing Home Insurance
About the AMF The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec s financial industry. Its mission is to protect the public by applying the laws and regulations that govern insurance, securities (for example, stocks and bonds), deposit institutions (other than banks) and the distribution of financial products and services. The AMF has published four brochures on insurance. This one will help you choose the right home insurance and make it easier for you to file any claims you may have in the future. The other brochures are: Choosing Auto Insurance, Choosing Life and Health Insurance and Choosing Travel Insurance. NOTICE The AMF, its management and staff are not liable for the consequences of any errors in this brochure, which is provided for your information only. The AMF does not offer any advice on the purchase or use of specific financial products or services. The information in this publication is current as at July 2012. This brochure is available on the AMF website. Legal deposit Bibliothèque et Archives nationales du Québec, 2012 Legal deposit Library and Archives Canada, 2012 ISBN 978-2-550-64911-3 (Print version)
Table of contents Choosing home insurance...3 Five steps to choosing the right home insurance...5 1. Evaluate your needs 2. Choose your coverage 3. Decide whether you need additional protection 4. Shop around 5. Buy home insurance that meets your needs Four important things to know about home insurance... 16 1. Renewing your home insurance 2. Cancelling your home insurance 3. Are you having trouble getting insurance? 4. Are you eligible for replacement cost? What to do in the event of damage or loss... 18 What happens if you have a dispute with your insurer... 19 Choosing home insurance Your insurer can offer you protection against certain risks Home insurance provides homeowners and tenants with financial protection against damage or loss. Besides covering your property, it can protect you in case of accidental damage caused to others. Insurance policies are not all the same There are many products and endorsements (additional protection) on the market. How can you know whether your insurance policy provides all the protection you need? The following five steps will help you find out and allow you to understand what your insurer offers. Choosing Home Insurance 3
You will probably buy your home insurance from an insurance agent or broker. An agent sells the products of one insurance company while a broker can offer the products of multiple insurers. Whether he is an insurance broker or agent, your representative will evaluate your needs and recommend the best coverage for you. Do you know what is covered and what is not? Which of the following items are usually covered by a homeowner s policy? Your outdoor pool Your home theatre Your Jean-Paul Lemieux painting Your collection of X-Box games Your new spouse s property Your dog Not covered. You need an endorsement. Covered. Covered, but there are limits.* Covered, but there are limits.* Not covered. Your spouse must take out insurance separately unless you add his or her name to your policy and increase your coverage. The value of your dog is covered in the event of a loss. Damage caused by your dog to others is covered but there are exceptions. *See limits on page 10. Are you prepared for the unexpected? You walk in from work to find that your dishwasher has flooded the kitchen. Worse yet, your neighbours one floor below knock on the door to tell you that the water has damaged their ceiling and even their furniture 4 Autorité des marchés financiers
Five steps to choosing the right home insurance The following five steps will help you choose the home insurance you need. 1. Evaluate your needs What do you own? Taking an inventory of what you own is the best way to determine how much home insurance you need. List each item and its approximate purchase price. In another column, jot the replacement cost. How much would it cost you today to replace each item if it were stolen or damaged? The total of this column is how much insurance you should take out. An inventory is useful in case of damage or loss If you keep your inventory in a safe place, you will be able to show it to your insurer in case of damage or loss. Complete the inventory with photos or a video and proofs of purchase. Choosing Home Insurance 5
Find out the cost of rebuilding your home You should know that in the event of damage or loss, homeowner insurance policies offer two types of compensation: cash value on the day of the damage or loss (the depreciated value of your home) and replacement cost (the cost of rebuilding your home). Don t rely on your home s market value to determine the replacement cost because it may not be enough to rebuild your home from A to Z. Although the best thing to do is to hire a professional appraiser, most consumers tend to take the advice of their insurance representative, who can help with the appraisal and then suggest an appropriate coverage amount. What does guaranteed replacement cost mean? Mark has insured his house with AllNew Insurance for $200,000, the amount suggested by his insurer following an appraisal of how much it would cost to rebuild the home. Two months later, the house burns down due to an electrical fault. It s a total loss. Professional appraisers say it will cost $220,000 to rebuild the house. If Mark had taken out guaranteed replacement cost coverage, he would have been able to rebuild his home and receive full compensation from his insurer. 6 Autorité des marchés financiers
2. Choose your coverage Choose the amount of coverage Are you a tenant? It s up to you to decide how much you want to insure your personal property for. This will be easy to figure out if you have a complete inventory of your belongings. Remember that the higher the coverage amount, the higher the premium. Most insurers will require that you purchase at least $15,000 of coverage. They do this to cover the cost of issuing the policy and because many tenants tend to underestimate their insurance needs. If you had to replace your appliances, kitchen, bedroom and living room furniture, computer, electronics and video games, you may quickly find that $15,000 is not enough. You should also include the cost of your clothing, bedding, cookware and sports equipment. Are you a homeowner? Your representative will advise you on how much coverage you need for the house and then suggest an amount for your personal property. To help you decide if the amount is sufficient, the representative will ask if you own antiques or luxury items. An inventory of your home s contents may also be helpful to make sure that you have enough coverage for your personal property. Student insurance If your child leaves home to pursue full-time studies and is still a dependant, your policy covers his belongings and his civil liability. Talk to your insurer to find out if there are conditions and the amount of the coverage. Choosing Home Insurance 7
Are you a condo owner? The building and common areas are covered by the condominium insurance policy. What s left for you to do is to decide how much coverage you need for your personal property. Your representative will also suggest an amount to cover improvements made to your home that are not covered by the building s insurance. Make sure it is enough to cover such improvements as the floor covering added last year or the new kitchen cabinets. Do you have too much coverage? In home insurance, you don t need coverage that exceeds the value of your possessions because you will have to prove the loss in the event of a claim. This means you won t be able to claim more than the value of your loss. Choose between basic and comprehensive coverage Basic coverage offers protection against a limited set of perils listed in the policy. These typically include: Vandalism Wind storms Fire Water damage Explosions Theft or attempted theft Transportation accidents that damage your belongings BASEBALL IN THE LIVING ROOM Your two kids start playing baseball in the living room while you re sleeping. Your brand new home theatre gets hit by a curve ball. The $2,200 damage will be covered if you bought comprehensive coverage for the contents but not if you only have the basic form. 8 Autorité des marchés financiers
The comprehensive coverage protects your home and belongings against all risks. Regardless of your choice, you will have to deal with limits and exclusions. For example, flooding is a risk that is excluded from both types of policy. A spoiled vacation On vacation in Cape Cod, Cassandra doesn t realize that her dog is running on the beach after breaking free from his leash. Suddenly, she hears a cry: The dog has bitten a child s hand. The father threatens to sue Cassandra. Choose the amount of coverage for civil liability You can be held liable for damage accidentally caused to others. Civil liability insurance can be very useful when you consider the financial consequences of a simple accident. Insurers generally offer coverage ranging from $1 million to $5 million. How much you take out depends on your needs. Do you have children? Do you travel outside the country often? Do you have a dog? Your representative will suggest an appropriate amount based on your lifestyle, but ultimately, the decision is yours. Did you know? Water damage,* fire and theft are the three main causes of claims in Québec. Source: Insurance Bureau of Canada *See insert on water damage on page 12. Choosing Home Insurance 9
3. Decide whether you need additional protection Pay attention to limits Your representative should check if you have possessions that could be subject to limits in your policy and suggest additional insurance (endorsement) if necessary. The amounts of the limits can vary from one insurer to another. The table below shows some of the limits suggested by the Insurance Bureau of Canada, which represents most of the private insurers in the country (insurers may have higher limits). Limits applicable at all times (theft included) Cash $200 Lawn tractors and snow blowers $5,000 Boats $1,000 Software $1,000 Pets $1,000 Business equipment $2,000 Wine ($100 per bottle) $5,000 Limitations applicables in case of theft only Jewellery $1,000 Video games $1,000 Works of art $5,000 Bicycles $1,000 This is not a complete list. Take the time to look at the policy with your representative to find out which items have a limit. Do you have special belongings such as a collection, antiques or any luxury items? Find out whether they will be sufficiently covered in the event of a loss. If not, your representative can offer you additional coverage in the form of an endorsement. 10 Autorité des marchés financiers
Do you have a home office? You should know that your business equipment is usually only covered to a $2,000 limit. If you are self-employed, you should consider purchasing additional insurance to cover all your belongings, at home and away from home. You should also take out civil liability insurance. Do you own a cottage or a boat? Your cottage is a separate property that needs its own insurance. Contact your insurer. Your policy sets a limit on boats or pleasure crafts ($1,000 or more depending on the insurer). However, if your boat exceeds a certain number of feet or horsepower, you will have to buy additional coverage, especially civil liability. Call your representative to find out the limits in your policy. Important exclusions Some property like pools and spas in your backyard are not covered. Some risks are also excluded such as earthquakes, oil spills and leaks. Not all water damage is covered; see the insert in this regard on the next page. Your representative may offer you various endorsements: - To add coverage to your policy - To fully or partially eliminate some of the exclusions in your policy For example, he may suggest an above-ground pool endorsement or an earthquake endorsement. The scope of the coverage and choice of endorsements can differ from one insurer to another. There are exclusions for which you cannot obtain coverage, for example, flooding, landslides and losses due to war or terrorism. Choosing Home Insurance 11
Water damage Water damage is the number one claim in the country but not all such damage is covered. Your home insurance covers damage caused by plumbing problems (for example, a dishwasher pipe breaks) and broken water mains (for example, a city water pipe breaks and floods your basement). However, you usually need an endorsement to cover water infiltration (for example, seepage through the foundation in spring) and sewer back-ups. You cannot get flood coverage. This means damage caused by overflow from a waterway (a wave, tide, tidal wave, tsunami, flooded river or other body of water). DID YOU KNOW? Exclusions are risks not covered by your insurance policy. 4. Shop around Prices can vary significantly from one insurer to the other. That s why you should shop around for your insurance every year. To avoid misunderstandings, make sure to explain that you re only looking for a quote. Factors that influence premiums Whether you are a tenant or a homeowner, the premium charged by your insurer will depend on many factors, including the following: The number of rooms The year built Main heating (wood, electricity, etc.) system, auxiliary system and proximity to a fire hydrant The selected coverage 12 Autorité des marchés financiers
How can you pay less? You can increase your deductible. For instance, if you raise your deductible from $250 to $500, the premium will go down. However, you have to be prepared to pay this amount in the event of a loss. Make sure you evaluate your possessions properly. You don t need more coverage than they are worth. Insurers will often offer discounts if you buy both auto and home insurance from them. Find out if installing an alarm system entitles you to a discount. Compare apples with apples While home insurance premiums can vary a lot among insurers, make sure you re comparing the same coverage. The basic form costs much less than the comprehensive form. The insurance amount and endorsements you choose also play a big role in determining the premium. BE FORTHCOMING IN YOUR DECLARATIONS Did you fail to mention that you have a home office or that you made two claims last year? You may think that you ll pay a lower premium but this could be a costly assumption. The insurer could refuse to compensate you even if the claim has nothing to do with your omission. The insurer can even decide to cancel your policy. Same place, different premiums Carol and Julia both live in the same building, i.e. an apartment in a suburban duplex. They purchase insurance of about the same amount so shouldn t they pay the same premium? The answer is no. Carol s insurer gave her a discount because she is over age 55 and her apartment has a central alarm system. Julia s policy has an office equipment endorsement and she chose a smaller deductible. Choosing Home Insurance 13
5. Buy home insurance that meets your needs You ve found the home insurance that you need. Before buying: Find out whether your insurer and its representative are registered with the Autorité des marchés financiers. Call the AMF Information Centre or check the Register on-line at www.lautorite.qc.ca. Make sure the insurer has answered all your questions and reviewed all your needs. Confirm the insurance amounts and coverage selected. 14 Autorité des marchés financiers
HOME INSURANCE CHECKLIST Does the coverage meet your needs? Did you select the basic or comprehensive coverage? What is the price difference between the two? How much is the deductible? How much will your premium go down if you increase the deductible? Are you eligible for other discounts? Do you have personal possessions that are subject to a limit in the policy? Are the belongings of everyone living in your home covered and what about their civil liability? How can you cover your pool, spa, sauna or home office? Do you have replacement cost insurance? Do you need coverage for water damage (e.g. sewer back-up or seepage through a window or roof), earthquakes, oil leaks or spills? Have you answered all your representative s questions? ARE YOU PLANNING MAJOR RENOVATIONS? TELL YOUR INSURER Additional exclusions may apply when a building is under construction (for example, broken windows and vandalism are not covered). You may have to review the coverage or coverage amounts. Choosing Home Insurance 15
Four important things to know about home insurance 1. Renewing your home insurance Home insurance is not automatically renewed. Make sure you receive a renewal offer before your policy expires. When you do, look to see whether there are any changes to the policy (premium and endorsements) but also check whether your needs have changed. Have you, for example, acquired more possessions, renovated your home or added a home office? If you haven t received a renewal offer, contact your representative or insurer. If you don t want to renew your policy, notify your insurer in writing before it expires; otherwise, you may have to pay a penalty. 2. Cancelling your home insurance You can cancel your policy at any time and for any reason simply by informing your insurer in writing. The cancellation is effective as soon as the insurer receives the notice. You will then have to pay a penalty that varies based on the time remaining on your policy. Your insurer can also cancel your policy but must give you a 15-day notice to this effect. No penalty applies in this case. 16 Autorité des marchés financiers
3. Are you having trouble getting insurance? There could be many reasons: Your home is old, it s not renovated, you ve filed a lot of claims or you ve had trouble paying your premiums. There is no law requiring an insurer to sell you insurance. However, the Insurance Bureau of Canada has set up a mechanism for providing access to home insurance and can help you in this regard. 4. Are you eligible for replacement cost? Most insurance policies state that if property is damaged following a covered loss, you are entitled to replacement (unless it can be repaired). To find out whether you are entitled to replacement cost, read your policy or call your insurer. However, replacement cost does not always apply, for instance, if you re not replacing the property in question or if it cannot be replaced (work of art, antique). In such cases, you will be entitled to the value as of the date of damage or loss, i.e. replacement cost less depreciation. Are you moving? Notify your insurer! If you re moving, tell your insurer ahead of time to make sure your coverage follows you to the new address. If you re leaving your home permanently, for example, when you re moving but haven t yet sold your home, important exclusions apply. Ask your insurer. If you re leaving for four consecutive days or more during the heating season, for instance, for vacation down south, you should take certain precautions. Ask someone to check the heating system daily or shut off the water, in which case you must also drain the pipes and any appliances that could be damaged by frost. Your insurer may refuse to compensate you if you don t take these precautions. Choosing Home Insurance 17
What to do in the event of damage or losse? In the event of damage or loss, notify your broker or insurer as soon as possible. To be compensated, you have to provide your insurer with all the necessary supporting documentation (receipts, invoices, user guides) to demonstrate your loss. Lastly, you will have to answer your insurer s questions concerning the circumstances of the damage or loss. For its part, the insurer must compensate you no later than 60 days after receiving your notice of claim and the supporting documentation. In case of damage or loss: Notify the police if you were the victim of a criminal act (fire, theft, vandalism). Make temporary emergency repairs to prevent further damage and keep the receipts. Wait for the insurer s agreement before proceeding with permanent repairs. Inform your broker or insurer as soon as possible. Make a list of the damaged property, pull out the sales receipts and photos. Do not dispose of the damaged property; the insurer must be able to see it. The insurer will assign a claims adjuster to your file. The claims adjuster works for the insurer. You can choose to hire an independent one at your own expense to deal with the insurer. Before doing so, check to make sure he is registered with the Autorité des marchés financiers. Your claim must include only the damaged property, which must be appraised at its fair value. A false claim may disqualify you from compensation. You may also have to find another insurer. 18 Autorité des marchés financiers
What happens if you have a dispute with your insurer? Start by trying to reach an agreement with your insurer or broker. If you can t, a number of recourses are available to you. You can always contact the Autorité des marchés financiers, the body responsible for regulating Québec s financial markets. Autorité des marchés financiers The AMF offers a complaint examination and assistance service to consumers of financial products and services. An agent from our Information Centre will explain how to file a complaint with the company with which you did business. If you are still not satisfied, you can ask that your file be transferred to the AMF. The AMF will study your file and may offer its mediation service (amicable settlement). This service is free for consumers but the company involved must agree to participate. This service is an alternative to the courts and may help you and the company arrive at a satisfactory resolution. Choosing Home Insurance 19
Chambre de l assurance de dommages (ChAD) The ChAD receives complaints from consumers concerning claims adjusters, brokers and agents in damage insurance. Once the investigation is completed, a complaint may be filed against the representative before the discipline committee, which can impose sanctions ranging from a mere reprimand to de-registration and impose fines of $2,000 to $50,000 per infraction. Although it does not allow consumers to recover lost money, this approach is useful for those who feel they were wronged by a representative and want him to change his conduct. The ChAD maintains discipline and oversees the training and ethics of its members, who are adjusters, brokers and agents in damage insurance. The Autorité des marchés financiers delegates responsibilities to self-regulating bodies such as the ChAD to help ensure compliance with regulations. 20 Autorité des marchés financiers
Arbitration When there is a disagreement about the damages, your home insurance policy states that you have access to arbitration but can also choose to go to court. If you choose arbitration, your insurer will have to agree to this method on receipt of your written request. You and your insurer will then each have to name an expert. Both experts will work with an impartial arbitrator. The arbitration award will replace a judgment and you and the insurer will each have to pay half of the arbitration fees plus the fees of your experts. When a written request for arbitration is made by the insurer, the policyholder has the choice to refuse and opt for the courts instead. Turning to the AMF does not mean you lose your right to go to court (unless there is a settlement or arbitration). However, be careful about how long you take because the law sets time limits for taking someone to court. A lawyer can tell you more. Visit www.educaloi.qc.ca to learn how the legal system works in Québec. Choosing Home Insurance 21
Useful resources Autorité des marchés financiers Québec City: 418-525-0337 Montréal: 514-395-0337 Toll-free: 1-877-525-0337 Website: www.lautorite.qc.ca Youth site: www.tesaffaires.com Chambre de l assurance de dommages (ChAD) Montréal: 514-842-2591 Toll-free: 1-800-361-7288 Fax: 514-842-3138 Website: www.chad.ca Insurance Bureau of Canada Montréal: 514-288-4321 Toll-free: 1-877-288-4321 Website: www.infoassurance.ca 22 Autorité des marchés financiers
To contact the Autorité des marchés financiers QUÉBEC CITY Place de la Cité, tour Cominar 2640, boulevard Laurier, bureau 400 Québec (Québec) G1V 5C1 MONTRÉAL 800, square Victoria, 22 e étage C.P. 246, tour de la Bourse Montréal (Québec) H4Z 1G3 INFORMATION CENTRE Québec City: 418-525-0337 Montréal: 514-395-0337 Toll-free number: 1-877-525-0337 You can also visit the AMF website at lautorite.qc.ca Youth site: tesaffaires.com