Home Insurance Policy Exclusions

Young family playing together in the house they just moved into

April 20, 2019. If you have a mortgage or want to make sure your house is protected from unexpected damage, home insurance is a must. But even the best policy will not cover every single circumstance that could damage your home. The purpose of home insurance is sharing risk among homeowners, so a few losses are shared by many. There must be enough people at risk for certain losses for insurance to be affordable so it is impossible to cover every possible loss.

Some losses occur because of a lack of maintenance, which is the home owner’s responsibility, and are therefore not covered.

Other kinds of losses, like some natural disasters, are so expensive that premiums collected by insurance policies would not be enough to cover them and the company would go under, unable to help their customers in the future.

For these reasons, home insurance policies contain exclusions which differ from policy to policy but are generally similar across Canada.

Types of home insurance exclusions

Common exclusions are:

• Wear and tear and faulty workmanship or design

Home insurance is for unexpected incidents, not preventable wear and tear damage. Basic maintenance is your responsibility as a homeowner and it is the builder’s responsibility to make sure the house is properly constructed. Problems like slow leaks, rot, condensation, and other issues that arise over time from lack of maintenance or inadequate workmanship are not covered.

• Water damage caused by flooding or seepage from the foundation

Overland flooding (flooding from an overflowing body of water) and sewer back up are not covered by insurance. You can get additional coverage for overland flooding if you live in a high-risk area and sewer back up insurance can also be added to your policy.

• Changes in risk

The premium you pay is proportional to the risk involved in insuring your home. Any time there is a change in risk, you need to let your insurance company know. Examples include increasing the value of your home, leaving your home vacant, or starting a home-based business.

• Losses covered in other ways

Things like natural or nuclear disasters would be covered by government disaster relief or by company liability coverage for a nuclear accident so it is unnecessary for homeowners to have insurance for them.

• Catastrophic losses

Natural disasters like tsunamis, coastal flooding, landslides, war, terrorism, and overland flooding are often uninsurable because the insurer’s resources would not be enough to cover them.

• Damage from earth movement

Earthquakes, landslides, and sinkholes are usually not covered but you can purchase add-on coverage to protect against earth movement. Earthquake insurance has a higher deductible than basic house insurance, but if you live in an earthquake-prone area you may want to get extra coverage. Damage from fire or explosion caused by earth movement may be covered by basic home insurance.

• Damage from pests

Infestations from termites, mice, and bedbugs are not sudden and accidental but take time to happen, so they are not covered by insurance.

• Damage caused to the home’s exterior due to ice or snow

Damage from melting, freezing, or moving snow or ice is not covered by most policies.

• Government action

Action from government authorities, such as the police or military, is not covered by insurance. This includes damage to or confiscation of your home, land, or personal property.

• Dog bites

Some breeds of dogs might not be covered by your policy. Because 1/3 of liability claims are related to dog bites, adopting a dog increases the risk of insuring your home so let your insurer know if you get a dog.

Exclusions that can void your home insurance policy

The above exclusions will not be covered if you make a claim and there are some exclusions that will void your insurance policy, leaving you with no insurance at all. These include:

• Not having someone check on your home when you are away

Your insurance company will require someone to check on your home regularly (usually every 48-72 hours) when you are away. You should also turn the water off, drain the pipes, and install a water flow alarm system. Check your policy for what you are required to do when you go on a trip.

• Leaving your house vacant for longer than 30 days

If your house is vacant (meaning it is empty, the utilities have been shut off, and the occupants have moved out) for longer than 30 days, your insurance will be void unless you make arrangements with your insurer. You will need an add-on in the form of a vacancy permit. Your house can be considered vacant if you are in the process of renting or selling or doing extensive renovations that require you to move out.

• Fraudulent claims

It goes without saying that honest customers should not have to pay for fraudulent claims, such as starting a fire to try to cash in on a claim, and this will void an insurance policy.

• Illegal activities

Illegal activities, whether carried out with or without your knowledge, will void your insurance and damage from them or any other damage will not be covered.

• Failing to maintain and reasonably protect the property

Neglecting basic maintenance can lead to your house and personal property being undervalued, claims rejected, or your insurance voided.

Issues like mold and frozen pipes are common claims that will not be covered because they are preventable maintenance-related problems.

• Starting a business from your home

Becoming an entrepreneur is exciting and there is a lot to take care of. Many people do not think of updating their insurance when they start a home-based business. Because your house is insured as a home, not a business, which involves greater risk, business-related losses will not be covered, and your policy could be voided.

You need two types of coverage for a home-based business - contents and property, and liability. Property coverage covers your home and personal property and liability covers injury to a third party. You need an endorsement for having a home-based business even if clients do not come to your home.

• Not representing your home accurately when insuring it

Some houses are more difficult to insure than others. Not being honest about your home’s construction, contents, or location can void your policy. For example, a heritage home can be more difficult to insure. Talk to your insurer to make sure you get the right coverage.

• Renovations

You need to let your insurance company know whenever you add value to your home. When you add a suite, for example, the value of your home changes and your insurance policy will need to be adjusted.

Most policies also exclude damage from glass breakage, vandalism, and water damage for buildings that are under construction.

Extensive renovations could void your policy because your premium would be based on the house as you purchased it, not on its current value.

Take the time to understand your policy so if something happens you understand what is covered. If you would feel safer having additional coverage, you may be able to purchase endorsements for exclusions on your home insurance policy. It is also a good idea to talk to your insurer any time there is a significant change to your home, personal property, or lifestyle to make sure you have adequate coverage.