Ten surprising things home insurance covers (and 10 things it doesn't)

With climate change increasing the frequency of extreme weather occurrences across the country, Canadian homeowners are among those feeling the brunt of the impact.

The latest data from the Insurance Bureau of Canada (IBC) has shown that property claims have taken a larger portion of all insurance claims between 2010 and 2020, jumping from 28.3% to 33.9% during the period. The bureau attributed the situation primarily to a rise in the number and intensity of natural disasters, including flooding, drought, storms, and earthquakes.

Read more: How climate change is impacting home insurance rates in Canada

This is where home insurance comes in handy. Having the right coverage allows property owners to protect one of their biggest financial investments in case disaster strikes. However, among the keys to ensuring the home is adequately protected is by understanding what the policy covers, which is not an easy feat, especially for those without an insurance background.

In this article, Insurance Business will explain how home insurance works, and list down several inclusions and exclusions in a standard policy that many Canadian homeowners may find surprising.

How does home insurance work in Canada?

Home insurance is designed to protect the property and its contents in case of damage or loss. It also covers homeowners from liability if someone gets injured within their premises and pays out for additional living expenses if the house is temporarily uninhabitable.

Canadian property owners have three types of policies to choose from. These are:

• Standard coverage: The most basic form of protection, this type of home insurance, covers only the risks or perils named in the policy – that is why it is also referred to as a basic or named perils plan. Coverage typically includes fire, lightning, smoke, and theft.
• Broad coverage: As the name suggests, this provides wider a range of protection than standard policies. However, it does not offer full coverage, unlike the next type of home insurance.
• Comprehensive coverage: Also called special or all-perils policy, comprehensive home insurance offers the most extensive form of coverage. It protects the property and its contents against most types of risks, except for those specifically named as exclusions from the plan.

Read more: What Canadian homeowners need to know about flood insurance

Just like other types of insurance, policyholders are required to pay premiums for coverage. According to the Financial Consumer Agency of Canada (FCAC), insurance companies often factor in the following parameters when calculating rates:

• Type of home, such as single-family, semi-detached, condo, rental property, or seasonal residence
• Characteristics of the property, including materials, age, size, location, and replacement value of home and contents
• Distance between the home and a fire hydrant or a fire station
• Crime rate in the neighbourhood
• A homeowner’s claims history
• Type of coverage and policy
• Amount of deductible

Home insurance is not mandatory in Canada if the property is paid in full. But for those taking out a loan to buy one, most mortgage lenders require them to obtain coverage.

Read more: How to prevent flood and water damage to your home

Ten surprising things home insurance covers

To the average homeowner, reading and fully understanding a policy document can be a gargantuan task as it can often be a lengthy piece of contract filled with buzzwords. This is why many are surprised by what their insurance actually covers. Here are some of the unusual items many Canadian property owners might never think are covered by their home insurance policy.

1. Spoiled food

If there is a power outage and it lasts for an extended period causing food stored in the refrigerator and freezer to spoil, home insurance may pay the cost to restock these items once electricity returns. Most policies reimburse losses up to $500, but often homeowners need to pay a deductible, so it is advisable for them to assess if filing a claim is worthwhile.

2. Lightning strikes

When one thinks of the possible reasons why a home may be damaged, lightning does not always come out on top of the list. However, Environment Canada notes that lightning strikes are among the most common causes of weather-related property damage in the country. Most policies pay out the cost of damages – including those that have resulted in fire, bodily injury, and broken appliances or electrical wiring systems – unless the peril is specifically excluded.

3. Falling objects from the sky

The IBC notes that falling objects – excluding those propelled by a snow slide or earth movement – are covered by home insurance under the insured perils classification. These include airplane parts, meteors, space junk, and even poo. Back in 2016, a woman from Ottawa claimed a frozen lump of excrement – or what aviation experts call ‘blue ice,’ – from a passing aircraft tore through the roof of their house, causing significant damage. This was later covered by her home insurance. 

4. Counterfeit cheques or money

Homeowners who accidentally accepted counterfeit bills or forged cheques can file a claim for up $10,000 under several home insurance policies. These typically do not come with a deductible but it is still advisable for policyholders to check with their insurance provider for the complete details of coverage.

5. Animal stampede

Most insurance policies cover damage caused by wildlife, including incidents where rampaging animals knock down a fence and trample a garden, or a bear breaks into a house and wreaks havoc. Similarly, homeowners may be protected from legal liability if their dog bites a guest and they decide to sue.

Read more: Revealed – Ontario’s most and least expensive cities for home insurance

6. Gravestones

Even if they are not on the property, gravestones and urns are often covered by home insurance. Policies typically cover the cost to replace these items if they are stolen, vandalized, or damaged.

7. Identity theft

Most home insurance plans provide coverage for costs associated with identity theft and online fraud, including legal fees and lost income. Some policies pay out even if the incidents happen multiple times.

8. Dorm room theft

For couples with children off to college, home insurance covers the belongings their kids bring with them to their dorm rooms or rented places under the “personal property off premises” provision of policies. Same thing for their parents’ possessions if they are in an assisted living facility and depend on the policyholders for financial support.   

9. Lock replacement

Home insurance typically reimburses policyholders for the cost to replace their door locks if someone steals their keys or breaks into their properties. Lock replacement for vehicles may also be covered as long as these were within their premises when the incident occurred.

10. Volcanic eruptions

Canada does not have that many active volcanoes, so it may be surprising to know that standard home insurance provides some level of protection. Policies typically cover damages caused by an eruption, including lava flow, ash fall, and other volcanic particles. 

Ten things policyholders might think home insurance covers but does not

Although home insurance covers a lot of things, it does not cover everything. That is why it is crucial for policyholders to understand what they are protected against by taking time to read their policy document and discussing with their insurers any questions and clarifications. Here are some things often mistaken to be included in standard home insurance policies.

• Normal wear and tear: This includes rust, corrosion, or gradual deterioration of the home.
• Flooding: Standard home insurance protects against floods caused by burst pipes but not overland flooding, or those from overflowing bodies of water, which require policyholders to purchase an add-on.
• Earthquakes: Policies only cover earthquakes if the policyholder purchases a rider.
• Sewer backup: This is water damage resulting from a blockage in the main sewage line causing wastewater to reverse direction and flow up into the home. A few insurers include this type of coverage in their standard home insurance policy, but most offer it as an add-on.
• Frozen pipes: These may be covered but property owners must take the necessary precautions, especially if they are going on a long vacation away from home.
• Termite damage: Damages caused by insects such as termites, and rodents, including rats and squirrels, are typically not covered by basic policies.
• Valuable jewellery or collection: Standard home insurance may offer coverage for jewellery and other collectables but only up to a certain limit. For expensive jewellery and collections such as artworks and fine wine, policyholders are advised to purchase additional coverage.
• Fights: Personal liability coverage in a home insurance policy only protects against accidental or unintentional injury to others or damage to their property. It does not extend to when the policyholder intentionally injures someone.
• Home renovations: Property owners should consult with insurance providers first if they are planning to renovate their homes to know the extent of coverage of their existing policies.
• Poor maintenance: Home insurance is not a maintenance plan, so damage resulting from poor upkeep – like waiting months to fix a leaking sink – will not be covered.