Water, water everywhere, but are you insured?

Hey there, time traveller!
This article was published 04/06/2010 (5839 days ago), so information in it may no longer be current.

We recently reviewed our home insurance, which includes not only the protection on our house for damage from fire or other disasters, but also coverage on the contents and personal liability protection, in the event someone should be hurt on our property or we are found negligent for third-party property or bodily injury damage worldwide.

The recent record rainfalls in Manitoba will likely have many of you pulling out your insurance policies to see what kind of coverage you have for flood, sewage backup and "acts of God." This may be a good time to do a more thorough review of your coverage and the exclusions.

Although we did not have sewer backup damage this time (like we did in 1993, with two feet of water in our basement), the results of my audit were still pretty shocking.

Here are a few disturbing things we found out:

— Our insured value on the house was way too low. Construction and material costs have soared over the last 10 years and we would never be able to rebuild the house for the value for which it is insured.

— While we thought we had replacement value on the dwelling and outbuildings, that insufficient insured value meant we would be rebuilding a much smaller house in the event of a disaster.

— Our sewer backup insurance, while in place, would only cover up to $10,000 of damages in spite of a hefty premium. This coverage is also often limited and clearly inadequate for a house with a finished basement.

— While our personal property limit seemed to be enough overall, our coverage was severely restricted on individual items. This meant our few valuable pieces of art and jewelry would not be covered for full value. Any valuable individual items like this should be "scheduled", which means individually appraised and insured.

— Our liability coverage for personal injury and third-party property damage might not be sufficient, in an age where Canadian claims are becoming more Americanized.

— Our coverage does not insure damage by our pets. That was a shock, as we once had to replace a carpet after the dog had knocked over a can of paint.

My advice is to thoroughly review your coverage, ideally with an experienced insurance broker who specializes in the types of property you own and the risks to which you may be subject. Take the time with an expert to customize your coverage.

If you own a luxury property with high-value items among your contents, recreational vehicles, or multiple properties, then you would be wise to talk to an insurance specialist who focuses on such higher-end properties and the risks to which affluent people may be exposed.

I asked Kevin Solomon of Leipsic Private Risk Management for some tips. That firm specializes in risk assessment and protection for affluent people. He surprised me by asking questions about things I had never thought about, in terms of insurance needs. For example, do I serve on the boards of any corporations or non-profit organizations? Do I know what liability insurance those groups have in place? Do we have any exotic trips planned? Do we employ domestic employees? Do I have any corporations or trusts that own real estate or other physical property? Are my personal liability limits consistent across all major exposures?

Given the recent heavy rainfall, Kevin also advised that, for people with fully developed basements or walkouts, the best tactic is to install the necessary protection measures, including backup pumps and monitored high-water alarms. He also stressed how important it is to find an insurer who offers unlimited sewer backup coverage in the event of a major loss. It turns out they exist.

To stay protected properly, you need to have the appropriate coverage for your situation. Increasing deductibles are one way to lower your annual premium.

However, it is not advised to focus solely on your premium, especially if you own higher-end properties and items. Rather, Kevin advises, "Insure your properties to their full replacement value, consider higher deductibles and focus on loss prevention through superior protection measures. This offers significant value in terms of both premium reduction and maximum coverage, ultimately delivering peace of mind in the event of a disaster and claim settlement that will exceed expectation."

Oh, yes; and make sure those eavestroughs are cleaned out regularly and the downspouts are well away from your house!

 

David Christianson is a fee-for-service financial planner and portfolio manager, at Wellington West Total Wealth Management Inc. providing comprehensive financial advice and management. You can email him at dchristianson@wellwest.ca or visit his blog at www.davidchristianson.com.