The importance of understanding your home insurance policy

Your home is likely one of your most valuable assets. That’s why it’s important to understand your home insurance policy and make sure it truly meets your needs.

Reading your policy

Your home insurance contract—also called your policy—along with any endorsements (additional coverages), protects you against financial losses that may occur in certain situations. It typically includes:

• The insured persons
• Covered risks such as theft, fire and water damage
• Specific covered circumstances under which you may be compensated after a loss
• Exclusions, meaning the risks and property that are not covered. For a claim to be valid, it must not fall under an exclusion.

It’s essential to know what your policy does and does not cover. At renewal time, take a moment to reassess your needs and adjust your coverage if necessary. 

Understanding insurance terminology

While your insurance representative is the best person to walk you through the details of your policy, here are some key terms to know.

Declarations

This section includes the basic information about your policy, such as:

• The type of document (for example, a renewal) and the policy number.
• Your name and mailing address.
• The policy period (start and end dates of coverage).
• Coverage amounts, including:
  • Your liability coverage limit
  • The amount you must pay out of pocket in the event of a claim (the deductible)
  • The total amount you pay (the premium), which is based on the likelihood of a covered loss
• Other individuals or entities covered under the policy.
• A list of form numbers—coverages and endorsements that modify or enhance the policy. Some of these are optional and must be specifically requested.
• The name and contact information of the insurance company.
• An emergency phone number to report a major loss outside regular business hours.

Endorsements

An endorsement is additional coverage added to your base policy, usually to broaden protection. It can increase, limit or restrict coverage, clarify a specific risk, or add insured persons or locations.

General conditions

To keep your insurance valid, you must comply with certain requirements known as general conditions. If these are breached:

• Your policy may become void
• Your insurer may cancel it, or
• Your claim may be denied if it relates to the condition that was not met

This typically happens when a significant risk is misrepresented, when the risk changed since you purchased the policy or when essential information is not disclosed when purchasing the policy.

Exclusions and limits

Understanding exclusions and limits can help you avoid unpleasant surprises after a loss.

• An exclusion specifies which losses or types of property are not covered.
• Certain risks—events or circumstances that cause property damage—may be excluded.
• Your policy only covers insured property up to a specified amount, known as a limit.  Items such as cash, jewellery, furs, watercraft, artwork and antiques are often subject to maximum limits. If you need higher coverage amounts, your insurance representative can suggest endorsements to increase those limits.

Your broker or insurer

Contact your insurance representative to review your current policies or adjust your endorsements. Don’t hesitate to ask questions and make sure you have the coverage you need.

Other topics that may interest you

• The basic principles of insurance
• Additional coverage
• Limits
• Factors that affect your premium