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Home insurance for unexpected events and disasters

From: Financial Consumer Agency of Canada

Home insurance coverage for unexpected events and disasters

Home insurance policies don’t cover expected and predictable events.

For example, insurance companies expect roof shingles to wear over time and need replacing. Your home insurance policy won’t cover the cost of roof repairs in this case.

A home insurance policy doesn’t cover maintenance costs. You’re responsible for maintaining your home on an ongoing basis. If damage to your home is due to a lack of maintenance, your insurance policy won’t cover it.

Home insurance policies may cover certain types of unexpected events. Insurance companies refer to unexpected events as perils.

Unexpected events may include minor problems, up to natural disasters.

Learn more about home insurance.

What your home insurance policy covers

Your home insurance policy may cover damage caused by the following types of unexpected events:

What your home insurance policy doesn’t cover

Home insurance policies may not cover certain types of unexpected events. For example, earthquakes, landslides, floods and sewer backup.

You may need to buy additional coverage for risks that your policy doesn’t cover.

Earthquake insurance

Home insurance policies may not include coverage for most types of damage caused by earthquakes.

You may be able to buy extra coverage for earthquake damage. Insurance companies refer to these add-ons to your coverage as endorsements, riders or extensions.

The premiums for earthquake insurance are usually higher than for other types of coverage.

The cost of your premium depend on factors like:

Your deductible is usually a percentage of your coverage limit for your earthquake insurance add-on. Deductible percentages for earthquake insurance may range from 5% to 20%. A deductible is the amount of your claim that you agree to pay before your insurance company pays the rest of it.

You may not always be able to get compensation if an earthquake causes damage to your home. You’ll receive money if the cost of the damage is more than your deductible.

Some insurance companies allow you to lower your deductible by increasing your premium. You may also have the option to lower your premium by increasing your deductible.

Learn more about earthquake protection.

What your earthquake insurance doesn’t cover

Earthquakes may lead to other types of events or damage which may not be covered. Earthquake insurance may not provide coverage for damage from a tsunami or tidal waves caused by an earthquake.

Damage to land value isn’t covered by earthquake insurance or by insurance policies in general. For example, suppose an earthquake damages your land and makes it less valuable. Earthquake insurance usually won’t provide you with compensation.

Ask your insurance agent or broker about what your policy doesn’t cover.

Flood insurance

Home insurance policies usually don’t cover water damage from a source outside your home, such as flooding.

You may be able to buy extra coverage for flood damage. This type of coverage is also called overland flood insurance, inland flood insurance and enhanced water damage coverage.

Insurance companies determine your premium amount by the level of flood risk in your area. If you live in a very high-risk area, insurance companies may not offer you coverage. If they offer you coverage, they may charge you a higher premium. The risk level can also affect your deductible and coverage limit.

The deductible for flood insurance is usually higher than for many other types of damage covered by insurance. The deductible may be a fixed dollar amount or a percentage of your claim amount.

Learn more about water damage and flood protection.

Having an emergency fund might help with these situations without having to borrow money.

Learn more about setting up an emergency fund.

Disaster assistance programs

There are provincial and territorial government programs that may provide financial assistance to communities after a disaster. Find your provincial or territorial disaster assistance program:

Keep in mind that these programs have limits, exclusions and restrictions on eligibility. Programs vary by province and territory.

You may not be eligible for financial assistance if the disaster is insurable. For example, suppose earthquake insurance is available in your area, but you decide not to purchase it. You may not be eligible for a government assistance program after an earthquake.

Understanding your insurance needs

Your home is likely your most valuable asset. Assess your insurance needs and talk with your insurance agent or broker before getting insurance.

Assess your level of risk

Consider your home’s level of risk for different types of unexpected events and disasters. For example, determine if you live in an area subject to wildfires, landslides, floods or earthquakes.

Consider the age of your home. Newer homes may include features that make them more resistant to disasters. Older homes may be at higher risk.

Your insurance agent or broker may be able to help you assess your level of risk.

Learn more about natural hazards to help you assess your risk.

Know the cost to rebuild your home

Make sure you know how much it would cost to rebuild your home.

Find out how your home insurance policy and any add-ons for unexpected events and disasters will pay out your claims. Check how your insurance company will determine your deductible. For example, if they’ll determine it based on your home’s actual cash value or its replacement value.

Learn more about actual cash value and replacement value.

Guaranteed building replacement

Check if your home insurance policy includes guaranteed building replacement. If your home is destroyed by an insured risk, your insurance company will pay for the cost to rebuild your home. They’ll cover the cost even if it’s more than your policy limit.

Conditions usually apply to guaranteed building replacement coverage.

For example, you may be required to:

Other costs to consider

Think about other costs you might have after a disaster or other unexpected event.

Additional living expenses

If you need to evacuate your home, you may have to pay for additional living expenses. These may include:

Your home insurance policy may cover these expenses. However, it usually won’t cover them if the evacuation is due to flooding or an earthquake.

Flood insurance and earthquake insurance usually cover additional living expenses related to these types of events.

Mortgage payments and other ongoing expenses

Home insurance policies usually don’t cover your mortgage payments and other ongoing expenses you may have.

If unexpected events make it difficult for you to make your regular mortgage payments, contact your lender right away.

Learn more about managing your money in challenging times.

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