Property Insurance 101

Property Insurance 101: The Basics

Insurance doesn’t need to be complicated – in fact, it isn’t. The basics of insurance are simple, but they’re not taught in school, and most of us just pick up what we need to know in bits and pieces along the way. A quick, simple introduction to the foundations is often all you need to feel confident when talking to a Broker about protecting your biggest investment.

With that in mind, here is a basic, general introduction to property insurance. When you know what insurance is available, what Brokers are focusing on, and what is and isn’t covered, you can make an informed decision about what insurance is right for you.

What is property insurance?

Property insurance is financial protection against damage to, or involving, property you own. Without it, if something happens to your home – fire, or flood, or theft – you’ll be stuck with the bill.

It covers “property” – the things that legally belong to you. If you own a whole building – like a detached house, or a cottage – it can be insured. If you own part of a building – like a condo – the part you own can be covered. All your possessions can be covered – even if you don’t own the building they’re in.

There are different types of coverage that constitute “property insurance”. Many insurers offer package deals that protect against multiple risks. Some of these packages protect against only the risks listed in the policy, while some protect against “all risks” except those that are listed as excluded. Don’t just assume that because something happened to your house, it will be covered.

Why do I need property insurance?

Life is expensive. Buying a home, furnishing it, and keeping it in good condition are major expenses that can take most of a lifetime to pay down. If something unfortunate happens, and your home is badly damaged, would you be financially able to repair or rebuild?

You need property insurance to protect your investment and things out of your control. The overall cost of property insurance is relatively inexpensive (compared to potential costs it covers), and is an important purchase, because so much can happen that is out of our control.

I’m a homeowner. What do I need to know about insurance?

Your eligibility for insurance, and the cost of your coverage, depend on a lot of factors. Where you live plays a role – severe climate and natural disasters drive up insurance costs.

But the most important factor is your home itself. A house in poor condition will cost more to insure than a house in good condition. Insurers pay extra attention to several aspects of a home:

  • How it is heated: some heating systems are less safe than others, and cost more to insure.
  • The condition of the roof: the older a roof is, the more likely it is to leak. Given how common roof leaks are, and how costly they can be, the roof casts a long shadow on an insurance bill.
  • How secure it is: a good home security system can help deter thieves and reduce the severity of claims.

There are things you can do to reduce your premiums. Water damage is a common problem for many homes, particularly in some regions of Manitoba. The earlier water is detected, the less damage it can do. If you have water sensors, a back-flow valve or a sump pump installed, you may qualify for savings on your policy, or coverage you could otherwise not obtain.

Also, don’t forget about liability. If someone is injured on your property, you could be found to be legally liable for their medical costs or damages. Included in your homeowners policy is Liability coverage to ensure you are protected if you are found to be negligent and legally liable for injuries to others or damage to their property.

I’m a condominium owner. What do I need to know about insurance?

The Condominium building will have insurance which covers the common areas, such as the lobby, elevators, and pool area, along with the ‘shell’ of your unit. But what it does not cover is your personal belongings and any improvements and betterments you make to your unit. Condominium Insurance offers protection for your contents and any improvements you may have made to your unit, such as upgraded fixtures or cabinets. It also protects you in case you damage any of the other units (like if you have a flood which seeps into the unit below yours) or if someone gets hurt while visiting your unit.

Purchasing condominium insurance also provides coverage for any areas in your unit or within the entire building and common areas, for situations where the Condominium Corporation’s funds or insurance would not respond. In these situations, the costs are often levied among all of the unit owners. It is best to review your Condominium Corporation agreements, and speak with your Broker to determine best coverage for your needs.

I’m a tenant. What do I need to know about insurance?

There’s a widely-held misconception that tenants don’t need insurance because they don’t own the building they live in, or feel they don’t have anything of “value” that needs to be insured. You may not own your apartment, but you do own your furniture, your electronics, your keepsakes, and more – and those possessions can and should be protected. Tenant insurance can cover your belongings in cases of fire, water damage, theft, and more. Individually you may not think your possessions add up to a great amount, however in the event of a loss, the cost of replacing everything you own can quickly can become significant. We don’t think about the small things: the dishes, the linens, even the small appliances. Starting over can be devastating if you don’t have the funds to put you back where you were prior to the loss

Tenant insurance also offers liability coverage. If someone is accidentally injured in your home, many tenant insurance packages offer coverage for resulting legal fees or awarded damages. These types of coverage are featured with many homeowner insurance packages, but you don’t need to own a home to benefit from them.

I own a cottage. What do I need to know about insurance?

If you have a cottage, cabin, beach house, or other vacation home, you should insure it. Even if it’s not your primary residence, the same insurance considerations apply. In addition, secondary residences are usually vacant for much of the year, and because vacant buildings are at greater risk of damage, you may need additional coverage for your home away from home.

I own a building and I have tenants. What do I need to know about insurance?

Having tenants can change your premiums, since more people means more chances for damage. Your homeowner’s insurance will cover any damage to your building, and your liability insurance will cover any personal damage to people on your property. For this reason, you should encourage your renters to get Tenant insurance. Should you own a building with multiple leased units, a Rented Dwelling package may be more suitable to meet your insurance needs. Speak with your Broker about what is right for your situation.

This is just a quick introduction to property insurance, but hopefully it gives you a sense of the range of coverage available, and what to consider when contemplating what coverage you need. Your next step should be to talk to your Insurance Broker to answer any questions and provide you the information you need to make an informed decision on the right product for your property.