Seldom do homeowners read the finely printed prose of their insurance policy. Few will attempt such a feat without the aid of a dictionary. Alas, wordsmithing will only get you so far. A basic understanding of your legal rights and obligations arms you with the knowledge you need to make your insurance policy work for you.
Your homeowner's (or tenant's) policy of insurance sets out the terms and conditions of your contract with your insurance company. It establishes the who, what, where, when and how under which your insurance company may pay you compensation.
If you take out your insurance documents as you read this article, look for the following:
- A statement of the subject matter of your insurance.
- A statement of risks that are excluded under the contract.
- The pre- and post-loss duties and obligations of the parties.
- Important definitions.
- A declarations page that sets out the essential information for the contract: the identities of you and your insurance company, the cost of the policy, the deductible and the effective dates of coverage.
- Endorsements, meaning any other insurance contracts that alter the coverage already provided in the insuring agreement.
With these documents in the background, consider the following key components that dictate your relationship with your insurance company.
What is the what?
Insurance covers only those types of losses described in your contract. It will not cover every problem that you may encounter, nor is it a maintenance contract. Insurance is generally intended to help policyholders cope with the financial consequences of unpredictable events that are "sudden and accidental." Having a clear picture of what kinds of losses you can expect to be covered for affords some comfort when dealing with the aftermath of unpredictable and sometimes tragic events.
While most people will expect their insurance contract to cover losses or damage to their personal property (i.e. property coverages), your insurance also typically covers losses that arise from an injury to another person (i.e. liability coverages). Both types of insurance contain exclusions for circumstances considered to be outside the risk.
For example, if you were sued for negligently causing injury to someone else while trimming branches off your tree, your insurance company might be required to pay compensation to the injured person assuming you were found to be legally responsible for the injuries. However, your insurance company would not be required to pay compensation for injuries that resulted from your "intentional or criminal acts." Hopefully, you are not in the habit of throwing tree branches at passersby.
Other common exclusions in a homeowner's policy include injuries that result from: the use of a motor vehicle; a professional service you provide; loss or damages caused by war; or injuries from a communicable disease. A careful review of your policy will bring to light other kinds of exclusions ranging from the wild to the unsurprising.
Who is the who?
Your insurance contract likely distinguishes between those who are specifically named under the policy, and those who are not, but who nonetheless fall within a class of persons covered by the contract. For example, often homeowner policies cover contents owned by those named in the policy as well as those owned by other people living in the home.
How does it work?
When making a claim for property loss or damage, you must be sure to take the steps set out in your policy. Your insurer must be notified of the loss or damage. However, some contracts set out a specific timeline and form for the notice while others require you to contact your insurance company "promptly" or "as soon as practicable" and notification over the phone is sufficient. If you do not follow these requirements, you may be found to be breach of the contract and the insurance company may have the right to deny you coverage for that loss.
How to deal with a claim
In the event that you suffer a loss or damage to property that is covered by your policy, you will have to prove your loss. Most brokers advise their clients to take a video or collect pictures of the contents of their home. These images, in addition to receipts, provide a basis for the amount you are claiming.
Your insurance may cover the costs to repair, restore or replace the damaged property in like kind and quality or it may only cover value of the property taking into consideration depreciation. Is there a catch? Be sure to check the monetary limits of your coverage. If you have recently redecorated, your personal property may be worth more than the limits of your coverage.
Do I have other legal obligations?
The relationship between insurance companies and the individuals they insure is based on trust. Who you are and what kinds of activities you enjoy, including how you use and care for your property, are significant factors influencing how your insurance company calculates your premium and what the risk the company takes on in providing you with insurance. Not surprisingly, the most reliable source information about you is you.
The law recognizes this and requires you to act with the utmost duty of good faith. You must be forthright and forthcoming in providing the insurance company with relevant information. If you fail to disclose relevant information, your insurance contract may be void.
At the end of the day, the insurance company will decide whether and how much it will pay, if you make a claim for compensation. For you to truly have peace of mind when dealing with unexpected property damage, you rely on your insurance company to treat you fairly. Because of your reliance on your insurance company to assist you at the time of loss, it too is governed by the duty of good faith.
Getting intimate with the fine print of your policy's terms and conditions is not easy. Be sure to call your insurance broker or agent in the event you are uncertain. After all, it's for your peace of mind.
Ashley Deathe is an associate lawyer with the law firm Nelligan O'Brien Payne LLP (www.nelligan.ca), with offices in Ottawa, Kingston, Vankleek Hill and Alexandria.
[This article was originally published in the May 2011 issue of Fifty-Five Plus Magazine.]