Home Insurance Gotchas

A CBC story of a local woman, who was in Ottawa for Cancer treatment and got a rude surprise from her home insurance policy (when she got home), highlights the importance of reading your entire insurance policy and understanding all of the “ins and outs” of your policy.

The lady was in Ottawa for cancer treatment, and left a neighbour to check her mail, but the neighbour never went into the house. Since the poor woman was undergoing cancer treatment, she was away from her home for more than three days, and unfortunately her furnace “scrammed” (i.e. turned off, to protect itself), the house froze, the pipes exploded and her insurance company is now saying, she is not covered. Sounds awful doesn’t it, but the same thing is true of your home policy as well, go read it and you will see that if you are away from your home for a period of 2 days or more (especially in the winter) if no one checks your house, any damage done to your home is your own responsibility.

Home Insurance

Home Insurance is Important, but if it doesn’t pay out, that is a bad thing

The CBC was also kind enough to post a good article 6 Big Home insurance Misconceptions, that is well worth reading, but I will paraphrase some of the areas they cover in their article.

  • Rare or exceptional things in your house are covered under your insurance. No, unless you have told your insurance company about art, jewelry, or other cool things, your fancy things may not be covered under your home insurance policy. If you tell them, they will most likely raise your rates, but at least you will be covered.
  • Sewer backups, floods, earthquakes and maybe even forest fires are covered. Maybe, but you had better see that they are explicitly mentioned in your policy (yes read your entire policy). If they are not mentioned, ask your insurance provider the exact question, to ensure you are in fact covered, or you may get a rude surprise. Basement sewer backups were covered, but not necessarily any more. Will the city pay? If they think it is their fault, maybe.
  • If you are not taking care of your house, and that neglect causes damage to your house (and it can be proven), you might end up paying for the damage yourself. Keep your property well maintained.
  • Did you upgrade your house? Did you finish the basement, and did you tell your insurer it is now “finished”? If you added a room, is your insurer aware of it? If the answer is “no”, do you think they will pay out? They might, but it is better to be clear with your insurer, than hope they do something out of the goodness of their hearts™.

Also remember with home insurance, 3 Strikes and You are Out, so careful what you make a claim on (as well). Check with your insurer, and read your policy closely.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net


The Bank of Mom and Dad

Another interesting topic that came up at CPFC15 was the concern that First Home Purchasers are relying more and more on Parental help with the transaction (monetary help, as well as advisory help).

Bank of Dad

The Bank of Dad (Always Open)

I have spoken a few times about how both sets of parents helped my wife and I purchase our first home (leading to the Best Financial Advice Given, ever), and I don’t think parents helping kids buy their first homes is a new thing. In our case my parents helped us to make sure that we didn’t have to pay CMHC Loan Insurance premiums, and my wife’s parents helped with furniture purchases and repairs in our first home.

Is this a good or bad thing? As usual, it all depends on the situation.

In my opinion this is mostly a good thing (if the parents can afford to help out their kids, however, if the parents have to borrow money to do this, it is a very bad idea), but there are scenarios where this might not be the best idea:

  • If the parents are loaning the entire down payment on the house for the children, this is a bad thing. I always espouse that with all things people are much more diligent and attentive to a debt if they have “skin in the game” (i.e. their own money is part of the purchase). It also might create a sense of entitlement in the children, assuming their parents will continually bail them out in hard economic times.
  • The money loaned can simply allows the “kids” to become very house poor, and ties them down to a home that symbolizes being broke (to them).
  • If the money is loaned because “the kids” don’t have a very good credit rating, and can’t get a mortgage without a large down payment (or worse without a co-signer). Most times a bad credit-rating is earned, and maybe they really are a bad loan candidate ?

Families and money sometimes are a very bad mix, both parents and children should think carefully before there are large monetary transactions “between them”.


Home Insurance: Three Strikes and You Are Out

I had a great time at CPFC15 this past weekend, where a bunch of Personal Finance folk got together to discuss things and two of the speakers touched on points that resonated with me:

  • Rob Carrick from the Globe stated that the Insurance Industry needs to be put under higher scrutiny for some of their practices.
  • Ellen Roseman mentioned about the folks that have contacted her about having their home insurance cancelled (for many reasons)

With these two points in mind I will share with you an upsetting story that happened to my mother, with her home insurance.

Home Insurance

Home Insurance are you really covered ? For How Long ?

My parents have lived at the same address for more than 50 years, and they dutifully paid their home insurance premiums. There were a few small incidents in the house, but never any major claims until about 7 years ago. The water tank in the basement gave up the ghost in a spectacular way, and flooded the basement causing damage to the finished basement (dry wall, carpeting and clean up), so my parents made a claim due to this incident.

About a week after the “new” tank was put in, something went wrong with it, and it dumped its contents as well, so my Mother called the insurance company about that, and it was cleaned up as well.

The last straw (for the insurance companies) happened on my birthday about 2 years ago, when the oil tank in the basement leaked. Luckily the entire contents did not dump out but it was a significant spill which caused a very large claim to clean all of it up.

Thanks to this, the next year the Home Insurance on my mother’s house came up, she was told she was “uninsurable” due to these 3 incidents (uninsurable by any main stream insurance company, as we found out after calling a few). This is someone who had paid their insurance rates, and had been a model customer, but thanks to these 3 incidents (which in my opinion is really only 2 incidents, as the second water tank giving way was a function of the first tank failure, but we were told that is not the case in the insurance industry), she was going to have to use “off market” home insurers.

In this world you can insure anything, and you can find folks who will insure anything, however, they do not do it for cheap. For the next 4 more years (at least) my Mother must use these “alternate insurers” to insure her home.

I tell this as a cautionary tale, be aware that your Home Insurance can be cancelled for many reasons and the “Three Strikes” rule is one of the ways this can happen.

Image courtesy of fantasista at FreeDigitalPhotos.net


The Electricity Quandary

The Electric Power Suppliers of North America (and Europe) are in an interesting quandary these days, in that they are trying to get consumers (and businesses) to limit their power usage, because the power grids may not be able to deal with the growing load being put on them.

In Ontario there is a program to get a new “Smart” Thermostat that claims it will lower your power costs, because it can lower your usage during peak hours, but those kind of “Smart” thermostats have been around a very long time (in fact there are now two new “Even Smarter” thermostats from Nest and from Honeywell, which allegedly “think” for you, and you can use from your “smart” phone).

The big difference with the Hydro One peaksaver PLUS® thermostat is the following interesting feature:

On hot summer days when electricity demand is highest, peaksaver PLUS® signals your thermostat to slightly reduce your central air conditioner's energy demand so that it safely uses less electricity.

So Hydro One now has the option to turn off your A/C, if there is a heavy load on the grid? I think this is actually a very good thing (since most of the time they are going to want to do this, I am going to be at work), and it will save consumers some money too (unless there is a charge to do this?).

There are even tweets outlining how to behave with your Air Conditioning:

This wasn't that long ago either

This wasn’t that long ago either

The whole electric power equation is an interesting miasma of many orthogonal goals, which are counter to each other:

  • Old power plants are thought to be very dirty and bad for the environment, so new energy sources are needed, but we seem to be jettisoning our old power sources faster than we are creating new power sources.
  • A reliable power source is never cheap (the word reliable always means more expensive) because there is a need for backups, and over arching control to deal with fluctuations in power.
  • Green power is new(er) and is less reliable (for now). If you count Hydro Electric power as Green then this argument is mute, but for some reason Hydro electric is not “Green”.
  • New Power sources are still being improved on (photo voltaic cells being an excellent example (i.e. Solar Power)).

No-Fee Scotiabank Value Visa

All of this to say here may be some of the reasons that your Electric bills are starting to go up a great deal. Keep this in mind this summer as the temperatures rise and the possibility for BlackOuts due to system overload become a possibility. Is it really 11 years since the black out of 2003 ?

What is the demand in Ontario right now? Click here and see the pretty demand graph we created today.


The Perils of Home Ownership

This past weekend, my wife and I had a small crisis with our house, which made me again wonder if renting a home might not have been simpler at the end of it all. Every year you must to turn off the spigot in the garage (and maybe in the back of your house) in the fall, or it may freeze up and crack. Last year I forgot to do this and sure enough something in the pipes split and we ended up with a fair amount of water in the basement. It wasn’t enough to worry about an Insurance Claim, but it was one hell of a mess.

I Should Have Turned THIS off in the Fall

I Should Have Turned THIS off in the Fall

Michael James has railed and lampooned me for what a huge mess I have in my basement, well, I can assure him that there is a lot less mess, because we have had to throw out a great deal of stuff that was in cardboard boxes  (and that should have been thrown out a long time ago).

It’s interesting the things that I found down there, such as:

  • Tax Returns going back to 1981 (I am destroying those not of this century).
  • Lots of art work from our kids (who are all at University). Strangely for my 8 year old son we don’t have any art work.

Anyhow, the moral of this story is many fold so let me count it (as is my love of numbered lists):

  1. Turn off the interior faucet (if you have one) for your outside faucets (and if you don’t have an interior cut off, you might want to get one).
  2. If your basement is full of cardboard boxes sitting on the floor, you mustn’t care much about what is in there because it doesn’t take much water to destroy those.
  3. Go through your records and only keep those things that are needed (32-year-old tax returns are not needed, except for a good laugh about how much I made as a co-op student).
  4. If you hear water running in your house, but you can’t find any open faucets, check your basement FIRST.
  5. Always know where the water shut off is for your house (and if you need a wrench or vice grips to shut it off, have one near by).

My, that was an interesting weekend.


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