Business Insurance News & Views

How can water damage your home ?

What kind of water damage can you have in your house? Lots of different kinds. 

 

As an insurance broker, I can tell you that most water damage comes from burst pipes, sewer back up, cracks that develop in the caulking and sealing around bathtubs and bathroom tiles, or water coming in through the cracks of your basement foundation in spring time.

 

But water damage can come from many different places. Let me share with you some many different types of water damage we eperienced as a homeowner. We bought our house brand new from the builder around 25 years ago. After we had been in the house for 1 1/2 years, we noticed that there were some cracks on the inside walls of our basement foundation. We could still see these cracks since the basement wasn’t finished. We called the builder as there were many cracks. The builder came and inspected the damage and decided to fix two of the cracks were a small amount of water had leaked in. Ontario new homeowners were entitled to this coverage through the new home warranty program that existed at that time.  

A few months later, I noticed some water stains on the ceiling of our second-floor hallway. I called the builder and they came and fixed part of the roof. Both of these first two items were covered under the new home warranty so we did not have to pay anything. 

We’ve had a couple of instances of water damage where it was very difficult to figure out where the water was coming from. One day I noticed there were some water stains on our basement celing at  the bottom of the staris. It was in a strange place for a water stain, since there were no water pipes near there. Turns out that there was a bathroom above the water stain, But not directly above it. After a few weeks passed, we realized the water stains only appeared on the days the bathroom floor was being cleaned. It turned out that there was a crack in the seal underneath the toilet. And when the floor was being cleaned,  some water got under the seal and landed on the basement ceiling below. Interestingly enough, this exact same scenario happened a second time, approximately 10 years later. But that time we knew what the problem was and how to fix it. 

 

They were a couple of occasions when our dishwasher overflowed and leaked on the kitchen floor. I guess the drain inside the dishwasher might’ve gotten blocked are clogged so water came out. We noticed a stain on the basement ceiling underneath the dishwasher the 1 or 2 times this happened, and we knew where the problem was. so we knew that that that it happened. Many years later we were to realize that this caused a more serious problem. When we changed our kitchen floor tile, there was mould underneath the tile, from the times when the dishwasher had previously leaked. 

 

One evening I was standing in our ensuite bathroom and was resting my hand on the windowsill. It was raining outside, but it also felt like it was raining inside on my arm. My arm was getitng wet. This was very strange it didn’t make sense. After calling a roofer who checked the outside of the window for leaks, it turned out the eavestrough above this window had a flaw in it. Rainwater in the eavetrough was backing up entering the bathroom through the trim around the window. 

 

The most recent water damage occurred two years ago. There was a water stains in the middle of our basement floor. There were no water pipes nearby. Where could the water have come from ? We noticed the water stain would appear and dry out every few days over a few weeks. We thought we had a leak in the basement foundation. When a water restoration expert arrived to investigate, he thought the water was coming in through some cracks in the basement foundation. There were cracks in the exterior foundation, but based on his moisture measuring device, it wasn’t clear if the water was entering through the foundation cracks. A few days later, the restoration company sent someone to open up the basement wall. Turns out the waste/drain pipe from our dishwasher that was behind the drywall had completely broken off. Every time the dishwasher was used, water would leak on the floor. 

How can my credit score affect the cost of my home insurance

Most insurance companies in Canada & the United States find that policyholders with good credit ratings (i.e. good credit scores) have fewer and less severe claims. As a result, insurers are looking for clients with good credit ratings, and they have been rewarding them will discounts and lower premiums.

For the last few years in Ontario, most insurance companies use your credit score to determine your home insurance premium. A good credit score will help give you a cheaper home insurance premium.

One of the questions policyholders ask, is “I don’t remember giving the insurance company permission to access my credit score ? So how can they ? ”

That’s a great question. Most current home insurance application forms give your insurance company permission to access your credit score. But if you’ve had home insurance with the same insurance company for many years, it’s not clear whether or not they are using your specific credit score to determine your premium. That’s because many years ago, home insurance applications did not explicitly give insurance companies the right to access your credit score. So some insurance companies require their legacy policyholders to sign a consent form that explicitly gives them the right to access your credit score. In the case of older home insurance policies, when they don’t know your specific credit score, your home insurance company may renew your policy by assuming you have an average credit score, or they will provide a credit score based on your postal code. In cases of ‘postal code credit scoring’, insurance companies access the average credit score in your neighborhood, and your discount will depend on the credit score of you and your neighbours.

There are usually two ways your home insurance company can apply a credit score discount for a new policy holder;

  1. Provide a credit score based on your specific information. Information used is your name, address, date of birth. But why doesn’t this always work ?
    1. What if your legal name is “Anthony”, but you always go by “Tony”. Just suppose when you speak to the insurance company you tell them your name is Tony. The insurance company may not find a credit report for Tony living at your address, resulting in a higher price for your insurance. But they find a really good credit score for “Anthony” living at your address. You should let the insurance company know the official name used on your legal documents &/or the official name used with your credit card & loan companies.
    2. Just supposed you’ve recently moved, and the new address hasn’t been updated with your loan/credit card companies. Perhaps the credit bureau haven’t been notified of the new address by the credit companies, which means the insurance company won’t find a match when they try to access your credit score using your new address. You may have to provide your previous address or the address most recently associated with your credit companies to generate a credit score ‘hit’ and provide the best possible discount.

2. A generalized credit score discount depending on the area you live in. This is used when a customer doesn’t give their insurance company permission to access their credit score.

When your insurance company accesses your credit score, it’s treated differently than applying for a credit card or a loan. Each time you apply for a loan or credit card, an entry is registered on your credit history. In the case of a home insurance application in Ontario, it’s referred to as a ‘soft hit’ on your credit history. The insurance company sees your score, but the application for home insurance isn’t registered with the credit bureau and doesn’t have an impact on your credit score or credit history.

Most people want to pay the lowest price possible for their insurance. But some people aren’t comfortable with insurance companies using their credit score – we’ve had discussions with many policyholders who are offended by the topic, and feel it’s an invasion of their privacy.

We recommend consumer exercise caution when consenting to the use of their credit score to calculate their home insurance premiums. Ask your insurance broker to check your premium with and without the credit score discount. If you’ve got a good credit score you’ll likely receive a lower rate. If you’ve got a bad credit score, your rate will likely increase.

For a quote on your home insurance, please Click Here . During the quoting process, you should see an option that allows you to give permission for your credit score to be used in the quoting process.

In our next blog, we’ll give some specific examples of how a good, average, bad, and neighborhood credit score can affect your premiums.

 

 

What do you do when you aren’t happy with your home insurance claim

One of our long time clients, Robert, had a water damage claim on his home insurance almost a year ago. We thought the claim had been proceeding satisfactorily, but it turned out that it had not.

Water had leaked from Roberts kitchen, and damaged a lot of the kitchen cabinets below the counter-top.

The insurance companies claim adjuster gave Robert the choice of proceeding with the repairs using one of their preferred contractors, or Robert could take a cash settlement and use that money to arrange his own repairs and find his own contractor.

Robert decided to use the contractor recommended by the insurance company. In most cases, that’s a good choice. When starting a renovation to repair water damage, you often don’t know the full scope of the damage until you remove the drywall, flooring, and kitchen cabinets. Once the underlying structures are revealed, sometimes unexpected water damage or mould is revealed (perhaps there was mould damage to the basement ceiling that you couldn’t see because it was inside the ceiling ). Since Robert was using the contractor recommended by the insurance company, it would have been fairly straightforward for that contractor to report any additional damage to the insurer, and receive authorization for additional repairs. If Robert had taken a cash settlement instead, and hired his own contractor, he would have faced a more lengthy approval process to get the additional newly exposed water damage repaired.

Robert’s house was older, and needed some renovations. For more than a year, Robert and his wife had been talking about renovating their kitchen, and upgrading their kitchen cabinets. So they decided to do these renovations at the same time the water damage repairs were being completed.

This is when the claim got tricky.

The insurance company was obligated to put Robert’s kitchen back in the same situation that it was before the water damage occurred. This is the same for most home insurance claims. This meant replacing and repairing the kitchen cabinets below the counter-top. Any changes to the upper kitchen cabinetry would be up to Robert to organize and pay directly with the contractor.  Robert felt that the quote charged by the insurance companies contractor for the extra work was excessive, and he didn’t want to pay for it. It also didn’t make sense for Robert to hire a separate contractor to replace the upper Kitchen cabinets – he was worried that by using two different contractors, the  upper cabinetry might not match the lower cabinetry in terms of material and workmanship. When Robert approached the insurance company about the problem, they reminded him that this extra work was beyond the scope of the claim, and although they could try to influence the contractor to provide a price more suitable to Robert, they couldn’t force the contractor to give Robert a lower price.

We are negotiating with Robert and the insurance company for a second contractor (recommended by the insurance company) to come in and give a quote for the water damage repairs and the additional work. We also re-opened the option for Robert to take a cash settlement and hire his own contractor to do all the work. The last option is risky due to the potential for additional water damage to be uncovered as the work progresses – but it will solve the immediate problem.

 

Home Insurance Discounts

Would you like to save money on your home insurance premiums ?

Although there are some pricing/rating factors that may be out of your control (we discussed these in our earlier blog  Factors that determine your home insurance rate ) there are many discounts available to lower your home insurance rate.

The deductible is one of these options.  Most companies have a minimum $500 deductible but increasing the deductible can make a substantial difference.  Most home insurance companies offer $1000, $2500 and higher deductibles.

You can choose to insure both your home and auto policy with the same company and save money on both policies.  Insurance companies also reward loyalty.  If you have been with them for a certain amount of time you will qualify for a lower price.

Another way to save money is to have an alarm installed in your home.  Most companies will give a discount for a monitored burglary and/or fire alarm.  All that is needed to get this discount is an alarm certificate from the monitoring company.  Some Insurance companies like Wawanesa Insurance also give a discount for a local alarm.  This means an alarm will sound if an intruder gets into your home but the alarm is not connected to a central monitoring station.

Financial stability and credit can also generate discounts.  Many companies offer a discount if you are mortgage free as well as significant savings depending on your credit history. We’ll talk more in a subsequent blog about how maintaining a good credit rating can lower your home insurance ratings.

Sewer back up and water damage coverage’s  are a big portion of the home insurance premiums.  Some insurers like Intact Insurance  offer a series of sewer back up prevention discounts.  Installing a backwater valves which is attached to the main service line in your home or a sump pump could entitle you to a discount.  Lower rates are alo available if you have a tankless water heater.  This is a heating system that instantly heats water as it flows throughout your home but there is no hot water stored in your home except for what is in the heat exchanger.

Some discounts like the new home discount apply only for a period of time.  This discount decreases on an annual basis as your home ages. Once your home reaches a certain age the discount will no longer apply.

A good tip to remember is to always tell your broker about the discounts you think you should qualify for.  We look forward to hearing from you !

Important factors that impact your home insurance rate

There are many factors that go into making up the premium for home insurance.  These are known as rating factors. We will talk about the discounts and the factors that increase your price in a later blog.  Today we will focus on some basic factors that you may have little to no control over that figure into the calculation of your home insurance premiums.

The home itself is a factor in the price.  The age of the home, size (in terms of square footage), the location, the postal code, the heating, roof, plumbing and electrical updates all factor in.  Some factors are dependent upon how old your house is.  Most insurance companies offer a newer home credit.   Travelers Canada  will give a credit for a home 19 years of age or less.  When the home is brand new it will generate the highest discount but the savings decrease each year as the home ages.  The hot water tank is another one of these factors.  Since older hot water tanks can leak, the water can damage your basement and cause an insurance claim. So, the newer the hot water tank, the more money you can save.

Insurance companies also look at the age of the homeowners.  Most companies will factor the policyholders age into their pricing and credit is often given for those age 50 years of age and over.

The construction of the home is another factor.  Many older homes are solid brick compared to new homes which are brick veneer or siding.  A solid brick home is considered a sturdier construction, and will generate the best price.  Location is also a vital rating factor – some clients have found this out the hard way by moving only a few blocks away resulting in an increased premium.

The size of the house is one of the most important factors in determining the rebuild value for the home (i.e this is the amount of insurance you need on your home).  Many people are confused about this topic since they usually pay MORE than the rebuild value when they purchase their home. When you buy a house the purchase price includes the building and the land value, but for insurance purposes, insurers only look at the component related to the building/structure on the property.

Your stability as the homeowner is also taken into account – living at the same property for many years is a positive factor. Most companies have a mortgage free discount and some type of valued customer rating based on their credit score which we will further discuss in our next blog.   Your previous claims history, as well as your due diligence in maintaining continuous property insurance are also important in the rating process.

Welcome to Home Insurance in Toronto’s Blog !

Hard to believe, but we’ve finally got our blog setup.

This seems like a great way to talk about home insurance in Toronto. Interesting topics that we’ll cover in later blogs include sewer backup, installing sewer backup valves & sump pumps to help prevent sewer backup. There’s also several new water damage coverages that companies like Intact Insurance have started to offer such as surface water, ground water, and service lines. More on these topics later.