Pitfalls with House Insurance
One of the key principles of insurance law is full disclosure. Any failure to disclose material facts important to assessing the risk being insured may result in coverage being voided.
Why? Because the insurer is only accepting risks based on the information provided. If the information is inaccurate, false, or misleading, or changes are made without notice, then the insurer may say they never would have accepted the risk if they had known the facts, or would have charged a higher premium in the circumstances.
With house insurance, it is important you work with a knowledgeable insurance broker. A good broker will ask you questions about your insurance requirements, ask about your present use or intended use in the future, advise you on the limitations of coverage, and find you the best product at the best price.
Once you have purchased house insurance or any property insurance, it is important that you update your broker on any changes to the use or occupancy of the property insured.
Material changes to report to your broker include:
- Carrying out renovations;
- Adding a rental suite, border, or home stay student;
- Whether a renter is family or not related;
- Vacancy, whether abandoned by former tenants, to conduct repairs, or time to find new tenant;
- Trading homes with others for vacation purposes;
- Having a nanny or their spouse move in with you;
- Conducting business at the home, garage, or on the property, or storing business equipment.
The reported change may result in a new premium being charged to you for the change or additional coverage. By reporting material changes, you ensure your interests are protected. A failure to report may result in no coverage.
A common example where coverage is denied is when a house is left vacant for a period of time without notice to the insurer. This will happen where the owner rents out the house to tenants, the tenants abandon the house, the owner finds out, conducts repairs, looks for a new tenant, and a fire breaks out before a new tenant moves in.
Unless the owner reported the temporary vacancy to their broker and paid for a Vacancy Permit or Endorsement added to their policy, coverage is typically excluded under the terms of the policy.
For more information visit Insurance Bureau of Canada.