Insurance companies insist on insurance to full value, and in turn most policies are paid out on a Guaranteed Replacement Cost basis. This to ensure that the consumer has coverage to full replacement value of their dwelling, despite the market or construction conditions at the time of a claim. However, it is important to note that wordings for Guaranteed Replacement Cost excludes “any repair or replacement due to the operation of any law regulating the repair or construction to the building”. This is referring to any Bylaw or Building Code Upgrades applicable to a unit at the time of repair or reconstruction vs what it had at the time of loss.
A standard example of when Bylaws coverage applies would be with respect to the fact that various cities and municipalities now require interior sprinkler systems in all new construction. This is something that the original home did not have but is now required due to city bylaws. One must have bylaws coverage for this additional cost to be covered under their insurance claim. If not, they may face a large bill.
It is not unusual for large losses to have the bylaw/upgrade portion of the claim be upwards of $50,000, if not more. If your home is older, it is recommended that customers purchase a high, if not the highest, limit of bylaws coverage. If your home is newer in construction, we suggest customers keep abreast of any major changes within their community, like adding the requirement for interior sprinklers, to ensure they have an adequate Bylaws and Code Upgrade limit.
Global warming and climate change are bringing about extreme weather patterns on a regular basis. The Calgary floods, Snowmageddon in British Columbia this year, regular ice storms in the Eastern Provinces, and extreme blizzards in the Maritimes are all examples of weather that cause claims, and Water Damage coverage is evolving as a result.
The standard insurance policy “Water Damage To Your Dwelling” wording includes water damage coverage for accidental escape from a watermain, escape of water or steam from a plumbing, heating, sprinkler or air conditioning system, or domestic water container located within your dwelling and outside your dwelling (unless caused by freezing), water which enters your dwelling through an opening caused by an insured peril, water which enters the dwelling through a roof resulting from accumulation of ice or snow, burst pipe and rupture of appliance or heating unit.
Most policies also include or have available for purchase Limited Sewer Backup, for damage resulting from sewer backup, sump pump malfunction or septic.
However, companies such as Canadian Northern Shield are now offering another coverage option level to include coverage for occurrences such as fresh water flooding and damage caused by eaves, downspouts and drains. Wawanesa Insurance is in the process of rolling out a product enhancement. It is important to remember that each Insurance company will have their own variation of coverage.
As water damage is now considered the industry’s largest cause of loss, it is important to take note of the restriction applicable to the coverage. Most policies have restrictions and/or requirements with respect to water if you are away from your premise for an extended period of time during the heating season. There is not an option to cover damage caused by continuous or repeated seepage or leakage of water. It also does not cover the actual damage or repair to the source of water damage (the actual watermain, appliance, heating/air conditioning unit, or pipe itself). There is also often no coverage if the building is under construction or vacant, even if the insurance company is aware of either scenario.
Precautions are the best way to prevent losses. Regular household maintenance, water and heating alarms, backwater valves or automatic shut off systems go a long way in minimizing the chances and amounts of a loss.
“MacDonald-Gill Insurance, where we take care of policies, but more importantly people”