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Storms Put Spotlight On Home Insurance
Water damage not always covered
Are you covered for water damage under your home insurance policy? The question springs to mind after seeing Hurricane Katrina's catastrophic damage in New Orleans, as well as the local flooding caused by a southern Ontario storm on Aug. 19. You probably have stuff stored in your basement. It could be valuable stuff — computers, stereos, big-screen TVs — or things that mean a lot to you — photos, letters, books, household records. If your basement was flooded, would you be covered for losses? If so, for how much?
You don't know? Then, pick up the phone and call your insurance broker or agent (if you have one) or call the insurance company directly.
I made that call myself recently — as a result of all the heartbreaking news stories — and found my policy covers water damage caused by sewer backup, to a maximum of $50,000 per incident. Sewer backup is a major cause of basement flooding. Storm water can get into sanitary sewers — and then into below-grade structures —when storm sewers get overloaded and can't do their job in carrying water runoff. Some home insurance policies don't cover sewer backup at all. If you live in a flood-prone area, say Peterborough, you have to shop around — and you may not find anything available.
Other policies provide coverage for sewer back-up, but only if you ask for it and for an extra cost, about $50 a year. "Companies have different packages, effectively bronze, silver and gold," says Mark Yakabuski, vice-president of the Insurance Bureau of Canada, which has more than 100 member firms offering home insurance. "The silver and gold packages will automatically include it. There's merit in asking directly." What about water damage to your home that is not caused by sewer backup? Here, it gets more complicated.
If the water damage is caused by overflowing rivers, lakes, streams or creeks, you're out of luck. "Overland flooding," says Yakabuski, "is not covered and has never been covered." This would rule out home insurance claims from people in low-lying areas, where flooding occurs when storms burst through levees or dikes.
You're also out of luck if the water damage is caused by an earthquake — not insured — or soil movement in your yard.
But your policy will cover water damage caused by wind, hail, lightning or falling objects, such as trees — conditions that are insured. "With insurance, we're always interested in the source of the damage," Yakabuski says. "You have to identify what caused the damage in your basement, then link it up to what's covered under your policy." What about the popular perception that insurance doesn't cover "acts of God," such as storms? Don't believe it. Read your policy and you won't find any reference to acts of God. The idea that they're excluded is a myth. When determining which threats to your property are covered, you need to know what kind of home insurance policy you have.
Here's another question to ask: Do you have a standard package (the bronze, in Yakabuski's terms) that covers only certain named perils? Or do you have a more expensive policy that lists only what is excluded? The second type, while called an all-risks policy, doesn't cover absolutely everything.
Here's a list of what is covered, according to the Insurance Bureau's publication, "When Your Property Suffers Water Damage," at its website (http://www.ibc.ca):
· The sudden and accidental escape of water from a water main.
· The sudden or accidental escape of water or steam from within a plumbing, heating, sprinkler or air conditioning system or domestic water container located within your home.
· The sudden or accidental escape of water from within a domestic water container located outside your home (but not if the water escapes because of freezing).
· And water that enters through an opening created suddenly and accidentally by an insured peril other than water damage (such as wind, hail, lightning or falling objects).
So, what if your basement is flooded? What do you do next? Clean up as quickly as possible. Take steps to protect your basement from further damage. Remove the waterlogged stuff. But don't throw it into the garbage right away (unless it's a health hazard). Save it for the insurance adjuster, who has to assess the damage. It helps to have your own photos, too. Finally, take extra precautions if you run a home business from your basement. Instead of a homeowner's policy, you need a special policy that covers your computer equipment and files.
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