Having been part of the insurance industry for over 28 years, we have come across many misconceptions that people have about property and automobile insurance. We thought it might be helpful to list some of the most common ones and to clarify the truth behind them!
Property Insurance
- Myth: Homeowner’s policies cover flood and earthquake.
- Truth: Homeowner’s policies do not automatically cover flood and earthquake. In Alberta, flood coverage is currently not offered by most Insurers, however, earthquake can be endorsed onto a policy.
- Myth: The Replacement Cost of a home is the same as the Market Value.
- Truth: The Replacement Cost is a calculation of what it would cost to rebuild the home, and does not take into account the market, land value, taxes, etc.
- Myth: Water damage is always covered on a Homeowner’s policy.
- Truth: The majority of Homeowner’s policies exclude certain types of water damage, some of which can be endorsed onto the policy.
- Myth: A personal umbrella policy provides coverage for your business.
- Truth: A personal umbrella policy covers your personal risks (ie personal automobile and home) only, and a commercial umbrella policy would be required for your business.
- Myth: If your jewellery is stolen or lost, it will be fully replaced.
- Truth: The majority of Homeowner’s policies have Special Limits that apply to items such as jewellery, so it is important to check with your policy wordings and discuss with your Broker regarding scheduling jewellery items onto your policy.
- Myth: Vehicles stored in your home or garage are covered under your Homeowner’s policy.
- Truth: Any motorized vehicles (such as automobiles and motorcycles) are not covered under your Homeowner’s policy and should be insured under a personal Automobile policy. Items such as garden tractors are considered part of your Homeowner’s contents.
- Myth: A landlord’s insurance policy covers the tenant.
- Truth: The landlord would likely carry coverage on the building itself (Rented Dwelling), however, coverage does not extend to the tenant, their contents, or their liability. A separate Tenant’s package for the tenant’s contents and liability is highly recommended.
- Myth: Your business interests are covered under your Homeowner’s policy.
- Truth: Business interests are not covered by your Homeowner’s policy and can be insured under a Home Based Business endorsement (if requirements are met), or under a separate Commercial insurance policy.
Automobile Insurance
- Myth: “Full Coverage” means you are covered for every circumstance.
- Truth: There is no such thing as “Full Coverage”, as there are limitations and exclusions to all policies. Different coverage options are available, such as Liability, Collision, and Comprehensive coverage. We highly recommend reviewing your coverage options with your Broker.
- Myth: There is a grace period when your insurance lapses.
- Truth: When the insurance company issues a cancellation notice, the effective date of cancellation is specified. There is no additional grace period given.
- Myth: Personal Automobile insurance covers you for business/commercial use.
- Truth: Personal Automobile insurance covers your for personal use of the vehicle only. There are different classifications and rates for vehicles that are used for business or commercial purposes.
- Myth: Your Automobile insurance policy covers you no matter what you are driving.
- Truth: Your Automobile insurance policy provides coverage for your vehicles that are listed on the policy. If you are driving someone else’s vehicle, their Automobile insurance policy would provide coverage.
- Myth: If you purchase a new vehicle, you automatically have “Full Coverage”.
- Truth: If you purchase a new vehicle, then the vehicle would have the same coverage as the one your replacing it with or as your other vehicles on the same policy. We highly recommend that you contact your Broker prior to taking possession of your new vehicle to discuss the use and coverage options and ensure you are adequately covered.
- Myth: The physical damage from the SEF 27 Legal Liability to Non-Owned Auto endorsement extends to cover a rented commercial vehicle, motorcycle or motorhome.
- Truth: The physical damage extends to a Private Passenger type vehicle only.
- Myth: You will not be held responsible if your friend wrecks your car.
- Truth: If your friend has an accident while driving your vehicle, your policy will respond and depending on the circumstances, your rates may be affected. We always recommend that you use caution when lending your vehicle to others and ensure that they hold a valid operators licence.
- Myth: New vehicles always cost more to insure.
- Truth: This is often the case, but the premium varies greatly depending on the type of vehicle and coverage options chosen as well.
- Myth: Automobile insurance rates always increase after a claim.
- Truth: The impact of a claim on your rates depends on the type. For example, an at-fault Collision loss could impact your policy, however, a Comprehensive claim such as hail damage would not. Some insurance companies also offer endorsements that give you one “free” at-fault loss without impacting your policy or rates.
- Myth: A lapse in coverage will not impact your rate.
- Truth: A lapse in coverage could impact your rate, depending on the length of time you have gone without an active Automobile insurance policy or been listed as a driver. When making the decision to cancel coverage or a policy, we highly recommend that you first speak with your Broker to discuss the future impact.
We hope that you have found this information useful. If there are any questions you have about insurance that you would like to have clarified, we would be more than happy to help!
Thank you,
The Costen & Associates Team
