5 Things That Affect the Cost of Home Insurance During the Pandemic

• Some insurers are including a communicable disease exclusion in their policies.
• A home insurance policy is not a commercial insurance policy.
• The greatest threat to your home year-over-year is flooding.

There’s little doubt the COVID-19 pandemic has influenced everyone’s way of life. Though hope is on the horizon as vaccines against the virus make their way into Canadians’ arms, many of us intend to keep working from home for the foreseeable future.

That, in turn, leads to questions about home insurance and its costs. COVID-19 isn't a significant factor affecting the price of a home policy on its own. However, some insurers on Prince Edward Island are including a communicable disease exclusion in their policies to protect themselves from claims related to COVID-19. The exclusion prevents anyone who contracts the disease while visiting someone else’s house from making a claim against the homeowner’s policy. Whether we see insurers in other parts of Canada do the same remains to be seen. Generally, pandemic risk is not insurable because the insurance industry is unable to provide protection for losses where there is no way to diversify this risk since the pandemic is affecting the entire world at the same time.

Nevertheless, changes to your situation at home due to the pandemic could have some implications for your home insurance. Here are five things homeowners should be mindful of that may influence the cost of a property policy during the pandemic:

1. Working from home

As folks started working from home in early 2020, the Office of the Ontario Fire Marshal reported a 65% increase of fire-related fatalities between January and May. Some fatalities were related to kitchen fires from cooking or people microwaving disposable face masks to sterilize them for reuse (note: that is not a good idea).

The shift from daily office life to working from home partially or fully may continue for many Canadians even after the pandemic is brought under control. But don’t assume your existing policy covers working from home. A home insurance policy is not a commercial insurance policy. Depending on the nature of your work, you may require a commercial policy to be adequately covered. Typically, a home insurance policy won't cover:

• Business equipment that is damaged while in your home.
• Business equipment that is stolen or damaged while in a vehicle or outside of your home.
• Tools that are stolen or damaged while in a vehicle or outside of your home, if used for business purposes.
• Injuries to business clients who may visit your home.

Have a conversation with your broker to determine if you need to make changes to your existing coverage if you are working from home or running an independent business out of your abode.

2. Renting out a portion of your home

Many people may be renting out a room or basement apartment to help manage their costs while the pandemic persists. If you are one of the thousands of Canadians who have a renter or border, you must inform your insurer. Also, make your tenant aware they will need a tenant insurance policy to cover the cost of their personal belongings and provide them with liability protection. Your property policy will not pay for damages or losses a tenant suffers due to theft, fire, or a flood, or if someone visiting your tenant is injured on the property.

3. Renovations to your home

Since you’re spending more time in your abode, you may have decided to undertake a renovation project. In a RATESDOTCA survey in October 2020, 16.44% of Canadians said they did or planned to embark on a renovation project during the pandemic. Be aware, though, that renovating any portion of your dwelling may require changes to your insurance. For example, if you remodel your kitchen and use expensive finishes like marble, hardwood, and granite, that will cost more to insure than a home with more modest materials. Insurers look at the home’s replacement value, which is the cost to rebuild your house if, for example, it is destroyed by a fire.

But homeowners may want to ask their insurers how their policies may be affected if they decide to do renovations or need to rebuild their homes after a disaster such as a fire. That’s because the cost of softwood lumber has shot up by 120% in the past 12 months, causing some consternation about the potential repair or rebuilding expenses they will have following a disaster.

Before beginning your renovation project, read the fine print of your insurance policy. Your coverage may be void during construction. That's because the work results in a greater risk of damage. You have workers on site. Your building may have exposed areas. That exposure means there's a greater likelihood of theft or damage from weather, floods, or other hazards. Make sure the contractor you hire has a liability certificate with your residential address on it to ensure your home is protected for any damage during construction under the contractor’s policy.

4. Damage prevention and smart home technology

Reducing the risk of damages to your property and dwelling is always a smart move. Taking advantage of technology to beef up your home’s security can help you do that, and in some cases, get you a discount on your premium.

Whereas so-called smart home technology was once a niche industry, it’s becoming common, and it is estimated 15% of households worldwide will have at least one smart system installed by 2023. Meanwhile, one 2019 survey found 27% of Canadians have at least one smart home technology, and 78% intended to purchase more in 2020. Of the home technologies Canadians say they’re most likely to buy, smart assistants lead the way (55%), followed by smart appliances (38%), lighting control systems (37%), and security systems and cameras (36%).

Security systems and cameras can up your property’s protection. Other technologies such as smart water sensors, smart smoke and carbon monoxide detectors, and smart doorbells can also play a role in mitigating risk to your digs.

5. Climate change and flooding

With the pandemic prompting many businesses to give their employees more flexible work arrangements, people may be working from remote locations other than their homes, such as a cottage. If you’re not at home, how will you know if a flood strikes?

When thinking about the risks your dwelling faces, the most significant and widespread threat year-over-year in Canada are floods.

In a recent Intact Centre of Climate Adaption report, "Climate Change and the Preparedness of 16 Major Canadians Cities to Limit Flood Risk (February 2021)", the average score of the cities assessed was C+. Yellowknife and Winnipeg had the lowest scores (D), while Toronto, Edmonton, and Regina had the highest (B+). Furthermore, IBC notes insured damages from severe weather events across Canada reached $2.4 billion in 2020, making 2020 the fourth-highest year in insured losses since 1983.

Of note, a 2018 IBC survey found that almost 45% of Canadian homeowners believed they had flood insurance, yet 37% were not confident about what is and is not covered in their policies. A standard home insurance policy does not include protection against overland flooding or if a sewer backs up and makes a revolting mess in your house. Give your broker or insurer a call and ask them to add these types of coverages to your policy.

In the meantime, here are a few things you can do to reduce the risk flooding poses to your place:

• Make sure your eavestroughs are clear of debris, and the downspouts are pointed away from your house.
• If you don’t have a sump pump with a battery backup, backflow valve, and alarmed water sensor installed in your basement, look into getting them.
• Check the foundation of your dwelling inside and out for cracks in the walls and seal them if you do.
• Use sealant on exterior walls, doorways, and windows to prevent water from leaking inside.

Other steps to take to protect yourself and your home

Statistics from the Canadian Anti-Fraud Centre show Canadians lost over $106.4 million to fraud in 2020; $62.6 million is related to online fraud. Some insurers provide optional coverage for identity theft and legal expenses as part of a home or condo insurance policy. Others may offer optional coverage against a cyberattack on your computing and connected devices, ransomware, or a data breach.

Also, know there are other factors that affect the price of the property premium you pay, including the dwelling’s location, replacement value, and more.

To ensure you’re getting the best price for the home or condo insurance coverage you need, take a few minutes to compare policies and premiums from a broad range of insurers. It’s free to get quotes and an easy way to find out if you can save money on your insurance bill.