While most homeowner’s insurance policies contain adequate coverage, first-time home or cottage buyers need to realize that there are circumstances in which a standard policy may not be enough.
If you're renovating, for instance, you're responsible for the workers that are on your property for the length of the project. Construction work can be dangerous, and your fix-up project needs to be viewed as a work site.
If someone is hurt on the job, you can be held responsible and that liability also includes risk to the general contractor, the workers on site and even any people passing by.
Your potential liability also includes any damage to neighbouring properties. If the vibration from your excavation project damages your neighbour's house, for example, the cost of that repair is your responsibility.
Check Contractors’ Liability Coverage
That's why it's important to ensure that any contractors have their own liability and Worker's Compensation insurance, along with any personal coverage you might have. Ask for the name of their insurance carrier and be sure to verify that their policies are in force.
Although the liability coverage in your homeowner's insurance should cover most damages if someone is hurt at your home, you should take the time to decrease the likelihood of slips and falls on your new property. That may mean:
- Installing handrails on staircases
- Fixing loose floorboards and stairs
- Repairing leaking taps or downspouts
- Fixing cracks in outdoor steps
- Removing outdoor debris such as stones and tree branches
- Adding lighting to outdoor walkways
Consider an Umbrella Policy
You might also have more unusual liability risks compared to the average home owner, in which case, you might consider looking at additional coverage through an 'umbrella' policy.
Some items that could warrant additional liability coverage include: a backyard pool or trampoline, personal watercraft or off-road vehicles that others use, or an approach to your home or cottage that can be difficult to navigate, especially during the winter.
A $1-million umbrella policy costs an average of $200 to $350 a year on top of the regular homeowner premiums. While that might be more than you need, you could still be at risk if, say, you're running a home-based business.
Home-based Businesses Present Problems
According to Lindsay Olson, a vice president with the Insurance Bureau of Canada, anyone running a business out of their home needs to have coverage that is specific to that business - either as an extension of their regular policy, or a separate business policy.
A successful home-based business might mean that you have more people coming and going and, therefore, more risk associated with the activities in your home. Or perhaps you're storing chemicals or other substances.
If this is the case, a basic liability limit of $1 million may not be adequate. In fact, some insurers might question a third-party claim by a customer or employee who is injured in your home, Olson suggests.
You could, for instance, be out of pocket for thousands if, while you're out delivering your orders, someone breaks into your car and steals the rest of your deliveries.
That loss wouldn’t be covered under your auto insurance policy because theft of contents from a vehicle is covered under home or tenants insurance, Olson explains.
What's worse, because the product is related to your business, and you haven't disclosed to your insurer that you're running a business from your home, your homeowners policy likely won’t cover the loss, she adds.