Water Watch

Fire may rank as the top concern for tenants and homeowners in both Alberta and British Columbia, but it is water that tops the list in terms of insurable damage. That said, water damage, the most commonly claimed peril, was often overlooked when surveyed Albertans and British Columbians were asked to think about risks to their homes.

Results of an online survey undertaken by Canadian Direct Insurance (CDI), which operates throughout B.C. and Alberta, indicates that while fire ranks as the top concern for tenants and homeowners, fewer than one in five people worry about water damage. In all, 1,011 people took part – 506 in Alberta and 505 in B.C.

Based on claims data from CDI customers, survey results show that burst indoor pipes are the top cause of loss by water damage. Other common causes of water damage are sewer and storm drain back-up, domestic appliances, toilet and hot water tanks, and roofs.

Water damage resulting from sudden or accidental events is typically covered by home insurance policies, although there are certainly exceptions that insurers and brokers should discuss with customers. Leaking roofs and clogged eaves, which are a common source of outside water damage, may not be covered if the problem resulted because of a lack of maintenance.

With the extensive flooding in 2013 in Alberta, which forced many Calgarians to evacuate, survey respondents in the province voiced understandably more concern over water damage than their B.C. neighbours. Consider, for example how the top three concerns for polled tenants and home-owners differ in the two provinces.

In Alberta, fire was cited by 33% of respondents, water damage by 23%, and theft by 18%. Compare that to British Columbia, where fire was noted by 30% of respondents, theft by 19%, and water by 17%.

AVOIDING DAMAGE

Away from home

Approximately half of respondents in both provinces arrange to have someone check their homes for water leaks when travelling for longer than a weekend. Doing so is important because many policies have limitations or conditions around water damage caused by freezing if insureds are away from their homes for a certain period of time. Customers should be encouraged to read their policies to understand any limitations.

Flooded basements

Flooded basements are another common problem during any rainy season, and though residential damage from overland flooding is not usually insured in Canada, customers may have coverage for water back-up from sewers, storm drains or sump tanks.

It is important for customers to understand what their policies cover, and ask insurance advisors or brokers what coverage they have for sewer or water back-up – as well as whether or not there are separate limitations or deductibles for a sewer back-up claim.

Loss as a result of mould or pollution is typically not insured. Like any other maintenance issue, mould should be addressed immediately so that the problem is not exacerbated.

Noticeably absent from the “top three” lists for both provinces is earthquake, which occupies the fourth spot among respondents in B.C.

(The survey found that when B.C. tenants and homeowners were asked about potential damage to personal property in their homes, just 10% cited earthquake as the top concern.)

Based on historical customer data (excluding catastrophic events) for CDI customers, the most commonly filed claims are as follows: water damage (which includes sudden and accidental water escape, back-up or rupture, such as a pipe burst, sewer or storm drain back-up, domestic appliances such as washing machines, dishwashers and refrigerator water dispenses, and hot water tanks); theft (which includes burglary both on and off the insured premises) and mysterious disappearance (for example, lost jewellery pieces).

ON THE RISE

Both the frequency and value of water damage claims are on the rise, attributable to extreme weather events and the growing trend of well-appointed basements containing expensive furniture and high-end electronics.

While policies differ among providers, the general guideline is that most damage from sudden or accidental events is covered – with some noted exceptions, such as flood – but damage from lack of maintenance (such as neglected roof repairs) is not.

Value calculations

Calculating the value of personal belongings is a key measure for protection against loss, yet the survey found that only about one-third of respondents in both provinces have taken that preventive step. Both tenants and homeowners are urged to document their belongings – including basics like kitchen items and linens – by taking photos and shooting video.

While the majority of tenants who participated in the poll correctly realize their personal property is not covered by their landlord’s insurance, a quarter of renters do not realize that. Uninsured tenants also lack liability coverage, which protects them from being sued if they accidentally damage someone’s property, or injure another person.

Model changes under way

Unpredictable and extreme weather – think ‘hail alley’ in Alberta – is changing the way Canada’s insurance industry provides coverage. Increasingly, companies look to be moving to a model in which perils are covered as part of a “menu” of add-ons – each with its own deductible.

This approach puts more emphasis on the need for customers to understand their policies, and their limitations.

Deductibles, for their part, are set at a peril level. Insurers and brokers need to communicate with customers to make sure that coverages and options are well-understood.

TENANT/HOMEOWNER DIVIDE

Looking at the prevalence of home insurance claims among the surveyed owners and tenants, almost a third of homeowners in both provinces have made a claim compared to only eight per cent of tenants.

Older homeowners (defined as those aged 55 or older) are about twice as likely as younger homeowners (defined as those aged 35 and 54) to have made a claim. Older respondents are also most likely to have undertaken preventive maintenance, such as gutter cleaning, roof repairs and appliance inspections.

With the new season – be that featuring either rain or snow – customers should be urged to familiarize themselves with their home insurance policies to ensure that they understand how best to protect themselves from this most frequently claimed peril.