Homeowners need to watch for unexpected liabilities
While most homeowner’s insurance policies contain adequate liability coverage, there are circumstances in which a standard policy may not be enough.
Your net worth is a snapshot of your financial life at one moment in time. It's the total of everything you've earned and spent during your lifetime - your assets versus liabilities.
Whether you're protecting yourself from damage to your car with auto insurance, or using a life policy to protect your family's future, you already know how important it is to protect those assets.
But have you been devoting the same attention to potential unseen liabilities? What would you do, for instance, if something happened to someone on your property? Are you adequately covered?
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.
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.
Even day-to-day issues can change into unexpected problems. What about pets? What if someone fell on the walkway you were supposed to fix?
According to the Canadian Safety Council, approximately 42 Canadians are bitten every hour by a dog. You're responsible for any injuries if your pet bites someone, whether it's on your property or not - another reason to review your homeowner's policy.
Backdating a disability claim, for instance, raises the costs of benefits plans to employers and affects group rates. The same goes for bogus claims by homeowners that typically appear after a fire or burglary.
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 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
You might also have more unusual liability risks compared to the average home or cottage owner, in which case, you should look at additional coverage. An 'umbrella' insurance policy, for example, can help you protect your assets.
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 and auto premiums, according to the Insurance Information Institute, an industry-sponsored non-profit group.
While that might be more than you need, you could still be at risk if, say, you're running a home-based business.
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.
"What you think you're saving by not paying for an additional insurance policy is nothing compared to what you stand to lose," she warns.
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 will not be covered under your auto insurance policy, because theft of contents from a vehicle is covered under home or tenant's insurance," Olson explains.
What's worse, "because the product is related to a business, and you haven't disclosed to your insurer that you're running a business from your home, your home or tenant's insurance policy will not cover the loss," she adds.
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