Bylaws and Home Insurance: Expectations vs. Reality

Imagine a situation where you’re out to a fancy dinner in Canmore to celebrate an important milestone. Near the end of the dinner, you get a frantic call from a neighbour. Your home is on fire! Thanks to Calgary’s great fire fighting services, only your kitchen has significant fire damage. However, there is still smoke and water damage to other areas of your home.

It would be quite a shock, but luckily an adequate home insurance policy will cover most of the costs. You would be compensated for the clean-up, tear-down, and reconstruction of the damaged areas as well as for the replacement of your belongings. You’d also receive some help with additional living expenses if you needed to vacate your home during this process. However, the one thing you may not be covered for is the costs to conform to the updated bylaws of the city. This can be a huge expense depending on when your home was built and should be a concern for all homeowners, as municipal regulations are always changing. For example, if your home had been built 50 years ago, there would be a lot of updates you would be required to comply to – and these upgrades wouldn’t be covered by your home insurance.

Bylaws and home insurance aren’t often thought of together, but it’s important you consider the impact of municipal regulations on your home insurance and finances in the event a catastrophe occurs. While the expectation is that bylaws would be covered in your home insurance, the reality is that they’re often not included in standard coverage.

Bylaws and Home Insurance: How Home Replacement Cost is Affected

Bylaws are difficult because they are constantly changing. These changes are necessary to help protect lives and infrastructure, however, they can be a nightmare to deal with when you’re rebuilding a home after an insured claim. That’s because most standard home insurance policies agree to rebuild your home nearly exactly like it was. However, this is sometimes impossible as bylaws have changed to prohibit certain designs or materials.

For example, if an Edmonton home that was built 30 years ago were to be rebuilt after an insured loss, the reconstructed property would need alterations to comply with the current municipal bylaws. Say, hypothetically, it was now regulation for all homes to install a sprinkler system. These can be up to $2,500 or more. Since this was not a part of the home which was destroyed in the first place, your insurer probably won’t compensate you for this additional cost. Generally, if a property is over a decade old it no longer meets the requirements of the present public regulations.

Basically, bylaws increase your home’s replacement cost. However, these changes are not covered as it was not originally part of your home as per your insurance contract.

Bylaws and Home Insurance: The Exceptions

There are two exceptions where bylaws wouldn’t impact your insurance coverage:

1. Your insurer pays out actual cost value or replacement cost instead of rebuilding.
2. You have an add-on that covers bylaws.

In the first case, your insurer does not require you to rebuild your house as-is. Instead, your insured claim is paid out based on your settlement option and your policy limits. As the insurance company isn’t rebuilding the house, you’re free to construct the building you want. Of course, you’d still have to follow the bylaws, but you could alter your rebuild to be within your budget.

In the second case, you have an endorsement or add-on coverage that would cover the cost of updating to current bylaws. So, if you had an insured loss and needed to rebuild your home, the difference in costs to be compliant to municipal regulations would be covered. Otherwise, you’d be on the hook.

Some insurers are now including bylaw coverage in some of their comprehensive home insurance packages. Check with your broker to see if bylaws are covered.

 

 

In order to protect yourself, you should discuss your options for covering bylaw update expenses with your independent insurance broker. Insurers and policies differ from company to company; some companies will include this coverage, where a lot of others will request that you add it to your policy.

Whether you’re an established home buyer or you’re looking to enter the real estate market for the first time, leaving some room in your budget for home insurance is key.

The good news is, our insurance experts have compiled 10 ways that can help you save on your home insurance. Check out the list below, then contact your Sharp Insurance broker to see if you can take advantage of one (or all) of these discounts.

1. Bundle and Save

Insurance companies want your business, and they want you to consolidate all of your insurance needs in one place, on one policy. The good news is that by bundling your home, tenants or condo insurance with your other insurance needs like your car insurance, you could save up to 20%.

As an added benefit, your insurance becomes simplified with one premium, one renewal date, and in the event of an incident involving your home and car, you only pay one deductible.

2. Guaranteed 5%

There is lots of choice when it comes to direct writers and insurance brokers in the market today. That’s why at Sharp, we guarantee we can save you money on your insurance. On your next renewal, bring your policy to Sharp and we will beat your current premium price by up to 5% – guaranteed. Some conditions apply. Policy must be within participating markets. To learn more or get a quote, contact us today.

3. Purchase a newer home or condo

Newer homes, that are roughly ten years or younger, are more likely to have updated roofs, electrical and plumbing – making them less likely to have a claim. Many also come with sprinkler systems or water damage prevention devices. If you’re in a newer property, ask your Sharp Insurance broker if you are eligible for discounts.

4. Location, location, location!

Another thing insurance companies will look at when determining your premium is the location of your property. They will often ask how many meters or kms to the nearest fire station or fire hydrant. Being near emergency services is more likely to save you money on your home insurance. On the flip side, if you are looking at a property close to the river or areas that are prone to flooding, don’t anticipate saving any money on your premium, as you’re at a higher risk of making a water damage claim.

5. Give your property a face lift

Whether you’re buying a new home or simply giving your current property some much needed renovations, it’s important to let your broker know. Certain renovations and upgrades can save you money on your home insurance. These include:

• A new roof – insurance companies love rubber, slate or steel roofs and other more fire and weather resistant materials. They often will come with a discount due to the grade of building material.
• Water sensors, sump pumps or backwater valves that help protect your property from water damage and can earn you valuable discounts.
• New electrical – increasing the amp’s to your home
• Heating – type of furnace or simply having it inspected and cleaned yearly
• Plumbing systems – type of plumbing, having an automatic shut off.  Did you know you can connect your plumbing system to your monitored alarm to watch in case of an issue?

6. Annual premiums

Many of the insurance companies we work with will offer discounts if you pay your premium annually in one lump sum, as opposed to paying your premium monthly. You could save up to 4% by paying your premium annually. Talk to your Sharp Insurance broker to determine if this is right for you.

BONUS TIP: Some insurance companies will also offer a discount to homeowners that are mortgage free.

7. Safety first

By installing devices that protect your home, belongings and loved ones you are not only more prepared in the event of a break-in or fire, but you may qualify for savings on your home insurance.

Houses alarms, sprinkler systems, carbon monoxide detectors and fire extinguishers are all great additions to help keep your home happy and safe. Talk to your Sharp Insurance broker about how they could help you save up to 20% on your premium.

8. Improve your credit score

Your credit score measures your financial health. More than half of Canadian insurance companies utilize your credit score as a way of calculating the likelihood of you making a claim. If you have good credit, you could be rewarded with preferred pricing on your policy.

9. Claims free is the way to be

If you have made several claims in the past it could show that there are underlying issues with your home, or that you live in an area more likely to result in a claim. The longer you maintain a claims free status, the less risk you present to the insurance company. Many insurance companies will offer discounts on your home insurance when you have been claims free for several years.

10. Talk to a broker

At Sharp, we’re not like the other guys. Since we’re not owned by an insurance company you know that we are working to find the policy that meets your needs at a great price. Great coverage, a low price, unbiased advice – what more can you ask for? Talk to a Sharp Insurance broker and start your home insurance quote today.

BONUS TIP: By increasing your deductible you can save on your annual premium. Did you know that many companies will let you place a deductible on specific types of losses – like water or wind and hail.  You can choose to increase those deductibles to save money – great thing to do if you are in a higher risk area.