On July 8, the Insurance Bureau of Canada (IBC) reported that the huge hailstorm that hit northeast Calgary, Airdrie, and the surrounding area ended up causing close to $1.2 billion in insured damages. With more than 20,000 claims made, the majority of the damage was to personal property and vehicles, with some being claimed by commercial property owners.
It was the fourth most expensive natural disaster in Canadian history, but the most expensive hailstorm of all time. The Fort McMurray wildfire in 2016 continues to top the charts as the most costly catastrophe at $4 billion, with the 2013 floods in southern Alberta coming in second at $3.5 billion.
The Alberta Government has provided disaster funding for those who have suffered losses from uninsurable damages. Hail and sewer backups are covered by insurance, however some people experienced overland flooding, which may not be covered depending on the policy. People will be able to start applying online for the recovery program on June 29, with a deadline of Sept. 23, 2020.
Thankfully, there is some relief in sight for those who experienced overland flooding, but, that’s not actually not costing the most to homeowners. In a recent CanadianUnderwriter.ca article, an IBC spokesperson is quoted saying that some homeowners may be only receiving a small portion of the total amount of damage to their home from their insurance company because they chose actual cash value coverage rather than replacement cost. Although it is a way to lower insurance costs, actual cash value insurance is often not worth the savings.
How Does Actual Cash Value Insurance Work?
Actual cash value refers to the current market value of items in your home. It is usually calculated by taking the item’s original purchase price, then factoring in any subsequent appreciation or depreciation. So, if you have actual cash value coverage for your property, you will not receive the full amount to replace an item from your claim unless that item is brand new or has appreciated.
For example, if your washer and dryer were damaged in a flood but they were ten years old, with actual cash value insurance your insurance company would only provide their value as of today. They would not provide the full amount needed to purchase a brand-new washer and dryer.
The value of your property is generally calculated using one of three methods:
- By factoring in depreciation, or the decrease in the value over a period of time
- By assessing the property’s “fair market value”
- By using the “broad evidence rule,” which essentially means comparing the property against a number of others that are similar
The initial appeal of an actual cash value insurance policy is obvious. They have lower premiums. Many who purchase home insurance bank on the hope that they will never have to file a claim. The truth is, however, home insurance claims are more common than one may think. And especially lately, given Calgary and Alberta’s recent experiences with hail, fire and flood. Extreme weather has taken an extreme toll on this province.
But even without the bad luck Alberta has had, Zacks.com’s article “How Often Does the Average Homeowner File Insurance Claims?” says that the average homeowner will make a claim every nine to 10 years. Given that most people have 25-year mortgages these days, that means as a homeowner you can expect to make at least two home insurance claims and maybe more.
The most common summer home insurance claims include flooding, hail damage, fire, and burglary.
Replacement Cost Insurance
Instead of actual cash value, replacement cost insurance is highly recommended. Replacement cost insurance differs from actual cash value insurance in that it reflects the amount of money you would have to spend to replace a damaged or stolen item. Thus, depreciation does not factor in. It is a far stronger type of insurance that provides additional peace of mind.
Mind Your Roof
Keeping your roof in good repair is essential for not only ensuring the protection of everything underneath it, but also to ensure you will receive its full value or close to it when it is damaged due to unforeseen circumstances. Most policies take into consideration the age and condition of your roof before considering reimbursement. You may need to prove that you have been carrying out regular inspections and making repairs as needed. As a rule, if your roof is more than 10 years old, depreciation value will be factored in, meaning you will be unlikely to receive your roof’s full replacement amount.
Home Insurance in Calgary: Get the Lane’s Team Working for You
Lane’s Insurance is a leading Alberta insurance broker. Choosing a broker is a wise move for consumers looking to protect their interests when dealing with insurance providers. Brokers work for you, not the insurance companies, so they always look out for your best interests and they never recommend products that don’t fit your need just for the sake of making a sale.
In addition to home insurance, Lane’s Insurance offers a complete range of policies and coverage options for just about every imaginable situation. You can count on Lane’s for great rates on auto, business, travel and health insurance, and more.
Lane’s Insurance is pleased to serve homeowners and residents throughout Alberta. Use the following regional links to contact us at: