“Property” insurance, which includes insurance on homes and belongings, can protect you financially if your home, furniture, and some other types of belongings are damaged.
For example, if you insure your wedding ring and it is accidentally damaged, your insurer will have to pay to have it replaced or repaired.
Similarly, if a fire damages your home, your home insurance will pay you a certain amount of money to rebuild it and buy new furniture.
This article explains what you can insure under property insurance contracts, how the insurance contract is created and how it is applied.
Important! This article does not discuss automobile insurance, which is covered by more specific rules.
What You Can Insure
You can insure your own property or property belonging to another person. However, you must have an economic interest in the property you want to insure.
You have an economic interest if damage to or destruction of the property causes you direct financial damage.
For example, a person has promised to buy a building can have it insured even before she owns it.
What You Must Tell the Insurance Company
Before entering into a contract (policy) with the insurer, you have to make what is called an initial declaration of risk. This means that you must tell the insurer about anything that could have an impact on the insurance you’re applying for.
To the best of your knowledge and truthfully, you must declare relevant information relating to, for example,
- the property you want to insure (its value, features, condition, location, etc.),
- anything that can cause damage to the insured property, such as the fact that you have a welding shop in the basement of your house (risk of fire), and
- past events relating to the property you want to insure (e.g., the fact that your house has been broken into several times).
In other words, you must give any information that might be important for an insurer and that could influence its decision to insure the property. This information can also have an impact on the amount of the premium you will have to pay. The premium is what you have to pay for insurance coverage.
If the insurer asks you questions, you must answer truthfully and to the best of your knowledge. You cannot lie or conceal important details.
Important! You have to follow the same rules when you renew your insurance contract.
If you made a false statement to your insurer before entering into your insurance contract, the insurer can ask a court to cancel your contract. It can also have it cancelled if you failed to reveal information.
To have the contract cancelled, the insurer must prove one of two things:
- You intentionally made false statements or did not reveal certain information. This is called “bad faith”. This might be the case, for example, if you deliberately failed to mention the flooding that occurs on your land every year.
- The insurer would have refused to insure the property if you had given full and true information.
If the insurer cannot prove one of these two things, it will have to pay you for the damage caused to your property. However, it can reduce the amount of the amount it pays by establishing the difference between the premium you paid and the premium you should have paid.
When Coverage Begins
Your insurance normally begins once the risk of a loss starts for you (you buy a building, for example) and the insurer agrees to insure you. The date coverage begins is written in your insurance policy (contract).
In some cases, the insurer might provide you with a cover note - also called “interim” or “temporary” insurance. The purpose of this insurance is to cover your property before your main insurance starts to run.
Paying for the Insurance
The amounts you have to pay your insurer to benefit from property and home insurance are called “premiums”. They vary depending on these factors;
- the risks covered (fire, loss, theft, vandalism, etc.)
- the value of the insured property
- the amount of the insurance
You must pay the premiums at the time indicated in the insurance contract. If you don’t pay one of your premiums, the insurer can
- subtract the amount of the premium from any insurance pay-outs it owes you,
- take steps to force you to pay the premium (formal demand and action before the courts, if necessary), or
- send you a written notice that your insurance contract will end 15 days after you receive the notice.
Notifying the Insurer if the Risk to Property Increases
You must notify your insurer quickly when
- something has increased the risk of damage to the insured property,
- the increased risk results from events under your control, and
- the situation is likely to have an important impact on how the insurer sets the amount of the premium, evaluates the level of risk or decides whether to continue to insure.
An example would be if you decided to use your motorboat for commercial rather than personal purposes.
Once you have notified the insurer, it has two options:
- adjust the premiums for your insurance according to the new level of risk to be insured
- cancel your insurance contract
If the insurer chooses to adjust the premium, you have 30 days to accept it and pay the premium. If you don’t accept it or if you don’t pay it within 30 days, you will no longer be insured.
If you don’t notify your insurer of a situation that increases the risk, the consequences are the same as in the case of false statement or failure to reveal information.
Important! In the case of home insurance, you’re not required to notify your insurer of the following situations:
- You leave your principal residence for not more than 30 consecutive days.
- You don’t occupy (or don’t occupy very much) a residence insured as a second residence.
- You have maintenance or repair work done on your residence by tradespeople during a period of 30 days or less.
Notifying the Insurer of a Loss
When you realize that the insured property has been damaged, that is, that a “loss” has occurred, you must notify your insurer.
You must do this as quickly as possible, even if you’re not sure whether the damage is covered by your insurance (that will be up to your insurer to decide).
You can notify the insurer in writing (e.g., letter sent by mail or fax) or verbally (e.g., by telephone).
Once notified of the loss, the insurer might ask you for information about what happened. It might also ask you to provide documents. You must respond to these requests truthfully and as quickly as possible.
If you don’t notify your insurer of a loss or if you wait too long to do so, the insurer can refuse to pay you the indemnity, but only if these two requirements are met:
- Your conduct caused it harm (inconvenience, loss, etc.). This might be the case if certain evidence that would help assess the damage has disappeared over time.
- Your property or home insurance contract clearly states that you can lose your right to insurance for this reason.
Receiving an Insurance Payment
The insurer must pay the insurance payment no later than 60 days after receiving a notice of loss or after receiving necessary information and documents it requested.
You will probably have to pay a deductible. A deductible is a part of the damage the insurance does not cover and that you have to absorb.
Take, for example, a computer worth $800 that was stolen from you. If you have to pay a $200 deductible, your insurer will only pay you the difference, which is $600.
Also, the insurance policy might say that the insurer can repair, rebuild or replace the insured property instead of paying you money.
Finally, your insurance payment will never be more than the maximum amount of your insurance. For example, if you insured property worth $10,000 for an amount of up to $8,000, you will not receive more than $8,000.
When the Insurer Can Refuse to Pay
The insurer can sometimes refuse to pay you for the damage caused to insured property. Here are a few situations that justify such a refusal:
- The event that caused damage to the property is not covered by your insurance. It is therefore part of the “exclusions”.
- You were not respecting one of your responsibilities under the insurance contract when the event that caused damage to the property occurred.
- You deliberately provoked the event that caused the damage, for example, you set fire to your house to get the insurance.
- You deliberately lied to the insurer following a loss. For example, you exaggerated the value of the damaged property or the damage it suffered. These are false statements.
The End of Coverage
The insurer can cancel your property or home insurance at any time by giving you 15 days’ notice.
You can also cancel the insurance by giving the insurer written notice. You will stop being insured as soon as it receives your notice.
At the end of the insurance contract, the insurer must refund you any extra premium amounts that you paid.
This article explains in a general way the law that applies in Quebec. This article is not a legal opinion or legal advice. To find out the specific rules for your situation, consult a lawyer or notary.