Financial Crooks

2013 was not a great year for homeowners. Parts of southern Alberta including Calgary experienced devastating floods. Much of southern Ontario including Toronto suffered from a major ice storm. Ontario also experienced some flooding as well. Many homes were damaged by water, ice and falling trees. Insurance companies felt a shocking hit to their profits as the claims from home owners poured in. Seeking to recoup these losses, many insurers increased their 2014 home insurance rates.

How Did Insurance Companies React to the High Claim Rates in 2013?

Insurance companies responded to the waves of home insurance claims in slightly different ways.

Some ceased offering any coverage for flooding, in particular for storm sewer or sanitary sewer backup flooding. Others significantly reduced coverage and/or increased the premiums for that coverage.

Most never did offer any coverage for “over land” flooding. That’s the type where the water rises outside your home, perhaps from an overflowing creek or river, and pours into your home and especially the basement as if it’s filling a swimming pool. Even if you live no where near a stream or lake, you may still experience over land flooding, though. In Toronto, the problem was that huge volumes of rain fell in a very short period of time. The water could not be drained away quickly enough. The storm sewers filled to the top. Water began to form shallow lakes on roads and lawns. In some areas this water found a way into basements through doors and window wells and poured in.

Sewers themselves also backed up into houses as the pressure of the water in the mains grew unusually high.

By eliminating and reducing coverage for flooding, insurance companies are reducing the number and size of the claims they will have to pay out.

According to an article on CBCNews one of Canada’s large insurance companies raised premiums 15-20% in late 2013 because “catastrophic losses and weather-related claims have risen dramatically.”

Here in Ontario, some companies also took a hard look at their policies after the ice storm and the heavy snowfall winter. Many claims had been received not only for trees falling on homes but also for the damage done by snow and ice to roofs and home interiors.

What Happened to Our Home Insurance Policy for 2014 After the Ice Storm and Harsh Winter?

We have our home insured with a company that targets engineers and other university graduates and which was fairly recently taken over by a bank. It has been a good company to deal with when claims were necessary. (We’ve had to make only 1 home-related claim (a break-in at our previous home), but 2 vehicle-related claims (1 where someone attempted to steal our car and damaged the ignition; and 1 where someone decided not to stop like the rest of the highway traffic until after they slammed into our stopped car.) Their rates seem reasonable based on my occasional checks with competitors.

For our 2014 home insurance policy renewal, we were moderately surprised to see our rate had not gone up. I’ve read online of others who have seen their rates go up by several hundred dollars per year. Reading through our policy more closely, I discovered that the rate hadn’t gone up because the coverage had gone down.

Specifically, we are now only covered for $15 000 if our home experiences water damage due to a sewer backup. Frankly that’s just a token amount of coverage given the real costs most homeowners face to repair the damage of a typical backup.

And we suddenly lost all of our coverage for “Weight of Ice, snow, or sleet, ice damming, roof water damage.” A tiny note indicated this was because of the age of our roof.

How Old is an Old Roof?

Now our roof is not brand new, in fact we had to have a minor repair done a few years ago due to a mistake made when it was re-shingled. But it isn’t an ancient roof either. In fact the roof repair crew warranted the roof as good for another (then 7 now) 4 years minimum. It should be good for much longer than that.

So, and this is where I made my first mistake, I phoned my insurance company to ask: “How old do you think our roof is?”

Our home, by the way, has had several owners. It was built in 1969. So it was quite amusing to hear the insurance company had on file that our roof was installed in 1969.
No wonder they weren’t insuring it against weight damage! A couple of flakes of snow and an icicle would probably take out a roof that old.

According to the representative, for many policies they don’t have an age reported for the roof. In those cases they use the construction date of the home as the roof installation date.

So we updated our policy with the correct age of the roof.

And *Zing!* they got me.

Why I Agreed to Increase My Home Insurance Premium

The next thing the representative said was. “Ok, now we can offer you coverage for the weight of snow, ice or sleet, ice damming and roof water damage. We will provide up to one million in coverage for damage to the interior of your home. We will pay to replace or repair the roof.”

Sounds good!

“For only $69 a year.”

Rats.

Now I was on the spot. $69 doesn’t sound like much. That’s $5.75 a month. About the same as one kim chi maki roll.

“Ok. I’ll accept that.”

Bam. I just agreed to raising our premiums almost $100 a year for the same coverage we had last year. I suspect I goofed.

As penance, I am abstaining from sushi this week.

And soon we will have to look into installing a sewer backflow preventer. That $15 000 won’t be much use when our Guinea Pigs are doing the backstroke.

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Did your home insurance rate go up this year? Or did your coverage drop? Please share your unpleasant experiences with a comment.

My husband wasn’t too pleased when he saw this title lying on my bedside table. (He warned me that he’s seen me re-reading Agatha Christie’s lately starting after he increased his life insurance coverage and he has left an envelope to be opened by the police in the event of his death from “acute gastric enteritis” or if he commits suicide.) I pointed out that it didn’t say which spouse and discretely removed a few Post-it notes from books citing Datura and other “untraceable alkaloids.” Despite this family disharmony, I finished reading Managing Alone and would like to share my review of the book.
Title:
Managing Alone: Your trusted advisors’ guide to surviving the death of your spouse

Authors:
Jennifer Black and Janet Baccarani.

Both authors are CFPs working in Ontario. It appears that they self-published this book–perhaps in part to give to their clients as an educational tool?

Tone

This book is very easy to read. The tone is conversational and kind.

Each of the 10 chapters tells the story of a fictional couple with a different financial profile. Some examples include:

One couple are highly successful both financially and personally with adult children;
Another couple have a very modest income with all of their profits being re-invested in their growing small business;
Another couple has a stay-at-home parent and a working parent who is moderately successful financially.

In most cases, the death of one partner radically changes the life of the survivor. Some couples had their finances well planned, others did not.

Despite the sombre subject matter the authors carefully end each personal anecdote on a positive note: Widows and widowers re-marry or find new passions in life; families heal; children mature and find happiness.

What Topics are Covered in Managing Alone?

After each gentle narrative, different types of financial problems and plans are discussed.

Topics include

Setting up a trust to protect assets in the event of a re-marriage in later life
What to do with a successful small business when the key partner dies
What government benefits are available to widows/widowers and orphans
What to consider when selling a home and buying a smaller one
Establishing credit and a personal financial history
What does an Executor have to do
Questions to ask when choosing various kinds of advisors
What everyone should do, no matter how young, to prepare in advance for an unexpected death (joint bank accounts; insurance; power of attorney; wills; joint ownership of the home; designating beneficiaries; etc.)

Who is the Target Audience for This Book?

This book seems to be aimed at people with little or no financial planning background or experience. It serves as an introduction to the types of tasks that should be accomplished and decisions that should be made to deal with money and death.

Who is NOT the Target Audience for Managing Alone?

If you are older and have personally dealt with the death/s of friends or relatives there is likely little here that will surprise you. If you’ve already applied for CPP survivor benefits for a relative, handled a funeral, or acted as an Executor, you probably will find this book too simple.

For example, the book provides a case study of a gentleman who might want to create a trust to protect his property and investment assets to ensure they pass on to his children and grandchildren even if he re-marries. Very few actual details, however, are provided about how to set up that type of trust, who to ask for help with it, how it works, what the annual fees might be, etc. It is more an introduction of a concept than a “how to” article.

Would I Buy the Book?

No. I borrowed it from the library. It was interesting to read but I would not turn to it again in the future.

Would I Recommend the Book?

If I had friends or relatives who were really repulsed by the entire topic of planning for mortality and who in particular needed to make plans I might suggest they read this book. (For example, a single parent with young children who has a high risk of being diagnosed with a life-threatening illness; a couple with high risk careers and young children with no guardians or wills.) It might provide an opening to discuss how several simple steps, such as designating beneficiaries and holding assets jointly, could save a great deal of trouble in the future.

What Did I Personally Take Away from This Book?

Although I didn’t learn anything much new, I did get a timely reminder to

update our power of attorneys for personal care
teach our children where the financial records are kept (in case both my husband and I should die at the same time)
double check the Beneficiary designations are correctly reported for our newest investments (the forms were sent in but were they input correctly?)

Also, remember “Never be worth more to someone dead than alive.” Read Agatha Christie for additional details on this topic.