Common reasons insureds get their claims denied

Non-disclosure of key information to insurers is one of the most common reasons insureds see their claims denied. 

That’s why it’s up to brokers to double-check these common yet avoidable causes of home insurance claim denials. 

The Insurance Act states all relevant information must be disclosed during the initial application process. These undisclosed exposures may be overlooked by clients, either accidentally or in an effort to cut insurance costs, says a RatesDotCa expert. 

“Often the additional cost to properly insure the property is less than consumers may assume, in many cases less than $10 per month,” says Daniel Ivans, licensed broker and RatesDotCa insurance expert. “The cost of repairs for almost any kind of insured damages far exceeds the insurance premiums that would be charged to cover them.”

For example, if a homeowner rents the basement of their home to a tenant, premiums could increase between 0% and 18%, depending on the insurer, according to RatesDotCa data.  

“However, if the homeowner doesn’t disclose that they are renting their basement to a tenant and the tenant is the source of damages, it could lead to an insurance claim being denied or the policy being cancelled,” says Ivans. 

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A denied claim would cost a lot more than the price to be properly insured in the first place. 

Brokers should review these common sources of undisclosed claims exposures with their clients: 

• Additional families living in the home: Most insurance policies cap the number of families living in an insured home at two. Unrelated single adults, or tenants in a basement or add-on unit, can also count as an additional family.
• Tenanted apartments: If homeowners rent part of the home to a tenant, they must notify their insurer. “Insurance coverage will generally encompass loss of rental income in the event that damages or repairs necessitate the tenant moving out of the property,” says RatesDotCa.
• Short-term rentals: Much like tenanted apartments, short-term rentals must be disclosed.
• Aggressive pets: Adopting certain breeds of dogs known to be aggressive could change the risk assessment of the home.
• Operating a business on premises: Homeowners who run a business out of their homes must disclose this to their insurer.
• Installing wood-burning stoves or fireplaces: They change the risks of a home, and thus need to be disclosed.

Alyssa DiSabatino

Alyssa Di Sabatino has been a reporter for Canadian Underwriter since 2021, covering industry trends, market developments, and emerging risks.