A Guide to Protecting your Cottage & Boats, and Other Georgian Bay Insurance Issues
This information provides advice and guidance on insurance issues related to your cottage and boats for Canadian, US or overseas residents, and insurance coverage for associations. BrokerLink can provide discounts of up to 17% for members of GBA associations and has provided the details below on what to look out for, and how to work around any underwriting obstacles. Since, for Canadian residents, BrokerLink can extend the discount to your home and cars under a bundled policy, the potential savings could exceed your association dues, which includes GBA dues.
Contact BrokerLink for details at : 1-800-494–6022 or check the website: www.brokerlink.ca
This web page is intended for general information purposes only. While we have attempted to provide information that is helpful for our readers, GBA accepts no legal liability for the contents of this web page, which was provided by a third party. Ensure you check original sources of information for further details and updates.
Introduction
Insurance can be a very complicated and confusing topic for anyone but when you get into unique situations like ownership of a seasonal property, property in a foreign country, rented properties or properties with multiple owners; you need to work with an expert with experience in each of those areas. The GBA has arranged a group insurance plan for its members with Rice Inc. Insurance that has developed options and solutions for the often-unique scenarios that cottage owners may find themselves in when it comes to insurance.
CONTENTS – please click on the item below that you wish to review to go straight to that content:
- Cottage insurance, questions to ask yourself
- Insuring to Value
- Benefits of Bundling Policies
- Ownership Impacting Coverage?
- U.S Border Concerns
- Insurance for Renting Your Cottage
- Boat Coverage
- Water Damage Coverage – Terms and Concerns
- Local Cottage Association Coverage Questions
1. Cottage insurance, questions to ask yourself
Some cottages are seasonal while others are year-round. Some with plumbing and others without. Every cottage is unique. How do you know if you have the right cottage insurance?
If you have a cottage or are thinking of purchasing a cottage, consider the following details:
The Type of Insurance Offered
Comprehensive insurance offers very different coverage than Broad Form or Named Perils. It is important to work with an insurance company that offer different options and be certain that you understand them.
Rebuild Limit
Does your policy reflect the current cost to rebuild your cottage? Does your policy reflect upgrades you have made or the increased value of the cottage? Does your policy have penalties if you do not insure to full replacement value? Due to the current cost of materials, your cottage replacement value could be grossly underestimated.
Other Structures
Are you insured against damage to your bunkies, outbuildings, decks, docks and boats? Have you added or renovated any of these? If so, was your broker notified that additional coverage is required?
Renting Your Cottage
Is your coverage limited? Some insurance companies provide rental coverage for four to six weeks a year, while some do not provide rental coverage at all.
Unique Ownership
Is your cottage in your personal name? Did you want to keep your cottage in the family? Have you put it into an LLC, family trust or corporation? Can your insurance provider adequately cover this?
Unique Conditions
Is your cottage on rented or leased land? This can be a problem for some insurance providers.
A review of your cottage insurance policy could mean a difference of thousands of dollars should your cottage or other structures be under insured when an insurance loss occurs.
2. Insuring to Value
Your insurance policy is a contract between you and your insurance company. The company will base the premium they charge on several factors including fire protection (the distance in kms from a fire hall), the type of construction of your cottage (brick, wood frame or custom log cabin) and the use of the property (is it rented to others, do you use it every month or is it vacant for many months at a time).
One of the factors that is important to remember is the replacement cost of the structures. To be clear, replacement cost is the actual cost to rebuild your cottage should it be partially or completely destroyed and not the market value of the property. The removal of the debris, the cost of moving all new building materials to and from your property (including the additional cost of barging if it’s an island or water access property) and then the cost of the actual rebuilding of your structure back to its original state are all factors in determining this value. If your policy has an insufficient amount of coverage to cover these costs, you may find yourself in a situation where you are financing a large portion of a claim. In the event of a partial loss, you may be even more severely penalized. There are a few ways of avoiding this situation.
- Always make sure to notify your Insurance Broker/Agent if you have done any major renovations to your property or if you have built a new structure such as a new boathouse or bunkie. These changes will greatly increase the costs required to rebuild. Failure to notify could result in cancellation of coverage due to a material change in risk or an insufficient amount of coverage.
- Another thing to monitor is the actual value that is stated on the policy. Has it remained unchanged for many years? If so, you should contact your Insurance Broker/Agent to ensure the value is up to date and accurate. Factors such as inflation and the increased cost of material and labour will increase the replacement cost of your structures and should be accounted for in your policy.
The premium you pay for your policy is directly related to the replacement cost so increasing the amount of coverage may increase the premium but there are several ways to help offset these costs. There are many discounts available with certain insurers and it is important to speak with your Insurance Broker/Agent to make sure you are receiving all discounts available to you. Possible discounts include being Mortgage Free, Claims Free, over 50, a member of the local community association or GBA Member.
3. Benefits of Bundling Policies
When purchasing insurance, it is usually to your benefit to bundle your various policies with the same carrier. Properties such as your home and cottage for example, should if possible, go together. The benefit is that you will usually receive some sort of underwriting consideration such as a discount, but it may also make the insurance company more willing to take on the higher risk location types such as a cottage. Be aware you may not be allowed to bundle your properties if they are owned under different names such as a numbered company or family L.L.C.
In addition to placing your properties on the same policy you should if possible, place your property and automobile policies with the same carrier as once again, there will be discounts that will be applied to each. Even Marine/Watercraft policies may have discounts applied to them if they are written with the same carrier as your property. Discounts of 5% to 20% may be applied if policies are bundled together. GBA members have the opportunity to bundle their coverage with Rice Inc. as part of the exclusive GBA member insurance plan.
4. Ownership Impacting Coverage?
As the value of cottage properties increase year after year, the ownership of these assets becomes more the management of an investment as much as it is a vacation spot. Often families create L.L.C’s or other corporations to ease the tax burden when it is time to transfer ownership to the next generation. It is important to discuss these options with your insurance broker before you change the ownership as each structure can impact the coverage differently.
Usually if you place the ownership of the property in an existing company name that operates business outside the ownership of the property, you will find that the coverage needs to be written commercially due to liability concerns and this will increase the premium. However, if you create a holding company solely for the ownership of the seasonal property, you will find it can usually be written under a personal lines coverage at a significantly lower premium.
Other ownerships that can cause issues for insurance companies are that of owners that live outside of Ontario, Canada or even North America. Due to the changing world, some insurance companies are tightening up on who they will write policies for, due to the possible added exposure. US residents are currently having issues crossing the border and some companies have suspended coverage for them for fear that the properties may be left abandoned. Other companies have system limitations that will not allow a mailing address outside of the Canadian format. (ZIP instead of Postal Code and for European clients the area codes on the phone numbers). Specialty providers can work around these limitations.
Once you have a provider that can accommodate where you live, the next possible hurdle for owners that live outside of Ontario is that there may be a cap on liability coverage at $2,000,000 and it may be difficult to increase. Usually a cottage property will have designated premises liability which means the liability only covers the locations listed on the policy. You can ask about increasing the liability on the cottage location, but this may require an umbrella as part of your primary residence in the U.S or otherwise.
Often liability claims are made from necessity and not malice. If a friend or family member suffers a life altering injury at your property, they may be forced to bring suit against you to secure their standard of living going forward. It is always important to make sure you have adequate liability coverage in place.
5. U.S Border Concerns
Currently U.S cottage owners are restricted from accessing their properties due to the border crossing limitations during the Covid-19 pandemic. This situation is concerning to insurance companies as there is some uncertainty as to when these properties will be regularly occupied going forward.
The concern is that the magnitude of losses may be increased if a property is not regularly checked in on. For example, if a window is broken by a tree branch, in many cases this is not a claim that would be made. The concern now is that if that window is broken and left unattended for 12 months or longer, there is going to be vermin in the cottage and significant water damage to the interior.
Whenever possible, you should make arrangements to have your property regularly inspected to prevent small problems from turning into larger ones. Some polices may contain a clause that requires they be occupied within a certain time frame to maintain full coverage. It is important to be aware of any such clause in your policy.
6. Insurance for Renting Your Cottage
Before renting your cottage out, make sure you will be covered by your seasonal property insurance policy. Here are a few things to consider:
Know The Rules
While some policies won’t allow you to rent out your cottage at all, many do allow for rentals — but there’s usually a limit on the number of days or weeks you’re allowed to rent for each year. Policies may also have rules about how you rent out your cottage and they may prohibit the use of certain types of rental services.
Find Out How Your Coverage Might Change Once You Start Renting
Some insurance companies will only offer limited coverage if you are renting your cottage out. You may be able to keep coverage for certain risks such as fire, lightning, and explosion but others might be excluded such as vandalism or sewer backup.
Go With a Higher Liability Limit
When you have more frequent visitors like renters and their guests, you increase the risk of someone getting hurt on your property. This means you increase your chances of experiencing a liability claim. Make sure your policy’s liability limit is right for you.
Mind Your Boats and Wheels
Your insurance policy likely will not cover liability claims resulting from the rental of your motorized vehicles or boats. You may need to purchase special coverage if you are planning to allow renters to use them. Be sure to check with your Insurance Broker/Agent before giving them the green light.
Sometimes accidents happen, despite your best efforts to prevent them. Before the rental season begins, read over your insurance policy, and contact your Insurance Broker/Agent to make sure you have the coverage you need to protect yourself and your property.
7. Boat Coverage
As you take your boat out onto the water, ask yourself, “Do I have the right boat insurance?”.
Accidents happen. You should be protecting your boat and your family the same way you protect your car. The weather can be unpredictable just as the drivers of other boats, so it is a good idea to have the proper insurance to cover yourself and your family.
In most cases it is not compulsory to have boat insurance in Ontario, but sometimes you have no choice but to get insurance such as when you dock your boat at a marina and the marina requires it. Whether it is a small watercraft like a canoe or kayak or a motorized personal watercraft like a jet-ski or power boat, it should be insured.
You can often add a boat to your home policy but you run the risk of losing your claims free discount (when applicable) should you have a claim and this in turn impacts your eligibility with the homeowners insurance markets going forward.
Layup Warranty & Watercraft Navigational Limits
Did you know that with most boat insurance, your boat must be winterized and out of commission from December 1st to April 1st? These dates will vary between companies and could be as early as November 1st. There are also navigational limits, which are limits to where your watercraft is covered. For example, if you wish to take your boat down to the Florida Keys, those coastal waters need to be added to your policy as an endorsement.
Watercraft Theft Exclusions
One major headache for boat insurance is theft exclusions or conditions. These are conditions that must be met before a theft claim will be covered under your policy. Each company will have their own version of this, so it is important to ask the question of your broker.
For example, if the vessel is on a trailer, there is often a theft clause that could exclude coverage unless there is clear evidence that certain security measures are taken. You should confirm if your policy has such conditions with your broker.
Make sure your coverage includes liability for bodily injury, third party damage and for protection if you are injured by an uninsured owner or operator of another boat. Theft, damage, or loss of attached equipment, such as a GPS system is also important. The best advice is to talk to a boat insurance specialist to decide what kinds of coverage are best for you.
NOTE: They will also need to know if you have younger operators to make sure your policy covers them or if there are age restrictions.
8. Water Damage Coverage – Terms and Concerns
In the spring water can easily enter your home and cause extensive damage. This can happen when your sewer backs up or when water enters your home from a sudden accumulation of water on the surface of the ground. Typically, this occurs after heavy rains or spring run-off and this could be catastrophic. Do you know if your insurance covers you for either?
Exclusions such as those where the damage is caused by or arising out of shoreline ice build-up or by water-borne ice or other objects, all whether driven by wind or not are also possible. With all the rains we are currently experiencing, freshwater flooding is happening all around us. You want to make sure that you are protected from all sorts of water damage.
Sewer & Septic Backup
Damage occurs inside your home typically when there is an overflow of the sewage system. This could be the public sewer system, septic systems, or sump pumps. When the sewer system is not able to deal with the inflow of water, it overflows pushing water back into the home. This type of flooding is a mixture of wastewater filled with bacteria and other contaminants.
Overland Water
Damage is caused when water enters your home from excess water, spring run-offs or heavy rains on land that is typically dry. Water can enter your home through your basement windows and doors. Overland water insurance is available to most homes; however, those located in areas that are highly prone to overland flooding, those with a reverse slope driveway may not be eligible. As well, structures built on or over water will likely be excluded from this coverage as well.
Seepage
Damage is caused when water enters through foundations, basement walls, or basement floors. Usually this is excluded from coverage unless specifically covered by endorsement.
Ground Water
Means water in the soil beneath the surface of the ground, including but not limited to water in wells and in underground streams, and percolating waters.
Surface Waters
Means water on the surface of the ground where water does not usually accumulate in ordinary watercourses, lakes, or ponds.
With our changing weather patterns, damage from storms, spring thaw and other fresh water, flooding is happening everywhere. As the regularity and severity of these major weather events increases, it has become more important than ever to ensure that you are protected against potential losses. Contact your Insurance Broker/Agent to see what sort of water damage insurance you have or look into adding increased water damage insurance to your policy. Make sure your home and cottage are protected.
9. Local Cottage Association Coverage Questions
Each local cottage association is a collection of individuals that are working together; usually as volunteers, to make their seasonal properties a better place. While these intentions are good, there are some liability exposures that should be addressed by insurance coverage. As with most lawsuits, you may not feel you are liable for what you have been accused of, but you may have the need to pay for a legal defense to prove it, and in most cases your liability coverage pays for that defense.
Directors & Officers Coverage
Directors & Officers coverage or D&O as it is often referred to, is coverage for the directors and officers of an entity from suits that may be brought against them personally. For example, if the Association files for a grant and it is determined that the application was inaccurate, the directors responsible could be held liable for damages, such as paying back the grant or offsetting the shortfalls. Another example would be if an insurance policy is purchased with insufficient limits. The directors making the decision on the limit may be held liable should that decision impact a third party.
Commercial General Liability
Commercial General Liability or CGL; as it is commonly known, is intended to cover suit brought against the Association for alleged damages to property or personal injuries to a third party due to the Association’s negligence. If your association owns a dock and someone slips and falls on it, the Association could be sued as a result. If your Association holds BBQs or Regattas, you need to have liability coverage in place as these events are prime situations for injuries to occur. If your Associations chooses not to insure, then the Directors and Officers could find themselves being personally responsible for that decision.
Fire Pumps – Association & Private
Due to current changes to the environment, the frequency of large-scale forest fires in Ontario has increased. Other than removing dead trees from your property and making sure there is adequate distance (if possible) between your cottage and the tree line, purchasing a fire pump is a great option. Private fire pumps are relatively inexpensive and can be kept at your property to help fight any fires that may occur. These pumps, especially in remote or island locations, may be the only defense against a small fire turning into a total loss.
While fire pumps on your individual property make a lot of sense, Associations need to be aware of the possible liability exposures to them if they decide to operate community-based pumps. The first step is to always consult your broker to confirm that your policy will cover the operation and ownership of this style of pump by your Association. It is very possible that a claim could arise out of the improper use of the pump or its malfunction. Injuries to the operator, damage to property or lack of performance are all possible outcomes that could lead to a suit.
As with all liability suits, the claimant may not want to sue the Association but they may have financial demands of their own that they can’t meet as a result of their damages and a lawsuit is the only option they have.
Summary
Insurance is not a topic that most people enjoy thinking about and often important elements of their coverage are not brought to their attention until a claim has already happened. It is important to ask questions of your insurance representative and be confident in the responses that they provide to you. BrokerLink is one of Canada’s largest and most reliable insurance brokerages and are familiar with the unique challenges that water access properties can present to other insurance companies. If you would like to discuss your coverage or have your coverage quoted, please contact BrokerLink:
1165 Franklin Blvd.
Cambridge, ON
1-800- 494 – 6022
or at