Your home insurance policy may soon carry a COVID-19 exclusion

·2 min read

Homeowners may see something new when they renew their home insurance policies over the next few months: a communicable disease exclusion.

This will protect insurance companies from any claims related to the COVID-19 pandemic, Amanda Dean, vice-president Atlantic for the Insurance Bureau of Canada, said Wednesday.

"Generally, pandemic risk is not an insurable thing, as the insurance industry is unable to provide protection for losses of this nature because there's no way to diversify the risk due to it affecting the entire world at the same time," Dean said.

The exclusion reflects the changes being made by international reinsurance companies, which primary insurers buy insurance from.

"So what we're seeing is insurance companies starting to make the decision to add that to those home insurance policies,"

Dean said the exclusion endorsement prevents anyone who contracts COVID-19 at someone's house from making a claim against a home insurance policy.

"We know we're all doing our our best to protect ourselves, our neighbours, our friends and family. But you never know where this is going to creep up. If someone were to contract COVID-19 and pursue litigation, it could get quite, quite costly."

Dean said pandemic insurance is not normally available because the risk can't be diversified when it exists around the globe at the same time and can pop up in any community at any time.

And while typically no claim related to a pandemic can be made anyway, insurance companies have decided to add the exclusion wording the reinsurance companies added it to reinsurance agreements.

"What we're seeing is insurance companies making the decision to reflect that same wording within their homeowners policies that they're offering to their customers."

Insurance Bureau of Canada
Insurance Bureau of Canada

Dean said this is very new and she suggested homeowners speak to their insurance representative about it.

"Like any change at this point in time, it can be a bit unnerving because we've all gone through an awful lot in the past number of months."

While only one insurance company has added the communicable disease exclusion to the home insurance renewal policy, Dean said there is potential for more companies to do so.

"Where this is something that's happening with reinsurance companies, it will come down to business decisions with insurers that are selling home policies here in Canada."