Some Canadians dream of purchasing properties with the intention of repairing them and then ‘flipping’ them for a profit. Some of the best deals for these types of houses usually mean that they are not in the greatest shape. You’ll want to protect your investment, but because you are not living there or have any valuables, a standard policy is too much coverage. If you are looking for basic, ‘bare bones’ coverage, no-frills insurance may be the right fit for you.
What is a No-Frills insurance policy?
The term ‘no-frills’ implies something simple and basic, with all the non-essential elements removed. According to FSCO, a ‘no-frills’ policy offers “coverage to properties that don’t meet normal insurance standards,” or “special needs” houses. In other words, houses with any structural defect or issue are ordinarily ineligible for home insurance. Purchasing a house in disrepair with the intent of renovating and selling it for profit fits under this definition.
Is This a Popular Type of Coverage?
No. No-frills insurance is not broadly popular because it is a niche product with limited coverage and significant exclusions. While it can be a good option for budget-conscious individuals, it is generally not a recommendation for most homeowners or drivers. It’s a basic type of insurance designed to provide only the bare minimum coverage, making it unsuitable for those who need comprehensive protection.
Who is No-Frills Insurance Coverage For?
- Budget-Conscious Individuals: It can be a good choice if you have a tight budget and can afford to cover the excluded expenses yourself.
- Niche Users: It is a niche product and is not designed for the majority of homeowners or drivers who require more extensive coverage.
Examples of No-Frills Coverage
- Car Insurance: You might have enough coverage to replace your car, but not cover rental car fees.
- Homeowners Insurance: Repairs to your home might have coverage, but not the cost of putting you up in a hotel during repairs. You may be wondering if no-frills insurance makes sense if you’re building or renovating a home. Even then, it does not provide all the coverage you need (the product you need is builder’s risk insurance). No-frills policies usually only provide insurance against fire damage. Liability, water, theft, and other risks are not covered (although some insurers may allow you to add extra coverage).
What is a ‘Basic Fire Policy’?
If you are working toward restoring or flipping, a no-frills home insurance policy can protect it until you repair it and it qualifies for regular home insurance. This type of policy is sometimes known as a “Basic Fire policy”. This is because the insurable perils are limited to fire damage and a few other basic coverages.
No-frills insurance coverage is often sold without any coverage for your contents. If it is in your policy, it will be the most basic type of coverage available. In a nutshell, if fire causes damage in any way, this type of policy responds. Any subsequent water damage from the fire department or damage caused while fighting the fire in your home will also have coverage.
Advantages of No-Frills Insurance Coverage
What makes this type of policy attractive to some homeowners is that if there are physical problems with your home that keep it from meeting the standards set by insurers, you may save money in the long run by correcting these problems to qualify for better coverage. If you’re looking at purchasing a house in disrepair with the intent of ‘flipping’ it for profit, this basic form of coverage will give you peace of mind without having to pay for coverages you don’t need.
Exclusions and Limitations: What No-Frills Insurance Doesn’t Cover
No-frills insurance policies cover damage due to a fire-related incident. However, it does not cover damages or destruction to the property insured by natural heating, fermentation, or spontaneous combustion.
Generally, these policies do not cover things like:
- Water damage: A typical home insurance policy covers sudden and accidental water damage (from burst pipes, watermains, or overflowing appliances); no-frills insurance does not include this coverage.
- Vandalism: No-frills insurance doesn’t provide coverage against acts of vandalism, such as broken windows and locks, graffiti, and damage to lawns and shrubbery.
- Personal liability: No-frills insurance doesn’t include any benefits for legal costs, nor does it provide any benefits for voluntary medical or property payments.
- Storm damage: Clean-up from fallen trees, wind/hail damage, or lightning strikes is an exclusion in a no-frills insurance policy.
How Much Does No-Frills Insurance Coverage Cost?
The cost of all home insurance is reliant on many factors, including:
- Rebuild Cost: The cost to rebuild the home is a key factor in the overall premium.
- Location: The property’s location can affect the risk of claims. The region your home is located in and the proximity to hydrants and fire halls do factor into costs.
- Home security features: Monitored burglar alarms, exterior cameras, and motion-activated lights are proven deterrents against break-ins. Most insurers provide a 5–15% premium credit for professionally monitored systems.
- Property Condition: Homes in disrepair or with structural problems often qualify for limited, no-frills policies, which have lower coverage but also lower premiums.
Bonus Tip: Choose a system with central station monitoring and ensure you keep your account in good standing to maintain discounts.
In simple terms, no-frills insurance policies provide the least amount of home coverage. It offers fundamental coverage for homes that don’t meet the usual standards for insurance. Be sure to contact one of our isure representatives to discuss whether or not no-frills insurance will be suitable for your needs.
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