IBC: Holds on new insurance policies common on purchase of homes within wildfire radius

After clients with upcoming closing dates were unable to get home insurance for properties within 50 kms of a wildfire, realtor Jacqui Rostek Holder is recommending house hunters contact their insurance providers.

Holder shared the information in a tweet on Wednesday night. She later amended it to note that the radius seems to vary.

“I wanted to raise awareness to those buying homes because someone might assume that for example, a home in an area in Dartmouth would be easy to get insurance for later, but avoid getting the letter while doing due diligence/conditions for the purchase, and then find out that there is a moratorium on new policies,” Holder told the Examiner. 

“I want to stress that I am having clients reach out to their companies to check on their specific situations. But it does appear in all cases of new policies, the fires have an impact within a certain radius.”

Holder said her brokerage and the lawyers she works with have confirmed that a number of sales issues have arisen due to an inability to get insurance at this point in time. She said buyers who’ve purchased homes where there’s already a binder letter (insurance is in place) should be fine — provided the home isn’t in an evacuation zone. 

“I don’t think anyone would be surprised if a sale couldn’t complete when in the zone,” she said. 

She said some buyers have discovered new insurance policies weren’t being written within 50 kms of the fires.

One member of Holder’s team contacted their own insurance company on Wednesday. That insurance provider had placed a hold on properties located within a 25 km radius from the fires, an area Holder described as “still enormous.” 

Definition of area under imminent threat varies

If you’ve purchased a home due to close in the next few days, the Insurance Bureau of Canada (IBC) said it is indeed a good idea to check with your insurance provider.

Many have placed holds on writing new policies for properties that can extend many kilometres from the edge of a wildfire. 

“During major wildfire events, insurance companies may put temporary limitations on the sale of new policies in those areas that are under imminent threat,” Amanda Dean, vice president for the Insurance Bureau of Canada’s Atlantic region, said in an interview Thursday. 

“And the definition of ‘area under imminent threat’ might vary from company to company.”

While one insurer may have a 50 kilometre radius from a wildfire, another might be 30 kilometre and another could set the radius at 25 kilometre. 

“That (number) would be informed by that provider’s experience in the past, whether it’s the Fort McMurray fire or what have you,” Dean said. 

Holds lift when state of emergency does

Dean said the hold on issuing new policies happens for a number of reasons. The home might be in an area of real or perceived imminent threat. It could also be the result of an insurance company dedicating local resources and energy to serving customers impacted by wildfires.

“The best thing is to talk to your insurance representative, especially if you have the purchase of a home that is due to close within the next couple of days,” Dean said. 

“The good thing to look forward to is that as the state of emergency is lifted, so will the holds on writing new insurance policies.”

Those holds typically lift fairly quickly, Dean said. 

“If the state of emergency is lifted on Monday and things go back to whatever normal looks like for folks in that particular area, it could renew the issuance of new policies at that time,” Dean explained. 

Advice for sellers

In the case of a house sale, Dean said it was also important to note that many policies include a declaration of emergency endorsement. That means the date of the policy is extended.

“For the seller to make sure that the home is still insured, the seller should absolutely contact their insurance representative to make sure that policy is still in place,” Dean said. 

“Because if there is a potential threat of the home being impacted by this particular event, you absolutely want to have insurance on that property. Recognize that that will delay the sale and the closing date, but it will just do so until the state of emergency is lifted.”

Policy modifications also frozen

Home insurance policy modifications would be treated the same as the purchase of a new policy. Dean said modifications for home insurance policies in areas near wildfires will also be frozen until the state of emergency has lifted. 

“Connect with them (insurance providers). Let them know what has changed in your situation, what you’re looking to modify within your policy,” Dean said. 

“They won’t be able to put anything through until the state of emergency order has been lifted. But it’s always good to let them know what has potentially changed within your home or whatever it is that you’re looking to change coverage on.”

Renewals to home insurance policies should remain unaffected. 

“If you have a home and your policy renews today, it renews tomorrow. Renewals should go through,” Dean said. “If you are having an issue, perhaps it could be something as simple as whoever is taking the call is quite junior and doesn’t understand what happens in these types of situations.”

In such cases, she advises people to call the Insurance Bureau of Canada’s consumer information line and they’d be happy to reach out to that particular insurer.

‘We’re just not used to wildfires’

Dean said it’s important for people to have the correct information to help quell any unnecessary panic during an already difficult time.

She said holds on new policies and modifications to existing ones during wildfires is a common practice by the insurance industry. But for many in Nova Scotia, this is a new experience. 

“We’re just not used to wildfires. This is not something that happens here. But we’ve had a very dry spring and so here we are,” Dean said. 

“Insurers will be able to underwrite those policies once the order has been lifted.”

Dean encouraged people to call IBC’s consumer information line (1-844-227-5422) if they have questions.