Act of God Defined
The expression Act of God is often used to describe when a natural event occurs in which damage is caused. When you hear about “Acts of God” you generally tend to think of events that cannot be prevented such as forest fires, earthquakes, tornadoes, landslides, and so forth.
In Canada, insurance companies do not use the term “Act of God” in any of their insurance products. Act of God is more of an American term. Instead, the term peril is used to refer to types of losses is covered in the Canadian insurance industry. In addition, a list of exclusions tells you what is not covered by your policy. Exclusions are always very specifically stated within your policy documents.
Acts of God in Canada (Known as Perils)
A peril is a particular risk that may cause a loss or damage. The type of policy you purchase will determine which perils you are covered for. Property insurance policies are generally written as Named Perils or All Risk.
Are Acts of God Covered by Insurance?
Most perils that would be considered acts of God, like lightning, high winds, tornadoes and wildfires, are typically covered under an “all perils” policy. Earthquakes and floods, on the other hand, are not generally covered, unless you ask specifically for add-on coverage.
Which Acts of God Are Covered by Insurance?
- All Risk: An All Risk policy covers all perils except for the perils that are excluded on the insurance policy. All Risk policies tend to be more expensive but are largely favoured by property insurance policyholders because they offer more coverage. The following perils are usually considered insurable by an All-Risk policy:
- Aircraft or vehicle impact
- Electrical current
- Falling object (excluding due to snowslide or earth movement)
- Smoke (excluding from fireplaces)
- Transportation of personal property
- Vandalism (occupied building)
- Water damage
- Wind and hail
- Window breakage (occupied building)
- Named Perils: If you have a Named Perils policy, you are covered for losses due to particular perils, which are explicitly outlined in your policy documents. Named Perils policies are often less expensive, but because they only cover specific perils, they offer you less coverage.
If you currently have property insurance, it is important to find out whether you have a Named Perils or All Risk policy because you may not have adequate coverage in place.
What Acts of God Are Not Covered by Insurance?
Even with an All Risk policy, not all perils are insured against. The most common exclusion that would be viewed as an “Act of God” is a flood. No insurance company in Canada offers flood insurance under a home policy without an extra endorsement for overland flood or sewer backup coverage.
Another common exclusion relating to an “Act of God” is an earthquake. Earthquake coverage is not automatically included on property policies, and as with floods, clients can usually purchase additional coverage against them. Ontario does have some earthquake prone zones, so if you believe you live in one, adding on earthquake coverage may be in your best interest.
Uninsured perils generally include predictable or preventable events due to the following:
- Criminal acts by the policyholder
- Earthquakes, landslides, and other earth movements
- Freezing outside the home
- Illegally acquired property
- Insect and rodent damage
- Intentional application of heat
- War, terrorism, & nuclear risks
Endorsements may be available for certain exclusions, so be sure to ask your broker about the best protection for your specific risks.
Prepare for natural disasters by knowing what you are covered for with your policy; don’t wait until one occurs to read your policy documents. If you are worried that you do not have proper coverage in place, or simply can’t make heads or tails of your policy, feel free to contact Mitchell & Whale to find out!