Whatever the profession or trade, salary, education level or social status, nobody is ever completely protected against financial problems. This means that, at some point in life, anybody can be forced to resort to a substandard creditor in order to avoid losing their home or car, or in order to simply to be able to survive until a crisis has passed. If you are currently in this situation, Assurances Multi-Risques would like to inform you of the possible consequences on your home insurance policy.


What is a substandard creditor for insurers?

Most insurers consider creditors other than banks and credit unions (i.e. Bank of Montreal, National Bank, Caisses Desjardins, etc.) as being substandard. Substandard creditors who give customers a 2nd, a 3rd or even a 4th chance at credit charge far higher interest rates than regular financial institutions.


Why do insurers refuse coverage to clients who deal with a substandard creditor?

There are several reasons why an insurer will refuse coverage to clients dealing with a substandard creditor. The most frequently mentioned reason is that the financial situation of such clients – who are shouldering higher interest charges on their mortgage loan – is somewhat precarious and that their credit score is lower than average. All of this signals an increased risk of claims for insurance companies as it is well known that financially burdened individuals tend to make more insurance claims than other clients.

To illustrate this, let’s just say that if you don’t have the money to replace your water heater and that it eventually bursts and floods your house, you are more likely to call upon your insurance company to pick up the tab. To learn more on the link between insurance and credit scores, please consult one of our previous articles on the subject.

Moreover, there are also been instances where insurers had to compensate a creditor because one of their clients who was experiencing financial difficulties had set fire to his house. It is also a known fact that 2nd, 3rd or 4th chance to credit clients are statistically at higher risk of fire hazard than other insurance clients. Many insurers are therefore reluctant to insure such clients since they run a higher risk of experiencing a total loss of their property due to fire.


How can you insure your home if you are dealing with a substandard creditor?

Many factors can come into play for an insurer to offer, or not, home insurance coverage to owners of residential or rental properties owned through a substandard creditor. Here are a few tips that can help you in your search for an insurer:

  • Contact an independent insurance broker who specializes in substandard creditor insurance;
  • Collaborate with your broker and make sure to answer all of his questions (if you are dealing with a substandard creditor, it’s normal for insurance companies to ask a lot of questions);
  • Be truthful with your insurer. Omitting information could cause you even more problems down the road. See one of our previous articles on the subject;
  • Avoid waiting until the last minute before starting to look for a new insurer as your insurance renewal date approaches;
  • Avoid any insurance interruption and insurance revocation for non-payment of premiums as this will further complicate your acceptance by an insurer. *To learn more about this, see one of our previous articles;
  • Make sure that your house is in good shape. Make any repairs requested by your insurer in order to avoid having your insurance cancelled.


In conclusion, if you are currently dealing with a substandard creditor, you may need specialized insurance and that means that your insurance premium is likely to be higher. Even if you are already hard pressed financially, this may still be well worth the money, however. Remember, that you would have to pay out of pocket for repairs if something happened to your home while you are not insured!

At AMR, we believe that everybody has a right to adequate insurance, whatever their financial situation. Therefore, don’t hesitate to contact one of our independent insurance brokers in order to find an insurer who will offer the coverage you need. Our specialized broker will contact several insurers in order to find the one that will be able offer you the best possible coverage.