It’s tax season, and all across the country, Canadians are searching for additional deductions. It’s also a good time make sure you’ve spoken to an insurance broker to make sure your insurance is up to date. If you’re claiming a tax deduction for business use of your vehicle, or your home, yet this is not declared to your insurance company, you could experience complications with your claim, or it could potentially be denied altogether.
At Erb and Erb Insurance Brokers Ltd. we have identified numerous situations where an individual's tax deduction claims had inadvertently opened them up to potentially having an insurance claim denied because the insurance company was not aware of the business in the home or the business use of the car.
For example, a prominent Waterloo lawyer claimed a tax deduction for business use of his vehicle because he used the vehicle for travelling to visit clients and go to meetings. His auto policy, however, was rated only for driving to and from work, which meant his insurance company didn’t know the true usage of his vehicle.
Or take the situation of a Kitchener woman whose auto policy was rated for ‘pleasure use only’ because she told her insurance company that she worked at home. However, she claimed a tax deduction for business use, because she used her van to pick up supplies and to make deliveries to the boutiques that carried her high-end products.
Finally, the auto policy for a Development Officer for a large not-for-profit organization was rated for driving to and from work. And although she did not claim a tax deduction for business use, she was reimbursed by her employer for all the driving she did as she went about, soliciting supporting donations.
Tax deductions for home-based businesses can have a serious impact on property insurance as well. A consultant worked from his condominium unit in Cambridge, and claimed some of his residential costs as a tax deduction. But he had not thought to advise his insurance company that he operated a home-run business.
The owner of a local tree removal company operated the business from his rural home. His business was insured with one company, and another insurance company covered his home under a separate policy. The company insuring his home did not know there was a business being operated from the property.
Both these individuals had tripped themselves up, innocently and unknowingly, over some ‘fine print’ in their policies. Residential policies in Ontario exclude coverage on any building used in whole or in part for business purposes, unless the insurance company knows about it and has specifically noted it on your policy.
Canadian law recognizes insurance policies as legal contracts, which must be entered into knowingly by both parties. The insurance contract allows an insurance company to deny a claim because of ‘misrepresentation’, when they haven’t been given a clear picture of what they are insuring. So all these individuals had unknowingly set themselves up to have their insurance claim be denied.
Erb and Erb Insurance Brokers Ltd. provides free insurance reviews conducted by friendly, knowledgeable, licensed Insurance Brokers. We help people to connect the dots and avoid potentially costly mistakes.
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