With regards to insurance, the 'act of God' isn't real

After a wildfire ripped through the town of Fort McMurray, Alta., in May 2021, forcing a lot more than 88,000 people to flee – the largest evacuation in Canadian history – and destroying a lot more than 2,500 houses, the damage was estimated at a lot more than $3 billion.

It's easy to deem something so catastrophic, so out of our control, this type of natural disaster an “act of God.” It is a commonly accepted colloquial phrase that will get tossed around whenever we don't have any explanation for the reason for such a devastating event. We might assume, too, that something as unpreventable and unpredictable as a wildfire or other natural disaster, would not be covered by insurance.

But the truth is, there is no God. A minimum of not in the realm of home insurance.

A major misnomer

Roughly 60,000 home insurance claims left the Fort McMurray wildfire. Based on the Insurance Bureau of Canada, 95% of these claims were resolved by May 2021. Any speculation as to whether the fireplace would be dubbed an act of God – and for that reason excluded from coverage – were quickly shut down by IBC along with other insurance experts.

“The term 'act of God' is nowhere in insurance plans,” says Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada (IBC). “It's not really an idea in insurance.”

So, where did this misnomer come from?

Sure, an earthquake might be considered an action of god, but so, too, is really a hail storm. And hail is usually covered under just about any policy

“I think what goes on,” says Daniel Mirkovic, president and CEO of Where you started Insurance, “is there might be a celebration that occurs, as an earthquake, and people view that as an act of God. And since basic policies don't typically cover earthquakes, you'll hear people say 'oh this was a act of God and there's no coverage for it.'”

But the term does apparently have a home in U.S. legislation. Inside a Slate article about why human-accelerated global warming should render the word “act of God” obsolete, writer Kyle Piscioniere traces the phrase back some 400 years back, if this began getting used inside the British legal system. Today, Piscioniere says, will still be utilized in American environmental legislation for companies to absolve themselves of activities that find yourself polluting environmental surroundings, like oil spills.

But in the world of Canadian property insurance, the label we give something isn't what determines coverage or responsibility. Your insurance plan is.

God or no god, it simply is dependant on coverage

Home insurance coverage depends on what insurers refer to as “perils.” And various types of policies cover different types of perils. For instance, simplest insurance policies (also called “named perils” policies) will include a summary of what perils you're covered for. Anything not on that list is excluded.

Comprehensive policies, however, operate a little differently. They cover you for those perils except for those listed. Put one other way, the list in a basic policy is inclusive, whereas their email list inside a comprehensive policy is exclusive. Some events are excluded from both simple and easy comprehensive policies, for example acts of war, terrorism, earthquakes, and nuclear hazards.

“This may be the problem, says Karageorgos “Some people think this was caused by some switch on above and thus it's not covered. Well, that may not be. The policy is a contract and so you need to see clearly.”

Mirkovic and Karageorgos say there are no specific exclusions for “acts of God” home based insurance policies – or car insurance policies, for instance – for weather-related events which are from our control. If something weather-related is excluded from a basic or comprehensive policy, like overland flooding, or an earthquake, it has nothing to use God.

“Sure, an earthquake might be considered an action of god, but so, too, is really a hail storm,” adds Mirkovic. “And hail is usually covered under just about any policy.”

Exclusions aren't always end of story

There was confusion around set up Fort McMurray wildfire would be covered by insurance, however it was. “One from the key aspects of home insurance policies is that they must cover fire,” says Mirkovic. “Regardless of what the fireplace has resulted from. Fire is mandated in Canada under the Insurance Act.”

That said, there are more weather-related events which are generally excluded from home insurance policies, like earthquakes, landslides and coastal flooding. But that doesn't always mean home owners are completely at a complete loss.

In Canada, there is something called the Disaster Financial Assistance Arrangements, or DFAA. This national government organization, managed by each one of the provinces and territories, provides financial help when private insurance isn't available.

For example, let's imagine there's an earthquake that triggers a tsunami that then results in coastal flooding to a home along a shoreline. Owners of that home would very first time for their property insurance company and discover if the flooding caused by the tsunami is included. When not, the insurance company will give them instructions that they could then take to their provincial or territorial DFAA, who would then determine if they're entitled to financial assistance.

“It's not really plenty of protection,” says Mirkovic. “But it is something. It's better than nothing.”

Home insurance companies will normally replace old with new, Mirkovic says, but DFAA has a schedule they must pay out to. For example, if your TV gets damaged because of something you're covered for, your house insurance company could possibly change it with a brand new one. DFAA, on the other hand, would want to know if you have another television within your house. Should you choose, they likely won't give you any compensation for the damaged one. Or they might only give you half of what it really originally cost because which get you a suitable television. “That's kind of the approach they take with everything else,” says Mirkovic.