Buying your first home can be daunting, especially when uninformed. To add to this, the list of unknowns can seem endless. If you are considering purchasing your first home, you likely want more information about protecting your new investment. How can you do this? With the right home insurance policy. Before you attend your next open house, ensure you are informed about the ins and outs of home insurance. Unsure where to begin? Don’t fret, isure has you covered. Here’s our list of FAQs about home insurance questions from new buyers.
Is Home Insurance Mandatory in Ontario?
Unlike car insurance, home insurance is not mandatory in Ontario. However, given the significant investment involved, protecting your asset with a quality home insurance policy is undoubtedly the right choice.
Unfortunately, it isn’t always this easy! If you carry a mortgage on your home, your lender will almost always require you to have insurance in place before your closing date. Nowadays, mortgages are the primary method people use to purchase a home. Lenders require home insurance because when you take out a loan, your home serves as collateral for the mortgage. In return, the lender wants to protect their investment and not be left with a loss in the event something occurs before it’s paid off.
As mentioned above, though not entirely recommended, home insurance continues to serve as a practical necessity for most homeowners in Ontario. The last thing anyone wants is to be uninsured in the event of a fire or burglary. Even if you already own your home outright, the peace of mind that comes with financial protection is priceless.
When Should I Start Shopping for Home Insurance?
You should start shopping for home insurance at least 30 days before your closing date. Starting 30 days out will give you enough time to talk with an insurance broker, ask necessary questions, compare quotes, and gather all the relevant information the insurance companies will need to provide you with a quote. Shopping for a home can be a stressful time, and crunching for time can make it even more stressful.
I Bought My House for $500,000; Why is the Insurance Amount in my Policy Not the Same?
People often confuse Market Value with Replacement Cost. Market Value is what you pay for a house on the real estate market, including the land. Replacement costs, however, are how much it would cost to rebuild your home tomorrow if an insured peril, such as a fire, occurs. Because replacement costs do not factor in the value of the land your house is on, the insurable amount will often be lower than the market value.
A lower Replacement Cost value also helps keep the insurance premium down, as well. For more information around this topic or any other home insurance questions, contact us today!
Why is the Replacement Cost More Than What I Paid for my Home?
While there are several reasons why your replacement cost could exceed what you paid for your house, here’s our list of why this may be:
- Upgrades, renovations and other improvements made to your space can make rebuilding it more expensive than the original amount.
- Construction may need to meet newer, stricter building codes.
- Demolition and preparation fees need to be included.
- Building materials used may have gone up in price or may no longer be available.
Following some catastrophic events, such as a wildfire and issues relating to the COVID-19 pandemic, or scarcity of labour and building materials, can all contribute to inflated construction fees.
What Information is Required for a Home Insurance Quote?
Arguably, the most popular of all home insurance questions, figuring out what you need to provide your insurance company with can be tricky. For your insurance company to give you a quote, they will need to know details about your home. Some of the information may include answers to questions like:
- What year was the house built?
- What types of wiring, plumbing and heating are in the house, and when did they receive an update?
- When was the roof last repaired?
- Have there been any claims on the house?
- Who will be living in the house, and who is on the title?
What’s the Difference Between Title Insurance and Homeowners’ Insurance?
There are many misconceptions when it comes to title and property insurance. Many first-time buyers think that title and property insurance are the same thing, and they fail to budget properly for both. Most first-time buyers know about the homeowners’ insurance that lenders require to protect their home, but aren’t aware that they also need to insure the title. Title insurance is a one-time fee paid at closing that ensures that the entire boundary of the property is owned by the buyer and that he or she will have a defence in court should there be a challenge of ownership.
Do I Need a Home Inspection?
Getting a trained professional to assess your potential new home is essential. Home inspectors are experts at unveiling problems within the home, which are often not pointed out by the seller. Inspections run about $300 to $500 per home. Make sure to save a copy of the inspection report so that you can refer back to it if problems crop up after move-in.
Do I Need a House Survey and an Appraisal?
First-time buyers don’t realize that they may need both. Surveying the home provides a permanent record of your property lines and helps verify the existing physical boundaries of the property. Getting an appraisal simply determines the market value.
What is Mortgage Insurance?
If your down payment is less than 20% of the purchase price of your home, you will require a mortgage that’s insured against default. This insurance is required by law and protects the lender in case you default on your mortgage payments. The cost will vary depending on the total amount borrowed. The amount is usually added to your mortgage, and the cost is added to your regular payment.
Does Home Insurance Cover Renovations?
If your insurer doesn’t know about your renovations, you may not have enough protection. You may not realize that improvements you’ve made can significantly affect the replacement cost of your home. When you add value to your home (such as a new kitchen or bathroom), your insurance should reflect those changes. While some policies cover minor remodelling work, always check with your isure representative to be sure, even if you think the changes are small.
For answers to more home insurance questions, don’t hesitate to reach out to one of our isure representatives! We will be more than happy to review your policy and discuss any changes that would ensure the best coverage possible for your investment. Contact us or request a quote today!
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