Did you know that unlike auto insurance, home insurance isn’t legally required in Ontario? However, mortgage lenders require it to protect their investment—and it also safeguards your financial future. Even if you fully own your home, having insurance is essential to protecting what may be your largest asset. As a first-time home buyer, this guide will help you understand the different types of insurance you’ll need and how to get the right coverage in Ontario.
Essential Insurance Types for First-Time Home Buyers in Ontario
You may become a bit overwhelmed as a first-time home buyer because there are a lot of steps to buying a home. The responsibilities don’t end when the deal is closed, either. So, the need for insurance has to be addressed. Below, we will outline two types of insurance that are going to be of concern for you:
- Mortgage Insurance
- Home Insurance
1. Mortgage Insurance
If you want to buy a home with a down payment of less than 20%, you’ll need mortgage loan insurance. This protects your lender in case you can’t make your payments on time. CMHC mortgage loan insurance allows you to get a mortgage for up to 95% of the purchase price of a home. It also ensures you get a reasonable interest rate, even with your smaller down payment.
To get mortgage loan insurance, you’ll need a minimum down payment. According to ratelab.ca, the amount depends on the home’s purchase price:
- If the home costs $500,000 or less, you’ll need a minimum down payment of 5%.
- If the home costs more than $500,000, you’ll need a minimum of 5% down on the first $500,000 and 10% on the remainder.
2. Home Insurance
Home insurance is what protects you, your family and your possessions from loss and liability. It also protects your mortgage lender, which is why it’s a requirement for securing a mortgage. Reputable mortgage lenders will not consider an offer to first-time home buyers without proof of the home buyer’s insurance.
The home insurance that you buy determines what will be covered. The insurance policies usually start with basic coverage, which is;
- Dwelling coverage (your house)
- Detached structures (e.g., garages)
- Personal belongings
- Personal liability
This forms the foundation for building the rest of the insurance package. First-time home buyers’ insurance is a personalized product, just like any other insurance product.
Nobody can predict when a mishap may take place that involves homeownership. Statistics from the Insurance Bureau of Canada show a sharp increase in property claims from 24.4% to 39.3%, mostly due to natural disasters. In the last five months alone, Ontario experienced five major storms that caused millions of dollars worth of damage.
How to Get a Home Insurance Quote in Ontario as a First-Time Buyer
To secure home insurance, here is the information most insurance companies will require:
- The possession date: This is an important date for your isure broker to know because it could impact insurance rates.
- Name on the property title: A person’s ownership of a property is referred to as the “title”. This is usually the name(s) of the first-time home buyers.
- Prior insurance history: A broker will need to know if it is the home-buyer’s first time applying for insurance, how many years they’ve had insurance (if at all) and any claim(s) made in the last 10 years (along with the reason for the claims).
- Information to determine cost to rebuild: If a home needs to be rebuilt, you must have the right amount of insurance coverage. To help establish the rebuild cost for a home, your isure broker will also ask about the year the home was built, siding material, roof material, square footage, plumbing and electrical materials, as well as home updates (such as renovations).
RECOMMENDATION: Buy Title Insurance! This protects your ownership of a property. It is bought when you purchase your home, usually paying a one-time premium. It will protect you from any flaws or mistakes on your ownership, mistakes by your lawyer, as well as protect you from paying taxes, utilities or mortgage payments that a previous owner may not have paid (called liens).
Contact one of our isure brokers today for a home insurance quote.
What’s Included in a Standard Ontario Home Insurance Policy?
As a first-time home buyer, you should know that each component below can be customized to suit your individual and family needs. Below are the main components of a home insurance policy:
- Named Perils: Most home insurance policies cover named perils, such as fire, wind and theft. You also have the option of adding additional coverage to your policy. Popular choices include sewer backup coverage and overland water protection, which protect you in the event of flooding.
- Contents Insurance: This is the portion of your policy that protects your belongings. It is under this section of your policy that you may wish to set up additional coverage, called a rider or an extension, for specific items of value, like jewelry.
- Liability Coverage: This part of your policy protects you if someone is injured or killed on your property.
- Loss of Use: This portion of your policy protects you if damage from one of your named perils prevents you from being able to live in your home while it is being repaired.
There are other “must-have” coverages you may want to consider when it comes to home insurance:
- Guaranteed building replacement cost: This coverage could help pay for the replacement of a home. It must be insured for no less than 100% of its value, and any improvements must be mentioned to your isure broker within 90 days of any project’s start date.
- Single limit: This includes the total value of the home, detached structures (i.e. a garage) and personal property. If there were a sudden loss, the single limit is the maximum amount an insurance company would pay out for a one-time insured loss.
How to Compare and Buy Home Insurance as a First-Time Buyer
Don’t just go with the first quote you receive. Your isure broker can compare policies from multiple providers to find the best combination of:
- Coverage quality: What’s included in the standard package?
- Add-on options: Are there customizable features that suit your lifestyle?
We also recommend asking your broker about available discounts, such as bundling your auto and home policies for lower rates.
Best Ways to Get Home Insurance in Ontario for First-Time Buyers
As a first-time home buyer, you should know that you can get home insurance through a variety of channels. You can get it through a direct writer of insurance (like Economical or Intact insurance) or through the company that provides your car insurance. Insurance companies provide discounts to customers who bundle their auto and home policies. Ask your isure broker for more information!
The benefit of speaking to one of our isure brokers is that we can tell you about what multiple home insurance companies are willing to offer you. You can be more at ease knowing that you’re getting the lowest price for the right amount of coverage.
Why You Should Speak to Your isure Broker Before Closing on a Home
Your insurer looks at your house purchase from the risk perspective; how likely your house could be damaged and how much damage might be incurred. They may have information that may not be available to you and can help you assess the potential for problems.
When you speak with your isure broker, you’ll be asked to provide key information about the home you are interested in to determine the value of the structure. For a full list of what your insurer needs to know to calculate its value, read our article, “Factors that Affect Home Insurance Costs in Ontario—and How to Save.”
Conclusion: Secure the Right Insurance Before You Move In
Before you move into your new home, review your policy in full with your isure broker. Understand what’s covered, what’s not, and ask questions if anything is unclear. The best time to shop for home insurance is as soon as you sign your purchase agreement. That gives us time to compare quotes, customize your policy, and ensure you’re protected before your closing date.
At isure, we’re here to help Ontario’s first-time home buyers make confident insurance decisions. Request a free quote today and let us take the guesswork out of protecting your biggest investment!
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