Buying your first home can be daunting, and the list of unknowns can seem endless. If you are looking at purchasing your first home, you probably want more information about protecting your new investment. How can you do this? With the right home insurance policy. Before you hit your next open house, 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 that this is such a large investment, protecting your asset with a quality home insurance policy is the reasonable choice.
If you carry a mortgage on your home, your lender will almost always require you to have insurance in place before your closing date.
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 one of our isure brokers, ask questions, compare quotes, and gather all the relevant information the insurance companies will need to provide you with a quote.
I bought my house for $500,000; so 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 a number of 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 does the insurance company need to give me a quote?
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 did the roof have a repair last?
- 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?
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 defense 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. Conducting a survey of 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.
As homeowners’ insurance is part of my monthly mortgage payment, I am confused; is it my responsibility to decide on what insurance to get or is the decision left up to my mortgage lender?
You decide on what insurance to get and keeping the policy updated is your responsibility. It is your home and your insurance policy. You should select the insurance you feel offers the best coverage at the best rates.
Do I have home insurance coverage for renovations I’ve done?
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 remodeling 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, contact one of our isure representatives today. We will be more than happy to review your policy and discuss any changes that would ensure the best coverage possible for your investment.