Some hints about buying insurance on your house
By Mark
Schadenberg
Home
insurance falls under four categories – contents, building (repair
/ replacement) insurance, mortgage / personal insurance, and the CMHC
fees.
The
CMHC costs are based on your percentage of down payment for a
high-ratio mortgage (less than 20% down) is technically as insurance
as it protects the lending institution in case you forfeit your
mortgage and the home has to be sold under power of sale or
foreclosure.
I
always remind clients that if they bridge finance and leave their
previous home vacant for any length of time, they obviously must pay
insurance on their old home up-to-and-including the day of closing.
The
insurance to cover the home's envelope is the one area that has seen
an increase in recent years as we seem to encounter more flooding,
drastic weather such as ice storms and tornadoes, but at the same
time fewer fires as homes become more modern in safety features and
mechanicals. With this extra-cold winter now behind us, what does
your policy state about coverage in case you had frozen water pipes?
The
so-called fire insurance is truly the cost-to-replace brand new if
your home was destroyed by fire. This number closely reflects the
house's upgrades (finished basement, gas fireplaces, hardwood floors,
jetted tub, etc) and is calculated by also using a correct square
footage multiplier. The insurance broker doesn't care if you have old
drafty slider windows because she/he is calculating rebuilding the
house with today's standard construction styles and materials, so
your new home will have vinyl windows.
Purchasing
a security system will also enhance your peace-of-mind and reduce
your insurance costs especially in the area of losses due to robbery.
An
insurance company will frown upon many amenities still found in older
homes – knob-and-tube wiring, 60-amp hydro service, over-fusing in
an outdated fuse box, galvanized plumbing, asbestos in any form
(flooring, wraps on pipes, vermiculite insulation), aging oil tanks, and naturally
insurance brokers do not like natural or wood-burning fireplaces.
Another
important factor is the distance you live from a fire station and a
hydrant.
Be
sure to get an apples versus apples quote when talking to insurance
firms as some policies may have a few 'perils' excluded from
coverage.
And,
if you can't get insurance for your home purchase, you can't get a
mortgage as a lending institution certainly requires proof of
insurance to forward you monies for your lawyer to complete the
transaction.
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DEFINITION OF 'INSURANCE'
A contract (policy) in which an individual or
entity receives financial protection or reimbursement against losses
from an insurance company. The company pools clients' risks to make
payments more affordable for the insured.
()()()()()()()()()()()()
CONDOMINIUMS
I think condominiums are terrific option for empty-nesters would would like to travel -- to visit family and warm climates.
I think many possible condo buyers in townhouse complexes know that condo fees cover shingles and lawn maintenance (landscaping), but quickly forget that the Ontario Condominium Act also spells out that the monthly fee also pays for exterior insurance. I think this was included for two reasons: to simply make sure everyone in the condo corporation area had identical insurance (Many folks don't have mortgages), but also because a fire in one unit will certainly cause damage to adjoining units.
My quick editorial, here is that condo fees must be closely monitored by the board of directors, but those folks usually all live on site and are just as concerned about expenditures as possible new residents to a complex.
YOUR GREATEST ASSET
I
must preface this next section by saying, I'm certainly not an
insurance salesperson. Personal insurance is integral for home owners
just as a will is to people with children.
A
friend of mine (see links below about GAPP), who is active in the insurance
business always reminds me that your greatest asset is not the equity
you have earned in your home, but rather your ability to continue
earning income as a healthy adult. Therefore, you truly do require
insurance that will assist you in continuing mortgage payments if you
are unable to work, and this protection could pay off your mortgage
if your spouse or you passes away.
BEST
SITES FOR YOUR HOMEWORK
I
truly believe that a first-time buyer should explore the wealth of
info on the CMHC website. It's terrific consumer background and it's
not skewed by any particular bank's (Credit union, etc) salesmanship.
CMHC covers all the calculators for determining how much of a home
you can afford, the importance of a strong credit (beacon) score, how
to think thoroughly about your wish list, a list all closing costs,
and why the CMHC fees system exists.
By
the way, I also believe it's impossible for our real estate system to
have a meltdown similar to what happened in the U.S. a few years ago
because of the stringent guidelines (almost too strict) and rules
defined by the Bank of Canada and the Canadian Mortgage & Housing
Corporation (CMHC).
Well
researched newspaper and magazine stories are also a good source such
as the link below to a Globe And Mail story supplying hints on how to
save some money on insurance as we realize we also require car
insurance.
LINKS:
http://www.fsco.gov.on.ca/en/insurance/brochures/Documents/brochures-8.pdf
Mark
Schadenberg, Sales
Representative
Senior
Real Estate Specialist (SRES designation)
Royal
LePage Triland Realty
757
Dundas St, Woodstock
www.wesellwoodstock.com
(519)
537-1553, cell or text
Email:
mschadenberg@rogers.com
Twitter:
markroyallepage
Facebook:
Mark Schadenberg, Royal LePage Triland
Discussion
. . . Direction . . . Determination . . . Destination
These are wonderful tips to follow. I recently got married to the love of my life and we are moving in together and bought this great house. Now comes a time where I need to insure the house and so this came in real handy. Thank you for sharing this with us. Keep up all the hard work. Thanks again.
ReplyDeleteJoshua Duncan @ Focus Insurance Atlanta