Friday, 13 March 2015

A look at all the angles in home insurance

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frown upon many amenities still found in older homes – knob-and-tube wiring, 60-amp hydro service, over-fusing in an outdated fuse box, galvanized plumbing, asbestos in any form (flooring, wraps on pipes, vermiculite insulation), aging oil tanks, and naturally insurance brokers do not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.
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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


1 comment:

  1. 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.

    Joshua Duncan @ Focus Insurance Atlanta

    ReplyDelete