It’s easy to get overwhelmed during the home buying process. On top of it being the largest transaction you’ve ever made, things move quickly – with a home inspection, meetings with your real estate lawyer, and mortgage broker or bank all typically within a few days. There’s one extra task you’ll want to add to your to-do list, which you won’t want to forget to do before you move in: buy home insurance.
Home insurance exists to protect you, the homeowner, from the potential costs that could result from any structural damages and/or thefts. Like most insurance policies, there’s a monthly premium you’ll have to pay for your home insurance, as well as deductibles if you ever need to make a claim. Since your home is potentially your largest investment, you’ll want to protect both it and yourself. Here’s what you need to know about home insurance:
What are the different types of home insurance?
The Insurance Bureau of Canada (IBC) outlines four different types of home insurance coverage that should be available across Canada: comprehensive, basic, broad and no frills. Insurance providers will tend to have their own definitions of these terms, so no matter who you decide to go with, make sure to read the fine print of your policy to find our what is and is not covered.
How are home insurance premiums calculated?
Similar to how a home inspector examines the structure of your home, a home insurance provider will assess the interior and exterior features, figure out the probability of something going wrong and then give you a quote. The more risks there are with your home, or the more expensive potential repairs would be, the more your premiums will cost you.
When determining your premiums, home insurance providers will look at the following:
- Construction of home (brick vs. cement vs. wood)
- Distance to closest fire hydrant
- Value of home and belongings
- Any special uses (home office, rental unit, etc.)
- Type of electricity
- Type of pipes
- Source of heating
- Anything else that might affect your premium, such as the age of the home, the home security system (if there is one), a pool, etc.
Do I have to buy home insurance?
It depends. If you have a mortgage, or have financed any portion of your home, your lender will likely require basic home insurance. If you own your home free and clear, it’s up to you to decide whether or not you should have any coverage on your home (but we always recommend it).
There are a few things to consider, as well, before purchasing a new home. A home in poor living conditions could result in an increase in premiums, because of work that may need to be done. Homes in areas with unpredictable weather or in remote areas may also be subject to higher rates. If you live in a neighbourhood with a lot of crime, you may need to install deadbolts or add a security system in order to lower your premiums.
Essentially anything that might leave your home vulnerable to damage is likely to increase your rates, so be aware of these possibilities when you’re house shopping.
Where can I purchase home insurance?
You can buy home insurance in-person, online or over the phone through any number of providers, including brokers, agents or a company. If you’re unsure, you can always ask friends and family for recommendations.
Whichever provider you go with should take the time to sit down with you and explain the policy options and premium rates. Don’t be shy during this meeting. Read all the fine print and ask any questions you might have.
And remember to shop around before committing, to make sure you’re getting the best deal. That being said – don’t lie to a provider to get a better rate. It will come back to bite you should you ever need to make a claim.
How do I cancel home insurance?
When cancelling home insurance, make sure to give as much notice as possible and provide a written letter requesting the cancellation. If you have prepaid your premium for the year, you may be able to get a prorated amount refunded, but check your policy.