How Do I Buy Home Insurance?
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Nolan Issac for unsplash
Home insurance is meant to protect homeowners from huge, unexpected out of pocket costs from theft and damage. It is also usually a legal requirement for owning a home if you are financing that home. Even if it wasn't, investing in the protection of the biggest asset you will ever own is a great move. Here are the basics about home insurance in Canada and how you can get the best insurance for your needs.
When do I need to buy home insurance?
You should always try to buy your home insurance on day one, the move in day. It can be difficult to backdate insurance if you find a problem in your home later on. Insurance companies are much more likely to pay for problems that you find in the home if you have it implemented from day one.
The actual purchase of home insurance should be made anywhere from 30 to 60 days before your move in date, because full coverage takes a while to kick in.
Who do I buy home insurance from in Ontario?
You can buy home insurance over the phone, in person with an agent or online. There are many competing brokers that are looking for your business. Do not be afraid to play them off of each other to get the best price that you possibly can.
Do I really need to buy home insurance?
MATT JONES for UNsplash
Yes! If you own your home outright, then perhaps you don't need insurance but even then it is a smart idea. The only question is what kind you need to buy. There are four major types as defined by the Insurance Bureau of Canada: no frills, basic, broad and comprehensive.
- No frills: The cheapest kind of home insurance, this is usually bought for legal reasons only, and usually meant only for properties that do not meet underwriting standards.
- Basic: You can save money on basic insurance; however, you take on some of the risk of the property. Basic insurance covers only the perils that are directly listed on the policy and nothing more.
- Broad: This will cover most of the big ticket repairs and events that occur to real estate. The pricing is mid-tier - not as expensive as comprehensive, but more expensive than basic.
- Comprehensive: This is the most expensive and the most inclusive home insurance policy available. The only perils that are not covered are the ones that are specifically named in the policy.
RateHub.ca is the best place to compare insurance rates and plans in Canada.
Mortgage Insurance versus Home Insurance
These are two different things. Home insurance protects the property whereas mortgage insurance protects the loan on the home.
If you are required to buy insurance through the Canada Mortgage and Housing Corporation (CMHC), you should also get home insurance as described above.
Here is a calculator for Mortgage Loan Insurance through CMHC to help you determine the cost of that insurance:
You need CMHC Mortgage Loan Insurance if you want to buy a home but have only 5% in cash as a down payment. This equalizes the playing field of home ownership for people without cash in hand. This has its advantages but also exposes families to more risk, which is why they need insurance. If this is you, please read the CMHC FAQ page and explore the requirements.
Let us know if you need any help navigating the home purchase and planning experience!
Take care,
Sharon
