Buying your first home is a thrilling experience. Often filled with joy, there are those moments of fear or intimidation that come with learning all the minute details and new responsibilities that come with homeownership. I should know! As a first-time home buyer myself, there are many things I wish I knew going into it.
If you are looking at purchasing your first home, one of the areas you will wish you had more information about is ensuring you protect your new investment with the right home insurance policy.
Here are answers to some common questions first-time homebuyers have about their home insurance:
Is home insurance mandatory in Ontario?
This may come as a surprise to many people but, unlike car insurance, home insurance is not mandatory in Ontario. However, given that this is such a large investment (likely your most significant investment,) it is easy to understand the importance of protecting your asset with a quality home insurance policy.
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 for at least 30 days before the closing date. Starting 30 days out will give you enough time to talk with your broker, ask questions, compare quotes, and gather all the required information the insurance companies will need to provide you with a quote.
Even before purchasing a home, we recommend talking with us first. While most homes are straight-forward to insurance, many small factors can make your new home harder to insure. For example, things like older wiring and being far away from a water source (fire department, water tanker) are just a sampling of what insurance companies consider. If you have purchased a house a little outside the insurance box, that is fine. We are here to find the right insurance solution for you and your needs.
On top of all the other last-minute things that pop-up as the closing day arrives, you don’t want to add getting insurance to that list.
I bought my house for $X; why is the insurance amount in my policy different?
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. The number that your insurance company is interested in is how much it would cost to rebuild your home tomorrow if an insured peril such as a fire occurred.
Replacement cost does not factor in the market value of the land your house is on, so in the majority of cases, the insurable amount will be lower than the Market Value. A lower Replacement Cost value also helps keep the insurance premium down as well.
What information does the insurance company need to give me a quote?
For the insurance company to give you a quote, they will need to know details about your home. Some of the required information includes answers to questions like:
- What year was the house built?
- What kind of wiring, plumbing, and heating is in the house, and when was it last updated?
- When was the roof last updated?
- Have there been any claims on the house?
- Who will be living in the house, and who is on the title?
How can I reduce my premium while making sure I have the right coverage?
There are multiple things you can do that will lower your home insurance premium. If you own a vehicle or multiple vehicles, you can benefit from discounts by bundling them with your home insurance.
If you have a security system such as a burglar alarm, you may also be eligible for discounts.
I would be happy to understand your scenario to provide actions you can take to keep that premium to a minimum.
As a first-time homebuyer, you will have many questions in your journey to homeownership. Knowing the answers to these common insurance questions ahead of time will make the process a lot easier for you!