Some Insight into Home Insurance
Home insurance is exactly what it sounds like; it is a type of insurance for your property and its contents that protects against damage, liability, and loss. While home insurance isn’t mandatory, it is if you are financing your purchase. One of the requirements of obtaining the mortgage will be that you have insurance in place. Even if you are not borrowing to buy, it is a huge expense and well worth investing in protection in the event of any sudden mishaps.
Insuring your home is a big thing. You will want to make sure you get the right coverage, at the right price that fits within your means. Determining the best kind of home insurance coverage for your needs can feel overwhelming to navigate. There are many providers and options available. Following are some of the most important aspects every homeowner should know about home insurance.
Why and when do I need home insurance?
Unlike auto insurance, home insurance isn’t government-mandated, but that doesn’t mean it’s not crucial to have. Lenders will require you to secure home insurance in order to protect the asset they’re financing. Having insurance can also give you peace of mind by knowing you’re covered when something unexpected happens. This could be a burglary, an on-site injury, or damage caused by a storm.
Flooding of basements is common and can be very costly, especially if you have a finished basement. Then you will have to replace all of the flooring and possibly furniture as well. Insurance provides peace of mind knowing you’re covered in this type of scenario.
It is important to have your home insurance kick in on the day you move into your property. This can be especially helpful so you’re covered for liability with movers or repair people on site.
When searching for home insurance, it’s beneficial to shop around and explore various options and prices out there. Insurers each have different methods of determining your premium. A premium is the amount you pay to the insurance provider on an annual or monthly basis for assuming the risk of the property.
Premiums are calculated using a number of factors about the home which determine how likely the property will require an insurance claim. Asking your insurance broker questions and comparing options can be the most effective way to get the best rate and coverage designed for you. It is unlikely two insurance companies will rate you the same way. They will often look at similar factors that go into a price, but they may weigh them differently. They could be looking for different types of customers who meet different criteria.
What types of insurance are out there?
The price you pay for your specific property will depend on a number of factors. There are three major types of insurance: home, condo and tenant.
At a basic level, insurers will assess the property’s size, location, construction materials, appliances, replacement costs, and upgrades to assess the home’s risks and calculate the insurance premium. The type of insurance you require will also play a role in determining your premium. For example, the cost of insurance for an average home will be more expensive than condo insurance.
There are ways to try lowering your premium. Paying it on an annual basis, increasing your deductible, combining it with your auto insurance, or even asking for a discount can help cut down on costs.
How much coverage and protection can I buy?
Once you’ve determined the type of insurance you need, you’ll next need to choose the level of coverage. According to the Insurance Bureau of Canada (IBC), there are four common varieties of home insurance policies, all of which have different levels of protection.
A comprehensive coverage insurance policy will protect the physical building and its contents against all insured perils, an event that will cause damage, except for those specifically excluded. Uninsurable perils, like earthquakes, and optional coverage, which is additional protection that’s not automatically part of the insurance policy, are not typically included in comprehensive policies. However, comprehensive policies are considered to be the most inclusive in terms of how much they cover.
Basic policies will cover only the perils explicitly named in the policy. For that reason, these are generally among the cheapest insurance options.
If you’re looking for a middle-of-the-road insurance package, a broad policy will apply comprehensive coverage on big-ticket items like the building, but also named perils for the home’s contents.
Finally, if your home doesn’t meet typical insurance requirements, for example it has extensive physical problems, a no-frills policy for these specific cases could be available from your provider.
Determining what kind of coverage you need will largely depend on your property’s location. Environmental factors such as floodplains and earthquake-prone areas could cause damage to your property. Not all insurance policies will protect you against these elements. You may be required to include a form of optional coverage known as an endorsement in your policy.
Basic coverage doesn’t include sewer backup or overland water, which is considered flooding endorsements. Those are the things you probably want to add if you’re in an area that is prone to flooding.
In addition to the physical building, insurance endorsements can also protect specific contents on the property. For instance, if you own high-value items like jewelry or art, a provider may only allow you to claim up to $6,000 in coverage for such items. However, an endorsement for high-priced items in your insurance policy would provide you with full coverage in the event of theft or damage.
A lot of people assume that because they have contents coverage, everything inside their house is going to be covered. That isn’t true. There are limits to the amount that will be covered on certain items.
What do I need to do to make a claim?
If an incident occurs on your property, report the event to your insurance provider as soon as possible to start the claims process. Documenting all aspects of the incident with photos, receipts and notes, and keeping a log of lost items will help greatly with processing your claim and getting reimbursed. You can never over-document. Take pictures, jot down notes.
Remember, if you were ever in an accident, you would want to document everything right away so it’s fresh in your mind.
You’ll be required to pay a deductible, which is your cost to cover damages before your provider pays out. Your provider will also be able to give guidance on what to do and what not to do when accidents happen on your property, especially in cases when repairs are required. For example, your provider may only work with approved contractors to ensure the quality of the repair.
It’s always good to keep your insurance provider in the loop when big upgrades or changes happen on your property. This will ensure you’re fully protected and will prevent a situation where you may be violating your contract and jeopardizing your claim.
An example would be during COVID-19, many homeowners were setting up a home business or undertaking renovations. In cases like these, you should update your provider. You are potentially adjusting replacement costs of materials and adding greater liability or risk to the property that would require coverage.
It’s important to keep your insurer up to date with what’s going on with your property to make sure you are properly covered and not risking your insurance so you can get a cheaper rate.
