Considering buying a new home?
When buying a new home it is easy to be entirely focused on finding your dream house. People often forget to consider certain aspects of houses and properties that may affect them financially in the long run. The following will provide you with some things to think about when searching for your next home.
Looking for Your Dream Home
According to the Insurance Bureau of Canada, here are some things to consider “before you sign on the dotted line”:
- Do the advantages of a new build (for example, a warranty, if applicable) outweigh the opportunities of older construction (for example, remodelling and customizing)?
- What risks will you assume if you don’t include a home inspection as a condition in your purchase offer?
- Is your budget sufficiently flexible to accommodate factors that are subject to change? In addition to insurance, these factors include:
- Monthly mortgage costs
- Monthly maintenance fees
- For a new condo, is there a sufficient reserve fund for future repairs?
- For an older condo, are any major repairs outstanding? Are any special assessments underway? Are adequate funds invested for future potential use?
- If you are buying a new build, what do you know about the builder’s experience? Has the builder had any claims or lawsuits?
- Are there any current claims (liens) on record against the property?
- Is the property in a flood-prone area? The local municipality may have a flood map.
– Source: Insurance Bureau of Canada
Insuring a New Home
There are a number of factors that will affect your home insurance premium over the years. Therefore, it is beneficial to understand the aspects that insurers consider when determining your home insurance premium. There may be specific elements of your potential new home that will result in very high, or possibly low, insurance premiums. These factors could influence your decision on whether or not to buy. According to the Insurance Bureau of Canada, here are factors that will affect your home insurance premiums:
- Type of residence (for example, single- or multiple-family, rental property, condominium, recreational property)
- Construction material used (for example, brick, cement), age, size and location
- Heating, plumbing, electrical systems, roofing and land grading
- Fire protection (for example, distance from a fire hydrant, type of nearest fire station)
- Loss experience (for example, rate of crime and fire in the neighbourhood)
- Your claims history and discount eligibility.
Shopping For Home Insurance
When it comes to being a homeowner with a mortgage, home insurance is a must. In fact, your mortgage lender will insist you have it. Even after you pay off your mortgage, home insurance is very important to maintain.
Affordable premiums are important, but you may also want to look at your deductible: the higher it is, the lower your premium will be. For example, if you choose a $1,000 deductible, you’ll likely have a lower premium than someone with a $200 deductible. Decide how much you can afford to cover if something were to happen.
Ask the Right Questions About Your Home Insurance Policy
Make sure you understand the details of your policy. A financial advisor will be able to answer your questions and figure out exactly what kind of coverage you need to protect your home and its contents.
There are many kinds of policies available for homeowners. Some offer basic coverage of named perils including fire, theft, some types of water damage, smoke damage and vandalism, plus things you may not expect: lightning, explosion, falling objects and even aircraft impact. Others are comprehensive policies that generally cover most risks to a building and its contents but with some exclusions. While many policies have a lot in common, some cover more than others.
Find Out What’s Excluded in Your Home Insurance Policy
You might have a policy that covers both buildings and contents for all risks and exposures, except for listed exclusions. Ask your financial advisor what the policy doesn’t cover, since all policies have excluded perils. It’s imperative that you know in advance, so there are no surprises when you make a claim.
It’s also important to understand what is included in your policy. Water damage, for instance, may not be covered depending on how the damage occurred. Some losses are not always top of mind. For example, as a condominium owner, are you covered if your washing machine floods and damages the unit below?
Liability Coverage with Your Home Insurance Policy
The liability portion of your policy covers incidents occurring at home, and also any legal responsibility arising out of your unintentional actions that harm others, wherever they occur. For example, if you have a swimming pool on your property, you absolutely need liability insurance.
Do you Need Additional Insurance Coverage?
If you have expensive jewellery, collectibles, musical instruments, computers or a home business, you may need additional coverage to be fully protected.
Home Insurance Needs Can Change
Home insurance is not static; your needs often change over time. For example, if you’ve increased the value of your home through additions or renovations, it’s important to let your financial advisor know to make sure you’re not underinsured
Understanding Home Insurance Premiums
For more information on insurance premiums please visit Understanding Insurance Premiums. Contact us anytime to compare your home insurance coverage or get a quote.