There's more involved in buying a home than finding the right property and qualifying for the mortgage. It's smart to protect against different types of loss, although it's not mandated by law. It's not always easy.
Prospective buyers all realize that there are more costs attached to a home purchase than the mortgage and the price of new furniture. Insurance is one of those costs, and it's important to be aware of requirements that protect the lender, as well as assessing the need for additional coverage to protect personal interests and capital investment.
Mortgage Default Insurance
A mortgage default policy, commonly known as CMHC insurance in Canada, is required for all loans with down payments between 5 and 19.99%. Premiums are calculated on a sliding fee scale that takes into account the price of the home, the amount of the down payment and the length of the loan term. Payment are made for the duration of the loan, "bundled" with principal, interest, taxes and other standard monthly charges.
Three Canadian companies provide CMHC insurance and, as of March 2017, rates varied between 4% and 2.80%.
Most lenders also require that buyers show evidence of property coverage insurance in an amount at least equal to the dollar amount of their investment, either the loan amount or structural replacement value. Regardless of the dollar amount, owners should assure that their property coverage is adequate to repair the structure in case of loss. It may be less that the appraised value, however, by the dollar amount of the land. Because building costs vary from one area to another, rates also vary.
All insurance is a form of risk management. It's not easy to manage all possible risk, but a knowledgeable insurance agent will help design coverage to meet specific needs. There is no "one size fits all" coverage; Ask pertinent questions.
This most inclusive type of insurance covers the structure and its contents, up to the limits an owner chooses or a lender requires. It is important to understand the limits of coverage, and the terms that are used. The Insurance Bureau of Canada lists "insured perils" such as "aircraft and vehicle impact," explosion, fire, lightning, riot and theft," among others; and "uninsured perils" that include such things as insect and rodent damage, earthquakes, floods, war and terrorism, and damage caused by "critical acts" of the owner. Optional coverage is sometimes available for some perils, including earthquakes and sewer backups.
A type of insurance that covers only what is specifically stated in the policy. Although not as inclusive as a normal comprehensive policy, this is often a less expensive option, and can be a compromise for owners who can assume a greater personal risk.
Another economical option: This type of policy includes coverage on "big-ticket" damage to the building, but stipulates specific perils that would constitute a claim for the contents.
Offered by some companies for property that does not meet standards for standard insurance. No Frills coverage is a limited option solution, and may represent a temporary solution for some owners.
Sometimes termed "slip, trip and fall" coverage, this is a wise choice to limit owner liability for injury to others that may occur on the property. In a litigious society, it offers valuable protection against financial ruin.
Property insurance is not mandated by law, but because a home represents a major financial investment, it would be unwise to be uninsured. There's also the option of a home warranty to protect your home. It is important to maintain records of improvements, and adjust coverage when property values rise. Adequate personal property coverage is also vital; Maintain an inventory of furnishings and antiques, art, jewelry and collections, and update values as needed.
Important Coverage Types in Calgary
Different areas of the world often have different climates and weather trends, which means the people who live in those locations often have different needs in terms of coverage in the event of a natural disaster. For those looking to insure a Calgary home, it's important to know what sort of coverage options are available to you.
Calgary Flood Insurance
Many homeowners that have house insurance are going to be shocked when they hear that their coverage does not include floods. Here is Calagry, in Alberta and in the rest of Canada there is no insurance company that provides coverage for flooding for residential properties.
Businesses and vehicles can get this type of coverage, however, which will be welcome news for many. A lot of cars and trucks were destroyed as flood waters poured into them and many had to be deserted since they could not travel through the high water levels found on the streets.
There was a time years ago when flood insurance could be purchased in Alberta. The problem was that only homeowners that were close to a flood plain would purchase it making this type of insurance unaffordable since so few were buying it.
The only type of water damage that can be claimed by a homeowner is damage that has been caused by the escape or the backing up of water from a septic tank, sump pump, storm drain or a sewer. This type of coverage is only available as an extension from most companies.
Businesses, however, are offered flood insurance on their policies from most companies without an additional charge. Usually the deductible is higher for a flood claim than other claims but in a situation like we've seen today, the deductible won't seem like much to any businesses in Calgary that have received extensive damage from the flooding.
Flood damage for vehicles is available as an option for automobile insurance. You'll have to look through your policy if your car has been damaged to find out if you have purchased this type of coverage for your vehicle.
Calgary Insurance for Hail Damage
If you have a home that was recently damaged by hail, you'll need to check your insurance policy to make sure that you are covered. Here in Canada, most of the insurance providers offer wind and hail damage and some automatically include this damage in all of their policies.
To find out whether you are covered or not, look at your policy exclusions. If you don't see wind or hail mentioned in the list, you're insured. If you have an insurance policy that names perils, check to make sure that wind and hail are on the list.
Most policies also provide conditions in the coverage. For example, if your roof or siding was close to reaching its life expectancy before the damage occurred, you might not receive the full replacement cost. As well, depreciation may be applied for wear and tear. If your siding was already well-worn, for example, it's assumed that it would naturally be more susceptible to damage.
In most cases, manufactured and mobile homes aren't covered for hail damage. If you aren't sure whether you are protected or not, it's always best to call up your insurance provider for verification. Sometimes it can be extremely difficult to understand the wording in your home insurance policy.
If you find out that you are covered, your insurance company will walk you step-by-step through the claim process. If your home is currently up for sale or you are closing on a home that may have been storm damaged, it's important to get a hold of your lawyer and real estate agent right away. It's also necessary to get the claim started immediately so that the information can be passed on to the new homeowner through his lawyer or real estate agent.
Everything needs to be properly documented since all claims stay with the home. Even when home ownership changes, the repairs will still be completed and the claim will be honoured. When the claim credit comes through, you may want to consider upgrading your vinyl siding to hardie board. This type of board is naturally resistant to storm damages, insects, corrosive salt, fire, mold and rot and comes with a 50-year warranty.