A Brief Guide to Home Buying Insurance in Canada
Buying a house is a huge responsibility and after saving, getting a mortgage, survey and lawyer, what else could be left? Insurance.
To save you holding your head in your hands, here is a brief Tyson Wokoeck & Associates guide to what might be on the cards when it comes to home buying insurance in Canada.
1. Prepare yourself
When you choose a lender, bear in mind that they may have certain requirements including certain types of cover. Check the small print or ask your mortgage lender what requirements they have in terms of insurance.
2. Mortgage Insurance
Mortgage Default Policy is a mortgage policy that you would have to take out if your deposit works out between 5% and 20% of the price of your property. It is to protect lenders against potential default on payment of your mortgage.
Your premium on this type of policy will be based on what you paid for your home, what kind of deposit you paid and the term of the loan.
You would typically pay the charges for this throughout the whole term of your mortgage with a number of other charges/tax as well.
Genworth Canada, Canada Mortgage and Housing Corporation (CMHC) and Canada Guaranty are the three major companies that can provide this type of coverage.
3. Property Insurance
Property coverage may also be noted as preferred by lenders, to cover the value of your property. This type of coverage is less straightforward and will depend on the type of property you have, its value etc. It’s best to consult an advisor but it’s definitely worth remembering that property coverage insurance could hit you.
4. Content Insurance
Insurance to cover your home contents is known as comprehensive cover in Canada. You can choose the amount you wish to get cover for and can do so for the contents inside as well as the structure. It’s designed to protect you from fire, theft, aircraft impact or natural disasters as well as other potential hazards.
4. More specific insurance options
Comprehensive cover is very wide and can be expensive. If you know your property is particularly vulnerable but you don’t want to payout for all-inclusive cover then you can get something called ‘Named Peril’ cover, which will only cover you for a specific type of peril like fire.
You can also name several perils in a ‘broad’ policy or restrict it to larger damage as well.
As mentioned, insurance might be a requirement for lenders, however, it’s not a legal requirement. Despite that it’s always wise to insure such a big investment and the costs really are masked by the potential losses you could incur should anything happen to it.
Tyson Wokoeck & Associates can help guide you in the right direction. If you’re looking for a property, get in touch with someone from our offices today.