The True Costs of Home Ownership Series - Insurance

This is installment #3 in my series about the costs involved in owning a home.  You can read all about Utilities (heat, hydro, water) HERE & Property Taxes HERE

I think that this series is most helpful for First-Time Buyers since those that already own a house are going to be familiar with all the various expenses involved! However, when it comes to Insurance, there are some Seller-related issues that are worth touching on, particularly for those that may be First-Time Sellers!

Insurance & Selling A Home
  • Keep your home well maintained while it's on the market! Anything from walkways cleared of snow & ice to minimizing potential hazards inside of the home...Why? Because if someone is injured on your property or inside your home then you are liable! How is this different than any other time that you own your home? There will be a lot more people visiting it, they will be strangers & we live in an increasingly litigious society. Cover your ASSets!
  • Have adequate insurance in place for both contents & the structure itself. Believe it or not, not everyone does! If someone gets hurt, the house burns down or floods or any number of other catastrophic events could cripple you financially without proper coverage.
  • Your insurance policy should end the day after the sale of your home closes. On closing day there should be 2 policies in place, yours & the Buyer's.
Insurance & Buying A Home
  • When you're making an offer on a home, depending on the home, it may make sense to include a condition of obtaining insurance on the home. This doesn't mean that you have to get a policy in place during the conditional time period, just that you have the go-ahead from your insurance company that they will insure the home at a cost that is satisfactory to you.
  • Some issues that should at least trigger a conversation about an insurance condition would be:
    • knob & tub wiring - insurance companies most likely will require you to have this addressed prior to closing or within a certain time-frame after taking possession of the home. Better to know this ahead of time than to                   find out just before closing & not be in a position to comply with the insurance company's requirements. Don't know what knob & tube wiring is? Find out more HERE
    • aluminum wiring - when you're arranging your insurance they're going to ask about the wiring...if it's aluminum they are going to require an ESA inspection & certificate & therefore this condition will need to be inserted in the offer, typically completed at the Seller's expense. Learn more about aluminum wiring HERE
    • fireplaces & wood stoves - WETT reports for wood burning stoves & gas inserts - usually a fireplace that was installed at the time the house was built, that has not been disturbed (by having an insert installed) will not require a WETT report, but all others will. Often home inspectors will say that ALL fireplaces need an inspection but this is where you should defer to your insurance company on what they require. It's an additional cost, typically at the Buyer's expense & if it's not needed then don't do it!
    • major systems that are at the end of their life-spans - the age of the roof & furnace, in particular, could be an issue in that your insurance company may require you to replace them within a certain time-frame after taking possession of the home (like 30days!) If that's not something you're able to financially take care of right away then you could be in trouble! 
  • Insurance companies will ask you a series of questions relating to the house like when it was built, details regarding the heating, roofing, electrical & plumbing, including when these were replaced. Other questions will be, how close to the nearest fire hydrant & fire station &'s all about risk management for them!
  • A Buyers insurance coverage should start the day of closing & just as I indicated above, there will be 2 policies in place on that day, with the Seller's coverage dropping off the following day.
Insurance & Owning A Home
  • insurance companies will periodically check in with requests for information while you own the I mentioned above, they will be looking at the age of your major systems as well as your credit score & both can affect your premiums.
  • smoke detectors & carbon monoxide detectors are both now mandatory in all homes in Ontario! - Besides the obvious, that they can save your life, not having them installed and/or in good working order could result in having an insurance claim denied.
  • A monitored alarm system could help lower your premiums as well as give you peace of mind. Read more about the ways to reduce your home insurance costs HERE & HERE
There are many types of insurance coverage you may want to have in place when you're a "grown-up" lol! When I add up the various premiums of my own insurance policies relating to our vehicles (there's a commercial policy on my vehicle due to my line of work), life insurance, mortgage insurance & home my business-related insurance, it makes me more than a little nauseous - it's actually our biggest house-hold expense each month! Now don't get too scared, YOUR insurance needs are probably different & therefore less expensive, lol!

There are some real risks involved in not having adequate coverage. A colleague recently shared a story of an estate sale that he is working on where, sadly, it was a young, fairly new homeowner who had no insurance & no equity in their property. What does that mean? The estate will be responsible for ALL the costs...funeral...selling the property...settling debts etc. This is not a burden you want to leave for your loved ones, right?

Some final thoughts on Insurance...
  • I always recommend a broker rather than dealing directly with an insurance company...just like with a mortgage broker, an insurance broker will shop your business around to find you the best coverage for your needs at the best price for that coverage. Remember as in all things in life, cheapest is not always the best choice!
  • Know what your policy covers & any exclusions
  • Get separate riders for "special things"
  • Keep current appraisals for expensive things
  • Try to maintain an up-to-date inventory of your possessions & any special/expensive finishes or custom work you have in your home & store this inventory list (with pictures!) offsite (like a safety deposit box at your bank) so that you can provide that to your insurance company in the event of a claim or if you need to dispute the value of replacement costs.

  • This is a huge topic & I've definitely only scratched the surface so please speak to a professional (if you need a referral, don't hesitate to ask!) about your own situation & needs! This series is meant to identify issues to be aware of & questions to find answers to....after all, we don't know all the things that we don't know!
**speaking of not knowing...I can't figure out why my font keeps changing, so frustrating, lol!

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