Whether you’re closing on a home or refinancing your mortgage, you are going to need to look into various insurance products. Some of these are going to be mandatory, others are optional, and some are just common sense to have or look into.
are the various types of insurance products you will encounter when closing your
home or mortgage transaction:
home insurance policy covers your home and its contents in various situations
such as floods, fires, break-ins and personal liability if someone gets hurt on
your property has a mortgage, your lender will likely require that you have the
appropriate coverage and that you submit proof of your coverage prior to
closing your transaction.
While home insurance costs can add up, there’s really no good reason to leave your biggest asset unprotected.
When shopping for home insurance, you can use a broker who would typically shop around for the best rates with the insurers they work with, or you can obtain a policy directly from an insurance company.
sure to read the fine print before you purchase a policy as they are not all
the same and coverages of certain items and situations can vary among insurers. Your mortgage lender may also have
requirements for minimum coverage levels which you’ll need to consider when
shopping around for a policy.
Costs vary depending on coverage, home value and additional factors
Your condo corporation will typically carry a commercial policy to cover common areas and the shared exterior and interior aspects of the condo. In most cases, this policy does not cover your individual unit and your contents. You’ll need a personal condo policy to protect your unit.
For example, if a homeowner in a unit above you has a flood and the water causes damage to your unit and belongings, the home insurance policy of both parties will likely cover the claim.
Like home insurance, most mortgage lenders will consider having a policy for your unit as mandatory and you will require to produce proof of coverage prior to closing (often referred to as an “insurance binder”).
The cost of condo unit insurance varies depending on coverage, condo value and additional factors
Renter's or Tenant's Insurance
you plan to rent your property or rent part of it, your tenant’s contents and liabilities
may not be covered, even if you have a homeowner’s policy in place on the
example, if your property is tenanted and there’s a flood, your home insurance
may cover the cost of repairing your property, but if your tenant’s possessions
such as their TV or couch suffers damages as a result, your insurance company
will likely not cover these items.
tenant insurance is not mandatory in Ontario, as a landlord, it is a good idea
to require your tenants to obtain their own insurance to cover their possessions
and personal liability while living in your unit. Landlords typically incorporate such requirements
as part of the lease agreement.
The cost of tenants insurance may vary with the level of coverage needed, but in most cases, it is an affordable monthly payment.
property’s title is legal proof that you are its owner. It describes your
rights to the land and any limitations like giving your local phone and power
companies legal right to construct, repair, replace and operate wires on a
section of your property.
insurance is a policy that protects the homeowner and lender against future
issues that may arise with the title of the property.
For example, you purchased a property with a shed that was built by the previous owners. It is later discovered that the shed partially sits on the neighbour’s property. In this case, a claim can be made to correct the situation.
insurance also protects against existing liens against the property’s title
(e.g. the previous owner had unpaid debts from utilities, mortgages, property
taxes or condominium charges secured against the property), title fraud, and
errors in surveys and public records.
Most lenders will require you to obtain a policy to insure your title as the policy also protects the lender’s interests in having a marketable property. Learn more about title insurance here.
Unlike usual insurance premiums that are paid monthly or annually, Title insurance is a one-time premium based on the value and location of the property.
Mortgage Default Insurance
Mortgage default insurance (also known as “mortgage insurance”) is mandatory on all mortgages with a down payment of less than 20 percent of a home’s purchase price.
This insurance protects lenders, but also allows qualifying buyers purchase a property with as little as 5% down payment.
Mortgage default policies typically costs between 2.8% to 4% of the mortgage amount. This cost can be rolled onto the mortgage so it’s not an out-of-pocket expense.
Life, Disability and Critical Illness Insurance
it is difficult to imagine, when taking on a mortgage, it is a good time to
consider unfortunate scenarios whereas you may not be able to pay your lender
and may put your home at the risk of foreclosure.
life or disability insurance may not have been a topic you thought about in the
past, it may be worthwhile considering a policy to protect you and your family
in a worst-case scenario.
Life insurance is not mandatory, but a good idea to look into. Disability and critical illness policies are also options that would supplement your income should you not be able to work due to a disability or a critical illness. These products are also typically offered through your employer’s benefit plans.
Costs can vary depending on type, coverage, and personal factors.
Home Systems Warranty
moved into your new home in the summer.
Come fall, you turn on the furnace and discover it isn’t working. You’re devastated when find out that you need
a new furnace at a cost of $4500.
In reality, the systems in your home are complex and can be expensive to repair or replace. There are several options that will cover major home systems and even appliances should they break down or require repair.
absolutely optional, if you are looking to reduce the risk of expensive repair
bills during the course of your home ownership.
There are various options that will have you covered and sleeping well
Costs vary depending on the coverage you are looking to get and the home’s age.