Buying home insurance for the first time
The loss of your home or an important component of it from fire, theft, severe weather or other peril is devastating. Without insurance you may not be able to recover financially after such a loss. That's why most banks or mortgage companies will insist that you purchase coverage and will ask for proof of insurance before lending you money to buy a home.
In most cases a homeowners' policy provides for guaranteed replacement of buildings and contents (there may be certain limiting conditions; your insurance broker can explain). This coverage is based upon an estimate of the replacement cost of your home, which includes things such as the price and availability of skilled labour, debris removal and extra expenses due to more demanding building codes. This replacement-cost estimate differs from the resale price of your home, which is based on location, land value and the amount paid for surrounding homes.
When arranging for insurance coverage for a home for the first time, your insurance broker may ask for the following information to help determine its replacement cost:
- Year built, total measurement of finished living area
- Style (bungalow, split-level) and number of storeys
- Foundation type (e.g., poured concrete slab, crawlspace or basement, including percentage of it that's finished)
- Exterior wall finish (stucco, vinyl siding); interior wall height
- Floor coverings (hardwood, tile) wall surfaces (wallpaper)
- Roof material
- Number of kitchens and quality of finishes; number of bathrooms
- Garage, carport or other structures attached to the house; sheds and outbuildings
- Unique access such as steeply sloped lot or remote location
In some instances - for example, if the home is deemed "high value" or has some unique attributes - the insurer may request that an inspection be done. Sometimes for older homes, the insurer may request an electrical inspection. Homes built several decades ago weren't wired for the power load of today's electrical appliances, and amateur handyman upgrades done to these older electrical systems are a commonly seen fire hazard.
Typically the amount of coverage provided for your contents is a percentage of the amount of coverage on your house. There are often limits to coverage for such things as jewellery or bicycles. If the value of your belongings exceeds these limits, or you have art, wine, collectibles or other high-value assets, talk to your insurance broker about additional coverage. Your broker can advise on coverage for additional perils such as earthquake and sewer back-up as well.
The personal liability portion of your homeowner's policy covers you at your home or anywhere in the work for bodily injury you may unintentionally inflict on others - often referred to as "third parties" - or to accidental damage you may do to their property.
During the term of your policy, advise your broker of any changes to your home situation that could be material to the policy so that changes can be made.
Additional resources
Insurance Bureau of Canada: Home Insurance Explained
Canadian Mortgage & Housing Corporation: Now That You're a Homeowner
Checklist for moving into a new home
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