Buying your first home is incredibly exciting – if you’re on the verge of making a purchase, congratulations!
This post is designed as a quick and simple summary of home insurance. Do you need it? How does it protect you? What affects the cost of home insurance? We’ll cover all of these points and more. There are a lot of important points to cover, so let’s dive right in:
Do I Need Home Insurance?
Need is a strong word – but in most cases, you will quite literally need home insurance if you want to buy a new home. Let’s explore why.
Most people require a mortgage to purchase a home. The institution that lends you the money for your mortgage will want some assurance that nothing catastrophic will happen to your home – after all, your home is likely the lender’s collateral on the mortgage. They want to protect their collateral, so they’ll require you to carry home insurance in order to obtain a mortgage.
The level of insurance that your lender will require can vary – some only require home insurance up to the total amount of the mortgage, while others will require you to carry enough insurance to completely replace your home in the event of catastrophic loss.
There is another type of insurance that lenders will sometimes require known as mortgage loan insurance. This is not home insurance. If your down payment on a home is below 20% of the home’s value, you will be required to purchase both mortgage loan insurance and home insurance.
Of course, this means you’ll only need home insurance if you get a mortgage. Even if you don’t get a mortgage, however, getting home insurance is still a very good idea. After all, your home is likely your most valuable asset – protecting it can help you through what could otherwise be a terrible financial loss.
What Factors Affect the Price of Home Insurance?
There are too many different factors that can affect home insurance prices to list here. Insurance is a complicated business, where risk is evaluated in incredibly granular ways. We can, however, give you a fairly comprehensive list of the factors that are most likely to affect home insurance prices. They include:
- The value of your home (and the amount of coverage you purchase)
- The risks that are covered by the insurance
- The insurance company you purchase your coverage from
- Your previous claiming history (including tenant insurance claims)
- Your address
- The condition of the home you’re purchasing (age, repairs needed, build, features, etc.)
- How the home will be used (primary residence, vacation home, rental property, etc.)
Different insurance companies will have different risk tolerances, so the price of your insurance can vary substantially from insurer to insurer, even if you purchase the same level of coverage and the same types of coverage. That’s one of the reasons insurance brokers are so useful – we can check quotes from several different insurance companies simultaneously, and find the coverage that will best suit your needs.
What Types of Coverage Are Available?
Home insurance covers you for different risks and hazards. The types of coverage vary from insurer to insurer, but all home insurance will cover certain basic hazards (most notably, fire). In most cases, home insurers choose what are known as comprehensive policies, which cover all risks and hazards with the exception of certain “named perils” – risks that are specifically excluded.
It’s on these named perils that many insurance companies will differ. Some companies will automatically cover things like sewer backup, while others will leave that type of coverage excluded. This, of course, affects the cost of the policy as well.
Looking for Home Insurance in Winnipeg?
Give us a call. We’re excited you’re getting your first home, and we’ll help you through the insurance buying process. We’re proud to offer home insurance in Winnipeg and the surrounding areas.