Two columns ago, I mentioned I am working on a package of information that goes a little deeper into the actual steps involved and timelines to consider once you have an accepted offer on a home.
I’ve had a few people reach out with suggestions as to information I should include.
This week I had a great call with Kaitlyn Anutooshkin, a personal insurance advisor with Hub International. She reached out after reading my earlier column and shared lining up your home insurance during a purchase is something people should know a bit more about.
Confirming that the home you are buying is insurable is one of the key things you need to take care of before you remove your final subjects and go firm on your purchase.
Homebuyers insurance - why is this important?
One of the lender requirements at the time of closing is that you have appropriate home insurance in place. They are lending hundreds of thousands of dollars based on the home you are buying so they want to make sure that if anything happens the home will be repaired or rebuilt.
Not all homes are considered insurable. Some may be considered high-risk due to area. As an example, some homes are built on flood plains, so most companies will not cover them. In our area, forest fires are a huge concern. Buying a home and home insurance while there are active fires nearby can be very challenging, if not impossible.
When your realtor confirms you have an accepted offer, they will advise you to purchase home insurance. This seems pretty straightforward.
Most people will do a Google search to see where to buy home insurance. There are insurance brokers locally, and there are multiple companies that offer home insurance online.
We are all busy, so the thought of being able to buy your insurance online in a few minutes may be tempting. I can’t stress enough the importance of connecting with a professional who will make sure you are properly covered.
I have had experience dealing with two home insurance claims recently; one of my own and one with my significant other. Through both of these claims I’ve learned more about home insurance than I wanted and I will say in both cases I was so grateful that we had the appropriate coverages in place.
Not only were we well covered, we had a human point of contact who was able to help us with the initial steps of our claims. Based on my overall experience with toll-free customer service numbers I can’t imagine how frustrating that might have been as we worked through our claims.
So where do you start? I suggest you talk to family or friends who own homes to see which company they work with.
When you go to the insurance company, they will ask you questions about the construction of the home you are buying. Take the one-page MLS listing with you. A great deal of the information that they insurers need will be included on that sheet.
As well, they will ask about (not an all-inclusive list):
• The age of the roof, and what type of roof it is (ie: shingles, tar and gravel, etc)
• The age of the hot water tank
• Protection details – nearest fire department
• Is there a security system?
• The type of electrical, plumbing, and heat sources in the home
• The intended occupancy of the house (your primary residence, a rental, is there a rental suite in the home?)
• Will you be conducting any type of business in the home?
• If you are buying a strata property, you will need to know what the strata’s insurance deductible is
There will very likely be some back and forth with your realtor and the seller trying to gather all of the information you need. Depending on how available everyone is this could take two or three days so don’t leave this to the day of subject removal.
At my last renewal my insurance advisor asked if I was ok with the company checking my credit. There was a slight discount available if my credit was clean.
I’ve had clients ask me about doing this. My insurance company told me this is done as a “soft hit,” which means it should not affect your credit score.
Once your personal insurance advisor has all of the information they need they will shop several insurance providers to find the right coverage for you. Some companies will require payment in full upfront while others offer the option of monthly payments. They will provide you with confirmation of insurability. Essentially this is a letter that includes your name and the address of the property that you are buying. Most companies will attach a quote so you know what you will be expected to pay.
If you are more than 30 days out from your closing date, you won’t be able to buy the coverage and it is important to know that the cost is subject to change. It is a wise idea to deal with this as soon as you hit the 30-day mark—one less thing to deal with close to your move date.
During the summer, if a fire starts nearby you may not be able to buy coverage. I always advise my clients to buy their insurance as soon as they can so their purchase can still move forward.
Buying a home is so exciting and so stressful all at the same time. The better prepared you are the smoother the process will go.
Home insurance is one piece of the puzzle that may not seem all that glamourous but making sure you have the proper coverages in place can make all the difference down the road.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.